Vacation Homes & Real Estate
The first thing to bear in mind with US real estate transactions, is that the process is different to many other countries, and therefore there are things that you need to do (or avoid doing) to ensure you have the best experience. One of the most significant differences to the US real estate process to many other countries is the multi-listings service (MLS). This means that a realtor in the US has access to all of the properties for sale in their area. This means that one single realtor can show a buyer every property they wish to see. In many other countries real estate agents only have a few listings each, meaning that buyers need to engage many real estate agents in order that they can see all the properties they would like to view. This is not the case in the US, as one well-chosen realtor can show every property. One of the regular errors made by overseas buyers is to contact multiple agents, and then find that they are all advertising the same properties. Whereas, the best thing to do is to take a little time to identify and select one realtor that you are comfortable working with, and then let them show you all the properties that match your criteria. A good real estate agent is an asset to a buyer. They are able to answer many questions a buyer may have, and even answer a few that a buyer had not even conceived, as to be a real estate agent in the US, an individual needs to pass an exam and be licensed. And in addition, a buyer does not have to pay a realtor for their services – the seller pays a commission to the realtor for a successful sale.
Many overseas buyers try and get properties at a discount by not using a realtor, but this is rarely the case. In fact, using a realtor often results in a better deal for the buyer because the realtor can present any offer to the seller in the most advantageous way using market data to ensure the best possible purchase price or terms.
Step one for anyone interested in investing in real estate in the US is to select a qualified real estate agent to work with, and explain their criteria. Once you have selected a good agent, the whole process becomes much easier, and much more satisfying.
Another significant part of the US real estate transaction is how the contract works. The contract is entered into between buyer and seller at the same time as an offer is made. Typically in the US, offers are not made verbally, but in writing, and must stipulate the price the buyer is willing to pay for the property, the escrow deposit they are willing to pledge, the type and amount of mortgage they will be applying for, and the date by which they will close the transaction. If the offer is accepted, then neither party can change the terms. If either party then defaults on the contract, such as by not closing by the date specified in the contract, the ‘damaged’ party can seek recourse.
Again, a properly qualified real estate agent should help buyers and sellers to transact real estate purchases without falling foul of any contractual pitfalls. Some buyers and sellers also choose to use a lawyer to assist with the transaction, although this is optional and not mandatory.
How will property be used?
Recognizing the use that is intended for the property is an integral part of the decision making process, and it should be one of the first decisions made. In most cases, buyers from overseas fit into one of three categories.
- A- Buying purely for investment,
- B- Buying to use as a vacation home,
- C- A hybrid between a) and b).
If buying purely for investment, a buyer should remember to make decisions only with their head. If buying to use as a vacation home, it is expected that much of the decision will be made with the heart. If the decision is actually a hybrid of the two, then the buyer must recognize that some compromises will most likely need to be made, as very few properties will satisfy all criteria, and the buyer will need to establish what is more important to them.
In some parts of the US, there is a demand for short-term rental propertiesshort-term rental properties, i.e. renters will be willing to pay to use the property for a vacation for just a few weeks. These types of properties are very attractive to overseas buyers who wish to use the property themselves, but also generate some rental income to help pay for the property. Care should be taken by the buyer who is looking for this type of property, as in some areas of the USA there are restrictions which prevent short-term rental. A good real estate agent will be able to advise as to which areas do allow short-term rental.