Purchasing property in a foreign country is a popular option for those looking to invest their money. It is also common with people who want a permanent vacation home, as well as those wanting to move abroad.
However, due to the complexity involved in such a process, there are several things that you will need to consider before moving forward with purchasing property in a foreign company. Foreign ownership laws, financing, and tax liability are just a few of the subjects you will need to be clear on if you are wanting to purchase property in a foreign country.
When searching for a property to purchase, it is also helpful to keep the cost of living in mind. Some countries have a much lower cost of living than the country you currently live in, while others are much higher. The cost of living should be included in your budget, as you will need to cover that as well as property costs.
Before purchasing any property, it is imperative that you become familiar with the laws of that specific locality. As is expected, the rules and regulations that govern the purchase of property in a foreign country vary, depending on the country. Additionally, each individual country possesses the right to place any desired restrictions on non-citizens who are attempting to purchase and own property in that country.
Some countries allow foreigners to purchase homes, but will require the buyers to obtain special residence permits. Or, they may require that the foreign buyers register with a specific government agency before they are able to complete the homebuying process.
Real estate attorneys from the country in which you are attempting to purchase property will be knowledgeable on any laws and restrictions. These realtors could be a good resource when you are just beginning your search, and wish to learn more about buying property in a foreign country.
What Are Some Examples of Foreign Property Purchasing Laws?
As previously mentioned, each country has their own set of rules and regulations. Some specific examples include:
- Spain: In order to purchase property in Spain, you will first be required to make out a will. The will must be drafted in Spanish. Any outstanding debts attached to the property would become your responsibility upon accepting ownership of the property;
- Mexico: In Mexico, in order to protect their native soil from foreign invasion, some lands are not eligible for purchase by foreign nationals. Foreigners are able to purchase property outright for residential use, outside of the 100km restricted land border zone, as well as outside of the 50km coastal zone. However, foreigners must enact a land trust through a Mexican bank in order to purchase any property within the restricted zones;
- Turkey: Foreigners are not allowed to purchase any property in rural Turkish areas, or near military land;
- Australia: In Australia, foreigners may purchase property under considerable restrictions. Non-residents must first obtain approval from the Foreign Investment Review Board, or, the FIRB. Additionally, non-residents may buy an established property for themselves as a home; however, this must be their primary residence. In order to live there part-time, or to purchase several properties for investment purposes, the properties must be new builds;
- Costa Rica: Costa Rica’s property laws are relatively foreigner friendly. Foreigners maintain the same rights as Costa Rica citizens when purchasing land. No local partner is necessary, with the exception of beachfront concession property. Additionally, Costa Rica maintains a central land registry, through which the buyer’s attorney may confirm that the property maintains a clear title. The land registry also details any restrictions on the property before the deal goes through; and
- Italy: Although there are some restrictions as to who may and may not purchase property in Italy, it is largely viewed as a “no restrictions” country. Citizens of countries with reciprocity are allowed to purchase property. What this means is that because Italian citizens are allowed to purchase property in the United States, United States citizens are allowed to purchase property in Italy.
These are just a few examples of foreign purchasing laws. In order to protect your interests, ease your mind, and remove some of the stress associated with such a big investment, you should speak with an experienced attorney. The attorney should be familiar with the foreign purchasing laws of the country you are interested in.
What Are Some of the Associated Costs With Buying a Property in a Foreign Country?
To reiterate, the cost of living is one of the major costs associated with purchasing property in a foreign country. While the property itself may be inexpensive, the cost of living may be much higher and cancel out any cost related benefit to purchasing property in that country. There are several related costs of buying a house or land in another country.
Food, utilities, and medical expenses are some of the most common examples of the cost of living. Some other associated costs could include:
- Acquisition taxes;
- Surveying fees;
- Foreign office permits;
- Double tax treaties;
- Large down payment and high interest rate on a mortgage through a foreign-owned bank;
- A separate life insurance policy, so your mortgage may be paid off should something happen to you;
- Attorney’s fees; and/or
- Realtor’s fees.
Additionally, the cost of purchasing a property in a foreign country does not end at the property’s negotiated sale price. In some countries, the net value of all of these costs may be less expensive than in the United States. However, it would be unwise to simply estimate how much these associated costs will amount to. It is imperative to be fully aware of all associated costs prior to signing any paperwork, specifically the purchase and sale agreement.
What Else Should I Know About Hiring a Real Estate Agent?
It was mentioned that obtaining a real estate agent may make the process of purchasing property in a foreign country easier. A real estate agent is a licensed professional who is authorized to conduct real estate business in a given state, or in a given country. Real estate agents are educated in real estate matters, and have passed a state board exam in order to obtain their credentials.
Some real estate agents may be dual licensed and can practice law, and still others are licenced notaries. As real estate agents are licensed professionals, they have a duty of care and are held to a standard of care that is reasonable for real estate agents.
Agents have access to the Multiple Listing Service (“MLS”). This service allows them to locate residential properties the very day that those properties are listed on the market. Additionally, they are often knowledgeable about the housing market in their specific area. What this means is that often, real estate agents know what homes in the area are selling for, and they know everything required throughout the homebuying or selling process.
Real estate agents may perform some of the following duties:
- Handle standard client forms and questionnaires;
- Review real estate contracts;
- Negotiate pricing, up to the closing of a deal; and/or
- Showcase properties, and guide clients through walk-throughs and open houses.
Generally speaking, the law does not require homebuyers or sellers to use a real estate agent. However, different states and countries may have laws that require a real estate agent’s involvement with the closing paperwork process. Additionally, agents do take a commission; meaning, part of the sale of the residence will be given to the agent.
While some people choose to buy or sell a home without the help of a real estate agent, there are numerous rules and requirements involved in real estate transactions that may be better handled by a licensed professional. Real estate agents will generally be knowledgeable about the ins and outs of the process which could make it easier on homebuyers or sellers, especially those that are buying or selling for the first time or are purchasing property in a foreign country.
Should you choose to work with a real estate agent, you will need to sign a listing agreement. This is a contract between you and the agent determining the obligations and rights of the business agreement. A listing agreement will generally detail:
- The amount of commission the agent expects as compensation;
- When the broker will receive the commission, or whether they will receive a flat fee;
- The beginning and ending dates for the relationship between the agent and the buyer or seller;
- The amount of time that the property will be listed; and
Do I Need an Attorney to Buy a Property in a Foreign Country?
As you can see, the process for purchasing property in a foreign country is clearly complex. It requires a thorough understanding of foreign property laws, as well as an extensive amount of time, research, planning, and preparation.
A skilled and knowledgeable property lawyer will ensure that you are aware of all purchasing laws and restrictions, as well as help you identify your needs and financing options. An experienced and local property lawyer will also be able to represent you in court, as needed, should any issues arise.
