Renting & Buying Property in the U.S.
How to Choose the Right Property Path
Once you’ve chosen the perfect location to settle in America it’s time to decide what sort of property you want to live in. The types of properties available in the U.S. include:
- Apartments (Flats) – these tend to come unfurnished but may have appliances such as an oven and fridge.
- Duplex Homes – A house with separate entrances for two households.
- Single Family Homes – A stand-alone house, often with a yard (garden).
- Condominiums – aka Condos – A building split into several units with each unit owned independently.
The amount you spend will depend on a huge variety of factors such as location and the size of the property that you want, but one of the biggest choices you have to make will be between buying or renting your property.
Below is a quick guide to buying and renting in the U.S., and a short discussion on which option might be the most attractive in today’s real estate climate.
On This Page
- Buying Property – A Quick Guide
- Finding a Property & Arranging Viewings
- Found a Property you Like? Next Steps
- Renting a Property – A Quick Guide
- Renting Apartments and Condos – Knowing the Differences
- Once You’ve Found a Property You Want to Rent
- So, Should You Rent or Buy?
- Frequently asked questions (FAQs) about taxes, company formaition, and residency in the U.S.
- Get advice on taxation, company formation, and residency in the U.S.
The process of buying a property in the U.S. can vary from state to state, so it’s important to research the rules and regulations unique to the state you plan to relocate to. In particular, pay attention to any tax rules that might be in place with regards to expats and buying property.
Below is a quick guide to how the process generally works, and some key aspects you need to know:
Realtor, Real Estate Agent or Broker – What’s the difference?
When it comes to viewing properties and beginning the process of buying one the best route is for you to use an agent who is licensed by the state. In some states Real Estate Agents don’t have to be licensed. The terminology can be confusing when looking for an agent to help you with the viewing and buying process.
A Real Estate Agent: Anyone who has a real estate license.
A Realtor®: A Real Estate Agent who is also a member of the National Association of Realtors. They have to uphold the ethics and standards of the association.
A Real Estate Broker: A person who has gained an additional broker’s license. They can work for themselves or hire Estate Agents to work for them
A Real Estate Associate Broker: Is someone who has a Broker’s license but chooses to work under the management of another Broker.
Brokers typically do everything that Real Estate agents and Realtors do, but they also manage financial aspects of the process. If you have any problems with your Real Estate Agent or a Realtor you should speak to the broker.
It’s up to you which kind of agent you choose, but Realtors are considered to be the most accountable due to their membership and standards. You can also check on the National Association of Realtors website to ensure the person you are engaging is a licensed Real Estate Agent.
When choosing an agent, it’s best to look at more than one and spend time interviewing them to make sure they are a good fit for you. Ask for their experience and qualifications and check their credentials and website.
Once you have decided on an agent you will sign a “Buyers Agency Agreement” with that agent. This will set out your requirements and expectations and ensure the agent will work in your best interests. Either side can terminate this agreement at any time.
You can use a number of methods to start your search for a home to buy. You can search on real estate websites, instruct an agent to search on your behalf, or you can look for newspaper ads or even drive around the neighborhood you want to move to and look for “For Sale” signs.
Once you have found a property you want to view you should instruct a Real Estate Agent / Realtor who will represent you as a buyer. Your Realtor will help you arrange viewings for properties and will be there during viewings and walk you through each property and answer your questions. The owners of the property are usually not present during these viewings and you are encouraged to ask questions and investigate the property in depth to see if it will meet your requirements.
It is also worthwhile getting your finances in order before you view properties. You can get pre-qualified if you need a mortgage. Choose different lenders and check out the deals they can offer you. Find out how much you can afford for a mortgage, what sort of down payment you will need and how much monthly payments will be based on how much you borrow.
Once you find a property you would like to purchase, your realtor will get the history of the house and do a CMA (Comparable Market Analysis) on the house and advice you on what offer to make. They will make the offer in writing, and once the price has been agreed it is “Ratified.”
From here you put down a payment called an “Escrow” or “Earnest Money”, of about 1-3% of the property value. This money is held by the broker or an Escrow company until you complete the purchase, at which point it is returned to you.
