FAQs of REAL ESTATE

 

 

1.What are the characteristics of the U.S. real estate market?

With stable society, well-established policy, sound legal system, mature market, stable appreciation, and active rental market, from the long-term investment perspective, investing real estate in the United States is low-risk, stable-income, and high-return. According to the Home Sales Report in the U.S., the sales in November 2009 increased by 7.4%, which is higher than 3.3% expected by the analysts.

 

2.What are the regulations of the U.S. government for the foreign investors?

Foreign buyers enjoy the same rights as the U.S. citizens and they can also mortgage. The United States is a country with private ownership of land. There is no restriction on the ownership for the property owners and the government rarely does the market intervention.

 

3.Does the U.S. real estate market have a great demand?

The high birth rate, high divorce rate, and high immigration rate produce 1 million households annually. The tourism market is prosperous and many Americans and foreigners own their vacation houses in the United States.

 

4.What is the influence of California government on the real estate?

The government will set the uses of every land, building type, height and density etc. by planning, manage the real estate practitioners, regulate the real estate market by a licensing system, levy the tax in accordance with law, and protect the interest of the public.

 

5.How about the legal environment of real estate in the U.S.?

Federal has few restrictions on the investment and house-purchasing of the non-citizens. Each state develop their own laws, but with few restrictions.

 

6.Can foreigners buy the real estate in the U.S.?

In most cases, for the buyer, the U.S. real estate market has no identity requirement of being residents or citizenship, and no special provisions for visas. Only a few states require that only citizens or residents can buy the local residential and commercial real estate.

 

7.What is the mortgage pattern of buying house or land? Is there any restriction on the age of lenders? How long is the mortgage period?

The down payment of buying a land is 30%-50% of the price, and that of buying a house is 20%-30%. The applicant's credit status (credit score) determines the level of lending rates. The one with no credit score apply for mortgage loans for 6 months will get the credits. When reapplying for mortagage, the interest rate will depend on the credit score. More than 18 years old. 5-30 years.

 

8.What can I do if quality problem occurs?

Realtors will inform the inspector carefully inspect the house, record and photograph before the transfer. If quality problems occur, you can require the landlords or developers repair without payment. Before the sale of the new house, the local Real Estate Board will also inspect the house and issue certification. Investors can also buy housing quality insurance.

 

9.Generally, what kind of properties I can buy?

The law of different states in American is not the same, but most states do not restrict the foreign natural persons and legal persons (companies, organizations) to buy residential and commercial real estate, including the main market in the east coast: California, Florida, New York etc.

 

10.How many lands I can buy? Is there any limitation?

Some states have limitations on the number of owning land, but it does not affect the general commercial and residential purchases.

 

11.How about the current house price in the U.S.?

The house prices of the 20 metropolitan areas in the U.S. reached a peak in July, 2006. The average falling of house price is more than 20-40% so far. Now, the average house price in the U.S. is about $170,000. The average house price in California is from $500,000 to $600,000.

 

12.What is the investment return of the real estate in the U.S.?

From 1926 to 1996, the average annual increase of the U.S. real estate market is 11%. From 1996 to 2006, it reaches 15% above. This is a long-term investment opportunity of once-in-a-life-time.

 

13.Can I immigrate to the United States by purchasing the real estate there?

At present, immigration to the U.S. can be implemented by some specific immigration projects. And it can not be directly implemented by purchasing the real estate. But buying the real estate if with loans will help you establish a credit record in the U.S.

 

14.What is Lot?

Lot refers to the land that is ready for house construction, and meets the following conditions:

1, Pipes, cables, gas and other basic facilities have been put in place;

2, Obtained the government approvals of the construction.

Generally, the lot price accounts for the 20%-30% of the value of house.

 

15.What is Real Estate Tax/Land Tax?

Real Estate Tax is a category of taxes that the owner of the real estate should pay to the local municipal government annually. It is Ad Valorem Tax, which accounts for 1-3% of the property value and should be paid in an annual basis or based on the annual or semi-annual of local regulations. In general, Real Estate Tax is used for local municipal construction, environmental protection, public security, health care, education and other related infrastructure. With the improvements of the above facilities, the local real estate values will increase, too. Therefore, Real Estate Tax is regarded as the positive promotion of the real estate market.

 

16.What other charges need to be paid after buying the house?

