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Guide to buying a property in USA

The great land of opportunity across the Pond still beckons for British property buyers in 2014.   Culturally, for many British people America is by far and away the most exciting place on the planet, with much of our entertainment industry coming from there and with every corner from New England to New Mexico, Oregon to Orlando having some sort of cultural resonance. It’s also a place where many British people would love to emigrate to “live the American dream” and make a lot of money.  Every year around 3,000 new British emigrants register as permanent residents of California alone. 

It’s relatively simple to buy property in America - there are no restrictions on foreign ownership, we speak the same language, they have a well-regulated, easy to understand property market plus a sophisticated internet infrastructure (MLS) that lists every property for sale and every bit of data you could ever want to know about an area.  There are plentiful flights throughout the year, wonderful roads and welcoming people.  It’s all very easy to do – especially if you can pay cash -  and it’s a huge and fabulously diverse country.

The vast majority of us will head south to Florida for the year-round sunshine to join all the other North European “snowbirds” escaping the freezing winters back home. Whether it’s Disney, shopping, boating, beaches or golf it’s got everything, even thriving art centres such as Miami and Sarasota. It’s not surprising that it recorded a record level of tourists in 2013. 

Some of us might prefer California – another popular but slightly less accessible area for buyers; although historic New England or Georgia, the ski resorts of the majestic Rockies, glamorous Las Vegas and Lake Tahoe are all niche markets for second-home owners.  

New York is a buzzing market in 2014 and many investors are looking there for capital growth in several of the downturn areas that are currently undergoing a reinvention. Prices are strong in the Big Apple, which frequently appears in the Top Five most expensive cities in the world for residential property. 

Across the US, property prices have generally recovered from the global downturn, with hotspots such as Miami at the forefront of the resurgent markets – some of the hardest hit have bounced back the fastest. But across many areas of Florida, prices are rising a little slower than they were a year ago and with new construction gaining momentum, it’s a great time to buy. With buyers once again embracing off-plan properties, it’s a sure sign that the market confidence is back. 

  

USA property hotspots

Florida, with its year-round sun and plentiful flights, is the number one state for overseas property buyers and attracts the highest number of British buyers. Orlando is the most popular destination for British property buyers, combining pleasure with business – a holiday home they can enjoy themselves and rent out to other holidaymakers. It's the number one holiday rentals hotspot for HomeAway.co.uk.

Most construction in the Greater Orlando area came about as a result of Disney’s development, and the bulk of stock was built before 2007, when construction pretty much ground to a halt.  But in the past 18 months new construction has restarted and with many brand new homes the same price as resale comparables, they are much in demand. Many of the short sales and foreclosures have now dried up. That said, you can still buy a new luxury villa on one of Orlando’s sought-after resorts for less than $450,000. Prices still largely dependent on proximity to theme parks. 

Florida’s East coast – around Daytona, Flagler and Cocoa Beaches – attracts buyers for its proximity to Disney, accessibility by air, and for the affordability of the property. You can buy a two–bed condo for less than $200,000 and your money goes further than on the west or Gulf Coast.  

Florida’s Gulf Coast - including Sarasota, Bradenton, St Petersburg, Clearwater and Tampa - is the second most popular destination for British investors. The coastline is hugged by a number of barrier islands that have become resort destinations, the most well known being Siesta Key, Anna Maria Island and Longboat Key.

Known as Florida’s cultural hub, with arts, music and theatre, the area has some of the world's finest beaches too, lapped by the warm waters of the Gulf of Mexico. Homes directly on the beach or waterfront command premium prices, starting around $400,000, but the homes themselves may be older. 

Further down the coast, Fort Myers, Naples, Sanibel and Cape Coral are popular. 

Affluent Naples, prices can rise considerably, and you’ll find many deed-restricted neighbourhoods and country club developments. Villas start from $300,000 and condominiums from the low $100,000s. Miami is booming again, with high-end branded condo developments in much demand from international buyers.

Elsewhere in the USA, British second-home buyers are a much rarer breed, perhaps surprisingly given the low prices and the country’s perennial appeal.

California and New York are the most popular areas for Brits to live and work, and both have exceptionally high property prices in the safe, cosmopolitan areas where most want to live, and - more importantly - can find legal work.

In New York’s Manhattan or Brooklyn, or LA’s Santa Monica, you’re looking at London prices - $400,000 plus for a two-bedroom apartment.

Go beyond these areas and the price decreases rapidly. The coast road from New York to Boston, with beautiful countryside and easy access to either metropolis, has three-bedroom houses in friendly seaside towns and harbours from under $200,000. Properties with a view of San Francisco Bay may sell for “a million a window”, but there are attractive inland villages and towns with houses that are palatial by European standards selling for $150,000 or less.

Buying process

The situation in America is slightly complicated by the variety of state laws, though the lack of a language barrier makes it seem easier, and the industry is well regulated and very transparent (all properties are listed on a nationwide database, Multiple Listings System or MLS, of which all agents have access).

Once the property is chosen, the agent working for the buyer prepares an offer to purchase a property. Once signed by the seller, this becomes a binding contract, and the buyer usually pays a deposit into an “escrow” account of 10 per cent for residents, as much as 20 to 30 per cent for non-residents.

The buyer will usually instruct a licensed home inspector to perform a detailed inspection of the property to identify any issues, or repairs that may be needed. An appraiser will visit the property to give a detailed report of the home’s market value. A title search is performed to ensure the property is free and clear of any charges and all building permits have been closed.

So long as the protections were written into the contract, should there be issues resulting from the searches and survey the buyer can still pull out. Otherwise, a real estate transaction can then be “closed” by an attorney or title insurance company.

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USA Property Buying Costs

Documentary stamps to record the deed with the local authorities cost 0.7 per cent of the purchase price and can be paid by the buyer or seller. The title insurance policy is a one-off payment of approximately 0.75 per cent of the purchase price – again, this is payable by the buyer or seller so part of the negotiation! Attorney or title company costs to close the transaction are usually around $700, split equally between buyer and seller. The buyer may be required to pay home owner association fees and building insurance in advance and this may be paid at closing. So, overall, budget up to 2.5 per cent for cash purchases and up to 7 per cent if you are getting a US based mortgage. 

You'll also need to find the most cost-effective, safe and easy way to move your money to the USA to complete your purchase.  Bank charges and fluctuating exchange rates can both have an impact on your overall cost - but you can save up to 4% of the cost by working with a specialist currency firm.  They can help you achieve currency exchange rates better than the banks, and reduce the risk of your international payments increasing.

On a £100,000 exchange, a currency specialist can save you up to £4,000 by providing better rates compared to your high street bank.  Click here to read more, or here to download your free guide to saving money on your purchase.   

USA Property: Need to Know:

When buying a condominium, buyers need to thoroughly investigate the financial health of the condo association. Ideally the association will have reserves in place for major items such as roof replacement or road resurfacing. Ask how many home owners are in arrears with their monthly fees – a high percentage should ring alarm bells as it indicates an increase in the monthly fees may be inevitable to cover the shortfall. Beware of past condo or homeowner (HOA) fees that may be demanded after you buy a house or condo. 

Some good news: when buying a new-build you can save on insurance costs – up to half if you are buying a brand new home versus a 15-year-old home. New-builds also come with a 10-year building warranty, but do make sure you know what fixtures or fittings are included in the sales price. 


Need more information?

If you would like more detail about some aspects of buying a property in Florida, then download our FREE guide, sponsored by My Florida Property Store, which covers the popular regions, with a run-down of the local property market including the types of property and things to watch. We give tips on legal, currency and tax as well as the steps involved in the buying process.

 


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