Inspections on the property are then ordered. This period of time is called the “Buyers inspection Period”. If the property does not pass inspection you can choose to end your interest and have your Earnest Money refunded in most cases (please check your contract terms). It’s important to note however, that once you have agreed to a purchase and the offer has been accepted, you are committed to buying the property. This includes the closing date of the sale – which is fixed at the time of the offer being accepted. It’s very important, therefore, to ensure that if you need to sell any other property to buy the one you are considering that this is completed before making an offer for U.S. property.
If you are unable to complete the sale by the agreed time, the seller will keep the Earnest Money that you have put down.
Your agent can negotiate with the sellers about any repairs that need to be made and the moving in date. Once it is all agreed then you set the date and the agent closes the deal. Your agent’s fees are paid for by the seller. They are usually around 6% of the sale price.
Remember that you do have to pay property taxes in the U.S. and in some states you will pay higher taxes if you are not a permanent resident.
Renting, as you might expect, is more straightforward than buying a property. You can instruct a real estate agent to search for rentals on your behalf, but if you do this you will be obliged to pay them a “Finder’s Fee” which can be 1-2 month’s rent. In other cases, a landlord might employ a realtor to vet and screen candidates, in which case the landlord will pay the fee.
Whether you need a realtor / real estate agent or not to help you find and secure a rental really depends on the market you are looking in. In some areas they are essential, and in others you can do the search yourself.
If you are searching yourself, there are a number of websites that will offer properties in your area, so use a search engine and look up the types of properties available and their prices before making an application to view properties. You might also rent via a rental agency so shop around to see what’s on offer.
The competition in some areas can be fierce for great rental properties so one way to help your application is to create a “Renter’s Resume”. This is a document that shows what you do for a living, references from previous landlords / employers, your income and any other factors that might support your application.
When searching for a property to live in, it’s quite common to see apartments and condos used to describe units within one building – often known as ‘flats’ in places like the UK. It can be confusing to understand why they are sometimes called condos and other times apartments.
The key difference between an apartment and a condo is in the ownership of the unit. Apartments are housed in a complex owned by a single entity – which is often a corporation and leased out to individual tenants. A condo is a unit owned by an individual and usually managed by that condo community’s homeowner association (HOA). If you rent a condo, the individual condo owner will be your landlord.
Costs of apartments vs. condos tend to be negligible, though condos often come with more high-end facilities and upgrades if the owner is investing in their unit. When renting a condo, you often get utilities and HOA fees included in your monthly rent. Apartments often come with fairly standard amenities such as a parking space, on-site laundry and outdoor pool. Condo’s can be a little more variable because of them being individually owned.
Follow the process shown on the real estate website or ask your agent to make an application. You will need to provide references to your landlord, and also pass a credit check. Once you have been accepted you will need to pay a security deposit which is typically a month’s rent in advance.
Leases will vary, but most landlords will want at least a one-year lease. You should check your lease carefully for your rights and responsibilities such as paying for utilities and maintaining the property.
Before you move in it’s important to get Renters Insurance, which will cover your property in case of theft or damage from fire, flood or other adverse circumstances.
Traditionally speaking, for many people buying a property is seen as a more attractive option than renting, and American’s seem to stick with this trend. A Pew Research study found that 72% of renters said they would like to buy at some point.
But is buying really the best option in America’s real estate market today?
Because the housing market has improved in recent years, many people are choosing to rent to save on mortgage fees. While some people believe it’s wise to invest money into buying a property in order to gain from the equity long term, others are now finding that they can save more if they rent. The money that’s left over can often give a greater return on investment than equity does, longer term.
On the other hand, buying your own property can give a much greater degree of security, and you don’t have to worry about rent being increased or having to find a new property if your landlord ends your lease. You are also not beholden to a landlord or rental agency, and can enjoy a greater degree of autonomy in many cases.
Whether you choose to rent or buy will also depend on the area you want to live and how the market is in that area. You should build a list of the key factors that are important to you – such as proximity to work and schools, the type of neighborhood you’re happy in and whether you can afford the large down payments often needed to buy as an expat.
Frequently Asked Questions (FAQs) About Taxes, Company Formation, and Residency in the U.S.
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