Common Mistakes Global Real Estate Buyers Make — and How You Can Fix Them

Many global buyers come to the
United States to buy property
without any idea how to
structure the purchase. It’s up to you as their
Realtor® to guide them. I’m Marc Weintraub, senior
business attorney and Florida
managing partner of Bailey
& Glasser LLP, a firm that specializes in
representing international
clients making real estate and
other investments in the U.S. Let’s take five minutes to
explore common mistakes
global buyers make when
taking title, and how to build
relationships with outside specialists who
can guide your buyers to a
successful purchase. A global buyer must ask
themselves some questions
before determining how to hold
title on a property. There are several options,
including holding title in an
individual name, in a
partnership-type company
or in a corporation. How title is held is determined
on a case-by-case basis. Let’s talk about holding title
in an individual’s name. Do
they have a spouse or somebody
else buying the property with
them? Should they put that person’s
name on the title too? And, if
they do put that person’s name
on the title, what happens if one of them
passes away? Does the
property go to the surviving
owner or would the property be passed down to the
buyer’s children? Would the
property be subject to an estate
outside of the U.S.? Another option is to hold title
in a partnership where taxation
can pass through. It’s fairly
simple. They own a company and that company is going to
manage and direct what
happens with the property. Finally, they can use a
corporation that is taxed on its
own and would require annual
tax filings and annual payments of
income tax in the U.S. There are pros and cons to
any of these options. For
example, if you hold title as an
individual, it’s in your personal name.
If something bad happens there,
it will impact you as an individual rather
than your company. A significant number of global
purchasers of Florida real
estate do so for a mixture of
investment, income and pleasure. When doing that, it’s really
important for the owner to
understand that, at some
point, their property is going to be managed by
somebody else. And potentially,
somebody else is going to need
to sign for them on things. Getting a power of attorney can
be simple if the buyer is in the
United States. But if the buyer
is overseas, getting a power of attorney can
be very difficult. If the
property is held by a company,
it’s very easy for the buyer to
sign a simple form that appoints an agent to take
care of managing the property,
and they can do it in the name of the buyer’s
company. It can make the
paperwork much easier, and
that is why I typically have my
global owners form some sort of a company to
hold their real estate in the
United States. Using a company
can avoid complicated and expensive
estate issues if an owner
passes away. Global buyers also, at times,
misunderstand the expenses
associated with holding their
property in the United States, and that these expenses go
beyond merely paying utilities
and taxes. Sometimes there
are expenses associated with having a company, or
paying management fees to
somebody, or expenses for
dealing with accountants and/or lawyers,
when having to file tax returns
and tax reports in the U.S. I always recommend that real
estate professionals build a
team of professionals who have
experience working with global real estate owners.
Ask these professionals to
provide you with a letter or
form that you can hand out to prospective buyers
that outlines their options for
taking title, along with the
pros and cons. Also, agents should understand
at the beginning of the
relationship what the client’s
goals are for the property. Do they want an investment
property? Are they looking for a
second home where they can
spend winters? What are their goals? Clarify
that early on, get them with
an attorney or CPA and you’ ll save yourself
headaches now and down
the road.

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