Monthly property management fee, property insurance fee and property tax are need, which totaled 2-3% of the house price.

 

17.What is Realty Transfer Tax?

Realty Transfer Tax is for the trading privileges of real estate property right. The levy mode of transaction varies from the different state. Such as New Jersey, usually, the sellers only need to pay State Tax; but in New York City, City Tax should be paid beside State Tax. If the buyers have mortgage, the Mortgage Tax should be paid.

 

18.What is Property Tax?

Property Tax is a category of taxes that the owner of the property annually paid to the local city government. Property Tax is usually accounted by year. The higher the house price is, the higher the Property Tax is. In general, Property Tax is used for municipal, county, school districts, community colleges and other government agencies. Property Tax is a federal tax deduction of personal income tax returns, which can be also used to offset the state income tax deduction. But the regulations of different states vary.

 

19.When buying a house, how do I find out the Property Tax?

Generally, the sellers should inform the Property Tax of the latest year or the recent years, which usually listed on the MLS. If not, the buyer’s lawyer may query through municipal tax department. Property Survey Report accurately displayed the Local Tax. It is noteworthy that in some places, Local Tax will be revaluated when changing hands. Local Tax is adjusted every 3-4 years in some places. So, a buyer should identify in advance, and understand how much you should pay in the future. It is also useful for you to consider whether you should buy the house or not.

 

20.If the valuation of the Local Tax of the town is higher than my buying price, what should I do?

You may appeal based on your purchasing price. When appealing on the Assessor’s Board, you have to prove that your purchasing price is Fair Market Value.

 

21.After buying the house, what expenses can be used to deduct federal income tax?

Real Estate Tax and the interests of 1 million U.S. dollars can be used to deduct federal income tax. In addition, only with the tax mode of Itemized Deduction, Real Estate Tax and mortgage interest can be deducted. For mew homebuyers, the Points can be deducted. For the re-lenders of the houses, those expenses can not be deducted. Other expenses in housing transactions such as Realty Transfer Tax, legal fees, registration fees, credit report fees of the loan company, appraisal fees etc. can not be deducted.

 

22.When selling the house, do I need to pay federal Capital Gain Tax?

If you were in the house for 2 years during the past 5 years, and you selling profit is less than $250,000(couple of $500,000), then some people need to pay Capital Gain Tax. But it does not apply to Investment Property and Vacation Home. For the Primary Residence the seller, the offer can be enjoyed; but for the Rental Residence, Capital Gain Tax needs to be declared.

 

23.How to determine the Selling Profit?

The Selling Profit means Adjusted Sale Price minus Adjust Cost Basis. Adjust Cost Basis means Purchase Price minus sales commissions, legal fees etc. Adjusted Sale Price means Selling Price minus Cost of Capital Improvement. Internal Revenue Service (IRS) has a stringent control on the costs of improvement. For example, the cost of repairing water heater can not be classified as cost of improvement, but installing a dishwasher can be. You can deduct the employee’s wages but you can not deduct your own wages. IRS also requires the sellers to declare the detailed profit calculations annually. The Receipt of the costs of improvement should be properly preserved.

 

24.When applying for Home Mortgage, what factors the Lender should take into consideration?

Legally, there is no legal requirement for Lenders to consider something, but generally, Lenders will consider the following factors: 
1.Work experience, salary history and current employment. And the Federal Tax Return in the recent years and W-2 form usually need to be submitted. If you income comes from other areas, such as real estate investment, child support and other investments, you need to submit relevant documents.
2.Credit History. Lenders often get your credit status such as credit score and the amount of credit card debt.
3.Outstanding Debts. Such as automobile loan, alimony and children support.
4.Assets. Such as automobile, rental property, stocks, bonds, cash, savings, IRS, retirement accounts, mutual funds etc.
5.Source of down payment. Note: if you have the gift from your relatives, lenders will ask you to provide gift letter.

 

25.What kind of loan information the lender should let me know?

Federal law requires the lender shall disclose all the loan costs, such as appraisal fees, lender’s attorney fees, escrow fees, services fees, mortgage interest rate etc. According to Federal Truth in Lending Act, all the lenders and agencies must disclose the loan fees by the consistent calculation method in order to facilitate the comparison by consumers. In short, lending rates must be informed to the borrowers by the form of APR (Annual Percentage Rate). In addition, Federal Equal Credit Opportunity Act prohibits the discrimination of race, religion, color, national origin, gender, marital status and whether to accept public funding.

