The property experts at Zillow, the leading real estate marketplace in the United States, share their tips for Australian home shoppers looking north.
Maybe you fell in love with a new city while on holiday in the US. Maybe you’re itching for a new experience. Or maybe, after observing the American dream from afar, you’ve decided to pursue it for yourself.
Whatever the reason, you’ve decided to move to the land of opportunity. But the prospect of navigating a foreign tax system, calculating extra administrative costs or learning about a completely different housing market can feel overwhelming.
For Australians looking to buy a home abroad, here are tips to keep in mind.
1. Talk to a pro
Make sure you talk to a professional before signing on the dotted line.
Talking to an expert, such as a mortgage lender or real estate professional with experience helping international buyers, can help you figure out what you need to do and what you can expect from the process. It’s comforting to have a seasoned professional on your side and can help alleviate some fear of the unknown.
Use search tools, like Zillow’s Agent Finder, to choose an agent based on sales and listing activity, area of expertise and reputation.
A real estate agent is an important partner when buying a home as they can provide helpful information about homes and neighbourhoods and have an extensive knowledge of the home buying process. In the US, the sales commission is paid by the seller, so buyers do not pay to have an agent work on their behalf.
2. Beware of scams
Some investor specialists try to take advantage of foreign investors who know little about the market. Be aware of the red flags for scams and internet fraud, and remember the key rule: it if sounds too good to be true, it probably is.
3. Understand the requirements
In the vast majority of cases, there are no US laws that prohibit foreign nationals buying properties and owning land in the US. However, there are additional disclosure requirements for foreign buyers using cash in some cities. It’s best to work with a professional to navigate your specific needs when it comes to buying your new home.
Australian citizens who buy property in the US will need to complete and file a tax return annually in both Australia and the US. Generally, US property held by a foreign investor will be subject to additional requirements as stipulated by the Foreign Investment in Real Property Tax Act. As an Australian resident, you are taxed on your worldwide income, including income from offshore bank accounts, any rental income from the US property and capital gains on overseas assets.
You don’t need to be a US citizen or have a green card to buy a home in the US,but you do need an Individual Taxpayer Identification Number (ITIN). An ITIN is a tax-processing number assigned to foreign nationals, who are required to have a US taxpayer identification number, but do not have one and are ineligible for a Social Security number.
An ITIN can be issued by the Internal Revenue Service or by an IRS-approved certified professional accountant.
4. Get financed
Using financing (like a mortgage) to buy a home is technically optional, but necessary for many buyers. US banks impose stricter lending criteria for foreign investors, which can make it difficult to obtain financing. Most banks require a hefty deposit, normally about a third of the home price.
Online tools are a good way to gauge what you can afford. However, Australian buyers will also want to consider issues such as currency exchange rates, international wire transfer fees, multinational taxation and accounting issues, and import-export restrictions regarding currency and household goods.
Success! Now what?
After finding a home, negotiating an offer and agreeing to a price with the seller, the home will go into escrow. Escrow is the period of time it takes to complete the remaining steps in the home buying process, including getting a home inspection and having the home appraised. At the home closing, you will sign all the paperwork required to complete the purchase. Welcome home!