The Actual Process of Investing in U.S. Real Estate

The Actual Process of Investing in U.S Real EstateHaving written weekly blog posts on how to buy U.S. Real Estate, I have shared a lot of wisdom on investing here in the U.S. Over the years I have had thousands of conversations with people from all parts of the globe about investing in USA Real Estate. Here is the process to purchase property in the U.S. and vocabulary terms we use here in the U.S.

The Purchase Contract:

While the verbiage on purchase contracts may vary from state to state, the purchase process is pretty much the same in all 50 states of the U.S.

An offer is made by way of filling out a purchase offer. This is typically done by a licensed Realtor, Seller or building developer who is educated in filling out pre- printed templated contracts with the terms of the offer.

Included in this is offer is the purchase price, the amount you (the buyer) is offering to purchase the property for, how much deposit you will put in to show good faith in consummating the purchase, your finance terms or whether you may be buying with cash. It will also identify what is included in the purchase such as appliances, fixtures, etc.

The Negotiation:

The seller reviews the offer and accepts it or counter offers. Once both parties agree on the price and terms of the purchase contract it is signed by all parties and we have what is called the “meeting of the minds.” As we have this meeting of the minds and all parties have signed the offer, it is now called a fully executed contract.

The Deposit of funds into a trust account:

The deposit that is made by the buyer is used to open escrow. Essentially a sum of money which is typically equal to 1 to 5 percent of the purchase price is put into a Trust account.

This trust account is a third party account run by a trusted party which is vetted by government agencies to insure buyer protection (usually controlled by a closing attorney or a closing title company).

The Title, title search and title insurance:

The closing company discussed above takes care of all title work. They also do all the necessary gathering of information from lenders, buyers and sellers and all parties to the transaction.

Any challenges they may find on a title search they go to work to remedy it before the day of closing (day of settlement). Title insurance is provided to the buyer (at a fee) which insures the buyer that should any encumbrance or challenge ever appear on the chain of title during your ownership of the property this insurance will provide for the cost to remedy any such challenges.

The Due Diligence Inspection period:

While the title company does their work you, as a buyer, have typically 10 days to do your deeper due diligence on the property. Most often you hire an independent third party to do a home inspection.

This "Property Inspector" looks at the property with trained eyes to provide a detailed report with pictures to the buyer so the buyer has a deeper understanding of the condition of the property. Any challenges to the property that may need to be fixed such as a leaky roof or an air conditioner that is not properly working may be negotiated at this time with the seller to remedy before time of closing.

The Lender:

If you are financing the property the lender will also be performing their tasks to secure the loan for you. As you are most likely aware, they will be contacting you for many pieces of verification as it relates to your income and expenses. As a foreign buyer of U.S. property, many lenders do not lend on investment property. We do however, work closely with those who are investor friendly to our foreign friends and can certainly connect you to them as you need them.

The Closing (the settlement):

When all the above tasks are complete to buyers satisfaction, the buyer closes on the property with the assistance of the closing attorney or title company and you take possession of the property. A deed is provided to you showing ownership to this property. Copies of this are given to the local tax assessor’s office and you are now the official owner of record.

For some of our foreign friends this may be very similar to how you purchase property in your country and for others there are lots of differences. Now you have the outline of what it looks like to purchase a property here in the U.S.

We are happy to answer any clarifying questions so always feel free to contact us, we are here to assist.

If you have any specific questions, shoot me an email today!