 

26.I was to buy a house, but now my current house has not been sold. Is there any way that I can ask for a loan from the current house to buy a new house?

There are two ways:
1.Home Equity Loan. If you have Home Equity Line of Credit (HELOC for short), you can directly withdraw money.
2.Use Bridge Loan, but it is usually with high interest rate.

 

27.What is fixed-rate Loan?

Fixed-rate Loan means the loan interest rate is fixed during the loan period (usually for 15, 20 or 30 years). But the monthly principal and interest of loan repayments changes. The interest of the loan repayment is much more in the early days. So, the year-end tax deductible portion is more.

 

28.What is Adjustable Rate Loan?

Adjustable Rate Loan varies from differences of the adjustable rate of lenders, the amount of loan repayment, and the time of repayment:
1.Adjustable Rate Mortgage (ARM): the lower fixed interest rate will be offered for a few years, and then there will be a maximum change amount for interest rate based on the index. (Usually, it changes by one-year treasury securities. At the same time, the lender limits the maximum change amount.) There is also the limitation of the minimum change amount.
2.Convertible ARM: it allows borrowers changing the adjustable rate mortgage into the fixed rate mortgage within a certain period. For example, the annual interest rate is fixed in the first 5 years.
3.Re-negotiable Rate Mortgage or Rollover: it fixes the interest rate of the fist few years and the monthly repayment amount, and then it allows borrowers to renegotiate the rates.
4.Graduated Payment Mortgage or GPM: the repayment amount will be quite small in the first 2 years, but it will be gradually raised in the 5th to 10th year.

 

29.What is Balloon Loan?

Balloon Loan requires that the borrower pay off the balloon balance within a certain time (usually in 3, 5 or 7 years). Its interest rate may be fixed or changed.

 

30.What is Jumbo Loan?

Jumbo Loan means the loan amount is over the amount that Fannie Mac and Freddie Mac allowed. For example, if the amount is $729，750.00 with the deadline of April 1, 2010, the interest rate of Jumbo Loan is usually higher than other loans.

 

31.What is Assumable Mortgage?

Assumable Mortgage allows the lender transfers the mortgage to the next buyer. Most mortgages are “Due-on-Sale”, only a few lenders provide Assumable Mortgage. Notably, the interest rate of Assumable Mortgage is not the original interest rate, and lenders will charge a transfer fee.

 

32.When transferring the house, who is the Title Deed for?

In Title State, such as New York, the Title Deed is kept by the lending bank until the mortgage is paid in full. But in Lien State, such as New Jersey, the Title Deed is in the buy’s hands.

 

33.What is Escrow Account?

Escrow Account is a special separate account that the lender pays Land Tax and the Housing Insurance for you. Usually in the transfer, the lender will escrow the Land Tax and the Housing Insurance of 1-3 months. Escrow Account has no interest rate. There are restrictions on the Escrow Account in The Real Estate Settlement Procedures Act. In accordance with the Act, the escrow amount the bank may levy is quite complex. But roughly speaking, there should be collection items no more than 2 months.

 

34.What is the difference between Home Equity Loan and Home Second Loan?

The common is their interest rate is tax deductible and both with house mortgage. The difference is Home Second Loan is fixed-rate loan and Home Equity Loan is usually with adjustable rate.

 

35.What transfer fee does the seller need to pay?

Attorney’s Fee
Realtor’s Commission
Realty Transfer Fee
Recording Fee
Repair Credit
Condo Association Fee
Property Tax Adjustment

 

36.There are how many categories of the property ownership in the United States?

