General Information: Real Estate practices for expats abroad

There’s a myriad of things you need to know about real estate practices abroad, but the main thing you should remember is that different countries have different sets of rules when it comes to housing and property. There are still several countries that do not allow foreigners to own property in their country, and the rules regarding foreign property ownership can be different depending on the country. The best way to handle property buying, renting, etc. is to have a real estate agent, but there are still some expats that opt to settle matters of real estate and property on their own. In this section, we explore all kinds of information that will help you learn about real estate practices abroad.

Real Estate Agents

Most people tend to use real estate agents or real estate companies when it comes to purchasing or renting property, not just abroad, but even in our home countries. It is convenient to ask for their service as they know the local housing market and practices better, therefore they can handle all the paperwork and all the other hassles that usually comes with property ownership or rentals. However, the disadvantage of real estate agents can come when you are completely uninformed about the local market, practices, and even the general neighbourhood and types of housing information in your new country of residence. It is important for you to know the basics when it comes to property in your new country so you can find the housing that’s best for you and not just best for the real estate company you hired.

Mortgages and Property Ownership

Expatriate home buying can be an exciting and enjoyable process once one understands a few basic principles of purchasing overseas property and overseas mortgages.

Contracts should never be signed if they are not fully understood, especially if you have not translated it into your native language. Advice from specialists is a must have. Seek out independent architects, surveyors and solicitors that are proficient in the property's country laws. You will want an expert in the process of that country and the specifics of property purchase and title transfer.

Occasionally you may find a developer has borrowed funds and part of this amount as been assigned to each plot as additional security to the developer's bank. You may find yourself inheriting a debt on your property before you even purchase. An experienced solicitor will be able to check this out for you.

Check for “opt-out” clauses when looking for mortgage financing so that if the loan fails the approval process you can receive your deposit back. Overseas mortgages usually require substantial deposits and it is wise to assume you will need to pay for most of your property in cash.

Before signing an agreement to purchase the property, arrange your mortgage “in principle” and unless you plan on using the property as rental income, you should arrange your financing in the currency you earn your income in. Some lenders require them to be the same but will make exceptions for rental property purchases.

Another consideration is the cost imposed by the legal and governmental authorities for purchasing property in that country. Your estate agent or mortgage originator can verify this for you. Also keep in mind that expenses do not end once you agree on a purchase price. There are legal fees, taxes and insurances that must be met in your host country and they can often be more expensive than what you may be accustomed to with American real estate transactions.

It is recommended that you open a bank account in a local country, acquire a Certificate of Importation for funds you bring in and then schedule standing orders with that bank to pay bills and taxes in a timely fashion. In some countries, such as France, Portugal and Spain, failure to pay on time could result in immediate court action and or seizure of your property.

Another option to consider is pooling funds with family or friends. This will open up your options regarding size and style of property as well as add to your negotiable funds for securing a better loan. Many overseas loans restrict loan values to 50-70% of the purchase price or valuation (whichever is lower). Loans are also often restricted to 20 or 25 year loans, or up to age 70, whichever comes first. Some countries may offer exceptions to the age rule if you can prove retirement income.

As with any large purchase, plan to give yourself a break, a “cool off”, before jumping into a purchase. Foreign property ownership is exciting but is filled with new laws, customs, cultures, requirements and technicalities you may not be familiar with in the United States.

Buying Property Abroad

While many home buyers complete their transaction and are very happy with the deal and the home they acquire, there are also pitfalls to trap you if you are not careful. 

Restrictions in Property Ownership by Foreigners and Differences in Legal Title

Many countries are quite happy for non-citizens to buy property and enjoy the same property ownership rights as their own citizens, however there are numerous countries who will not allow non-citizens to own property. In some instances, a foreigner may own a lease but not the freehold, in others there is an outright ban on foreign owners. This can usually be worked around, frequently by the formation of a property holding company in the country concerned – the expat owns the property company which in turn owns the property.

Legal title may also vary depending on the country’s own legal system. In some countries it is not possible to acquire property at all because title can only vest in the state; this may be a blanket situation or only affect certain parts of the country. Moving from that extreme situation there are numerous variations on how a buyer can acquire title and the exact nature of the title they can enjoy. Related to this is the impact of building regulations on what can and cannot be done with property – in many countries there are restrictions on building new homes, and unless you are able to obtain “planning permission” or “regulated building” status, that perfect lot you have bought will never see your dream home built on it.

