The role of a real estate agent in the United States is very similar to Canada. The U.S. uses a multiple listing service (MLS) through which brokers share information on listings and compensation to cooperating brokers. One difference between the U.S. and Canada is that there are many more MLS in the United States. This includes over 800 different MLS covering areas from a single market to extended metro and regional markets.

Keep in mind that if you are working directly with a U.S. real estate agent in one community, they may not have access to an MLS in another community. To ensure you receive the best service, it is important to engage a real estate agent that is a member of the real estate board in the community that you are searching for a property. Another difference between Canada and the U.S. is that only 50% of real estate agents in the U.S. are members of the National Association of REALTORS® and are considered REALTORS®.

With respect to U.S. real estate brokerages, you may also notice in some cases that there may be staff working on different aspects of your real estate transaction. You may not be dealing with the same real estate agent throughout the entire process of purchasing a property.

When purchasing or selling a property in the United States, keep in mind that the tax system is different than in Canada. It is highly recommended that a foreign buyer obtain the services of a Certified Professional Accountant or an Enrolled Agent in the United States.

Some tax differences to consider include the ability to deduct mortgage interest and property taxes as deductions. In addition, as personal residences are subject to capital gains and estate taxes, an accountant can advise what allowances and exemptions may apply to your specific situation. Other relevant tax considerations include the FIRPA withholding tax on the sale of a property, which can be about 15%.

For investors, the U.S. also offers a way to defer taxes on the sale of a property through a 1031 Like-Kind Exchange. This program allows an investor the ability to defer taxes if another similar property is purchased within 180 days. Also related to taxes, it is sometimes common in the U.S. for land transfer taxes to be paid by buyers, sellers or both depending on the details of the agreement.

Financing in the United States differs from Canada in the following ways. It is common to find no term open mortgages offered by U.S. financial institutions where the amortization period is the term. In addition, mortgage approvals take much longer in the U.S., anywhere from 30-45 days. Financing may also require that the property be appraised. In some cases, if the appraisal is lower than the offer price, the buyer will need to make up the shortfall.

You will also find that there is also a larger number of mortgage brokers in the U.S. as they have been around much longer than in Canada. This has led to the proliferation of numerous options for financing beyond those offered by typical banks.

Many Canadians purchasing property in the U.S. however prefer using a Canadian bank with a U.S. subsidiary to complete their transactions. This offers the ability for the bank to access their Canadian credit information to help expedite the approval process. Alternatively, an option is also to use a line of credit in Canada to fund the transaction entirely and avoid using the U.S. banking system.

When purchasing real estate in a foreign country, it is recommended that your first offer be your best due to the complexities involved with international transactions. In many jurisdictions in the United States, listing agents are also not required to disclose multiple offers as they are in Canada. Buyers must ask for this information and sellers must agree to provide it.

International buyers should also confirm whether their agent is representing them as clients in a fiduciary relationship. Some states such as Florida automatically create a client relationship. However, the agent you are working with could undertake the role of a facilitator or transactional broker where your representation is limited. In Florida, there are three options concerning the role the real estate brokerage firm will assume: (1) nonrepresentation (or no brokerage relationship) for the buyer and/or the seller, (2) single agent of either the buyer or the seller, and (3) transaction broker for the buyer and/or the seller. Florida does not permit real estate agents to operate as dual agents where a broker represents both the buyer and the seller as a fiduciary.

Buyer agent compensation can also vary. Although it is usually through the listing agent, the buyer may be required to compensate the buying agent depending on their contractual arrangement.

When closing a property in the United States some things to consider include the role of the title company and closing officer in facilitating the transaction. The title company is responsible for registering the deed and providing title insurance while the closing officer is responsible for holding the escrow or trust funds. Unlike in Canada where a lawyer generally completes the closing, there are many parties involved on closing day. Pre-Covid, closings typically occurred in person with multiple representatives at the table. This could include lawyers, buyers, sellers, title representatives, real estate agents, lenders and closing officers. Post-Covid, this may be undertaken virtually however, it still requires the involvement of multiple parties.

Closing delays are common especially in the United States. This could be as a result of missing paperwork, financing, title issues, condo approvals, and funds transfer/clearing issues. In addition, there could be delays associated with obtaining insurance while in a ‘hurricane box’ in Southeast states such as Florida. From the beginning of Hurricane Season, June 1st, through the end of Hurricane Season, November 30th, it will be difficult, if not impossible, to buy certain insurance coverage for the peril of Windstorm or Hurricane damage (as well as other insurance coverage). If a named Tropical Storm or Hurricane enters an approximately 16,000 sq. mile box extending over Florida and the adjacent states and well into the Atlantic Ocean, then the insurance companies will suspend binding coverage.

Other closing considerations include the frequent use of termite/insect inspectors, as well as obtaining flood insurance. Your real estate agent should inform you if the property you are interested in is located on a flood plain. In addition, other insurance issues should be explored through a ‘loss history report’. Unlike in Canada, prior claims count against a property and not a person, which may result in significantly increased insurance premiums. A pre-closing walk through is also something that is common and is usually undertaken 1-2 days before closing.

Before deciding to purchase property in the United States, it is important to acquaint yourself with the visa requirements. Ownership of property in the U.S. does not bestow residency or a work permit. A Social Security Number (SSN) or International Tax Identification Number (ITIN) and a U.S Bank Account is required (especially if you are using the property for income). The process to obtain the documentation can take 7-8 weeks.

If you are interested in obtaining residency status in the U.S., there are many different programs in place that can help you remain in the U.S. depending on your needs. Keep in mind that some of the visas do not allow foreigners to work or undertake business activities. It is highly recommended that prospective buyers understand the various U.S. visa and immigration requirements. Additional information can be obtained through the U.S. Department of State – Bureau of Consular Affairs and/or the U.S. Citizenship and Immigration Services.

If you are only interested in using your property solely as a vacation home and are planning to visit the U.S. under a visitor visa for an extended period of time, you should be aware of how the substantial presence test works. You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. This can result in paying income tax in the U.S. on all your worldwide income. There is a formula available through the U.S. Internal Revenue Service that can provide guidance and information on how to obtain a ‘closer connection exemption’.

Additionally, it is also important to obtain adequate private health coverage in the U.S. as the amount of coverage provided by provincial health insurance plans is very limited. Prospective buyers may also want to explore joining snowbird associations that cater to seasonal residents of the U.S. These associations can be a valuable resource and often have access to preferred vendors for Canadians owning property in the U.S.

There are other general considerations when purchasing property in the United States. As a result of our close ties economically, there are many similarities between U.S. and Canada making it an ideal country to invest in. Disclosures work in a similar way in that sellers must disclose material facts between contract and closing. In the United States, this is undertaken using a standard disclosure form. There is also a mandatory federal disclosure for lead based paint.

With respect to forms, you will find that there are many more pages of forms in a typical purchase and sale agreement including the addition of a termites form. There is a also a specific requirement to address money laundering activities similar to Canada. This is undertaken through the Financial Crimes Enforcement Network (FinCEN) and applies to amounts greater than $300,000 USD in limited markets in the United States.

There are also some relatively minor terminology differences between Canada and the United States. In Canada, the term trust is used to describe money that is being held by either a lawyer or a brokerage. In the United States, the term used is called escrow. In addition, a deposit is called earnest money in the United States. Lastly, any conditions in agreements are referred to as contingencies in the United States.