Every state is different, but there are several main categories:
a). Sole Ownership: an individual or a unit completely and separately own the property ownership of the real estate, such as the property ownership of unmarried men and women, and the property ownership unilaterally owned by the married couples under the agreement.
b). Joint Tenancy: two more persons jointly own the consistent property ownership and the right to inherit. Each property owner does not distinguish the ownership share and can not separately dispose of their properties. If the one of the property owners dead, then other property owners automatically get the property rights. So Joint Tenancy can not be disposed by the testament. Law reads: for Joint Tenancy, there must be written documents expressly agreed that each property owner jointly hold the rights by a joint way. For example, some state provided, husband and wife jointly hold the rights by the way of Joint Tenancy.
c). Tenancy in common: two more persons jointly hold the integral property ownership by shares. Owners own the property rights and take responsibilities and obligations by shares. The characteristic of Tenancy in common is: the two sides do not necessarily have equal property rights. For the shares of the real estate, the property owners can not be separate the real objects, but they can separate the interests and they are also entitled to dispose of their own share of the rights and interests of the property. In addition, the time and the share of the obtained ownership may vary from each property owner. In most cases, the property right owned by two more persons is common right.
d). Title Holding Trust: it includes corporate ownership, partnership and trust property ownership. Its characteristic is the party exercises the rights and obligations of the property in accordance with articles o incorporation and the relevant laws and regulations.
e). Limited Liability Company or Partnership

 

37.Are the paid points tax-deductible when refinancing?

Yes, but not all. Points must be deducted every year by the loan period. If you pay $3000.00 points for 30-year loans, then the tax deductible points are $100 every year. But if you paid the points and do home improvement with the gained mortgage refinance, you have more tax deductible when taxing in that year. For example, If you had a 15-year mortgage of $100，000 this year, you paid $2000，00(2 points), and with the gained mortgage refinance of $25,000, you did the kitchen renovation. Thus, when taxing in this year, you can deduct the tax of $500 (25% of $2000). The rest of $1,500 can be divided into 15 parts, which can be tax-deductible for $100 per year.

 

38.What is the difference between the refinance of FHA/VA and other refinances?

The refinance of FHA/VA is called FHA Refinancing, no requirements of home appraisal and employment verification.

 

39.The loan company said the loans have been sold to other banks when transferring, what is going on?

Most loans were sold to Mutual Fund or insurance company after the transfer. The loan companies were just intermediate service providers and dealt with the monthly repayment and real estate tax etc. According to the National Affordable Housing Act of 1990, the lender must:
1、Inform the borrower in at least 15 days before the effective date of the loan resale.
2、Indicate the name, address, effective date of the new loan organization, and the update date of first payment and free calls.
3、Do not change the loan conditions.
4、Provide the borrower the response time of 60 days, during this time, they can not be subject to the late payment penalties.

 

40.What is prepayment penalty?

Prepayment penalty is vey limited and even illegal in most states. But it is very possible for the lender to regulate the prepayment penalty in the first few years. Usually, the penalty is 1-2% of the loan.

 

41.Can I change the inside of the house? Does my application is needed?

Yes. But we do not advocate that.

 

42.How about the warranty?

The warranty of the main structure is 10 years and that of the electrics is 1 year. You may enjoy all the maintenance-free if paying insurance cost of $324 every year. (Insurance company pays all the maintenance fees.)

 

43.What is the penalty for delaying the house delivery?

With very serious consequences, generally, it does not appear.

 

44.Can I write the name of the children under the age of 18 in the one-time payment? After the death of the father, can the child own the joint property right (father and son)?

Yes. With the joint of adults, adults must sign. And the kid and adults must be immediate family. The property rights can be directly owned by the children, but with high Estate Tax of 50%.

 

45.What is the application fee and the annual fee of opening the U.S. account?

No application fees. But $100 need to be put into the account. Open a checking account and a saving account.

 

46.How much is the water, electricity and coal? Is there sprinkler system in the garden? Are solar energy, telephone lines, and network lines available?

Water, electricity and coal is contracted by privates, and different areas vary. 
There is no sprinkler system.
Telephone lines and network lines can be installed directly. The tenants pay.
Solar energy need to be confirmed by the boss.

 

47.Do I need to put curtains on the windows or garden turf?

Shutters have been put on some important parts. The tenant undertakes the rest part.
The property management company management the garden turf.

 

48.If the mortgage can not be approved, can the deposit and the down payment be refunded? With interest or not?

The deposit and the down payment can be refunded. Due to the short loan period and low interest of US dollars, so there is almost no interest. And the there is little risk for the stability of US dollar.

 

49.What taxed I need pay when selling the real estate? What items can be tax-avoidance?

Value-added tax (VAT) and Rental income tax.
VAT=15*[Real estate appraisal price when selling-(the paid interests + 1.1% of Property Tax every year + Depreciation + maintenance fees)]
Rental income tax: 10%-38% of the rental. Rental income needs to be taxed every year. We can help the customers to do that.