Home Purchase Financing

Buying an overseas property presents the issue of home financing. Mortgage products and services will vary depending on the market and regulations in the relevant country. It may or may not be possible for expats to raise home financing in that country, while it may not be a good deal to use a mortgage product in the home country in any event. 

Where a foreign mortgage is used, there are the issues of making the repayments in the foreign currency – if you are being paid in US dollars but your mortgage repayments are in another currency, then you are exposed not only to interest rate movements on the loan, but also to fluctuations in the exchange rates which can have a dramatic impact on your monthly payments even though the interest rate is fixed.

Many expats seek to raise the purchase price using their home in their native country so they can make the overseas property purchase in cash. This means that they are using a mortgage system they will understand better, and where they are earning money in the same currency as their mortgage repayments, then they do not have the risk of foreign exchange fluctuations.

Differing Building Standards & Safety Issues

Different countries have very different views on building and construction quality and the safety of the structures. It is imperative that overseas property buyers take every precaution when they are buying a home; this means using a reputable builder who is familiar with the level of building standards and quality you expect. More than this, you need to ensure that you arrange for structural and building surveys to be conducted and to a standard which you are happy with. It is not only the bricks and mortar construction you need to be satisfied with, but the supply of water (don’t assume that because the toilet flushes, you have an adequate water supply); the safety of the electrics and the location of the property itself.

The Need for Expert Legal Representation

You would not buy a property back home without a lawyer, but you may be surprised at how many purchase a home overseas without ever seeing one.  It is imperative you retain the services of an experienced local lawyer who is familiar with the specialized issues confronting overseas buyers. Good legal representation will help to minimize the risks associated with buying and owning an overseas property and improve your ability to make a good investment and enjoy your overseas home.

When you are in abroad, you will have to consider the basic things that will keep you alive and comfortable. Apart from food, a shelter will be a major factor that must be deliberated upon. Having to buy a property abroad is even more arduous. What could have been a place to reside temporarily may be a place to settle permanently down. That is why it is sensible to consider buying the property for long term benefits. Deciding on where to buy and what kind of property to invest on are the essentials that must likewise be carefully thought of by the expat. As some may consider buying a house a dead investment in some countries, it is considered a clever thing to purchase.

People buy properties abroad for many various reasons. As some enjoy dual citizenship and finds it more practical to be owning a home rather than rent flats or apartment while in the country, some ceases the opportunity to purchase properties while the economy in a country has dived, and properties are sold left and right. Some also enjoy the prospect of buy and sell of properties to be lucrative and feasible that will sustain regardless of fluctuations in the economy chart.

It is also a reason for some to purchase properties abroad when relocation is to be long term and permanent. It is undeniably true that renting an apartment sums up to be more expensive rather than buying one's property. That when the time comes the expat will go back to his country of origin or relocate elsewhere, the property bought can be set out for rent. That way it will become self-liquidating and still be able to enjoy its returns.

It is good if the expat will first consult the expert advice of a financial analyst before making the purchase. This will not only allow him to assess and appreciate the economic condition of the country but will likewise allow him to make a good find. Some foreclosed properties are found in the prime lots of the city and will prove to be cheaper without any liens and free from encumbrances. Properties found in the outskirts of the capital cities are always lesser in price and yet very practical to buy.

If the expat's reasons for buying is for the sole purpose of having a permanent place to stay during holidays when they frequent the same country, purchasing one's place will always be the wisest decision. The same property can be put on lease during the interim times the owner is out of the country. Return of investments can be meted, and the place can be utilized and maximized at the same time.

Buying properties abroad will not only make you financially stable as of the moment but will also make your future more secure and attractive. An expat who is always on the look out of his financial assets finds an opportunity in investing abroad either through residential purchases or agricultural and perhaps commercial assets.

However, some countries have very strict regulations regarding expats and foreigners who would wish to own properties in their country. Some countries, like the Philippines for one, do not allow non-Filipino citizen residents to acquire real estates. It will only be through a marriage with a Philippine national that an alien residing guest can buy real properties. While this may be a crucial way to do before one gets the right to buy a property, this has not become a hindrance. Quite a large number of foreigners can buy their houses and have managed to establish residency that allows them to put a business and purchase more properties in the Philippines.

Regardless of the kind of mandate the government of a country has to property ownership by expats, the bottom line is, it is not an impediment for one to own property and make an investment in another country. The only barrier will be the capacity of a then person to procure property, and no other deterrent factor shall limit him from investing and expand his financial prowess.