Representing Foreign Buyers of Real Estate in New York

Description

I. Introduction background and experience

1. 30 years’ experience as a real estate lawyer in New York
2. Speak, read and write French, Spanish, Portuguese and Hebrew
3. Extensive experience representing high net worth individuals from foreign countries
4. Extensive experience in every facet of real estate ranging from banks, coops, condo boards, individuals and developers
5. Very knowledgeable of each perspective

II .Why New York?

1. Pied a Terre
2. Investment
3. Real Estate Market has survived the test of time here.

III .Imagine Buying Real Estate in Europe or South America

1. Where do you turn? Where do you begin?
2. Do you need a lawyer?
3. In civil law countries (Latin American and Europe) no lawyers, use a Notary to execute transaction, no title insurance, no board approval, no estate tax, no wills
4. Do you need an accountant?
5. Who are the important players in the process?
6. The broker is the contract person-the go to individual that must directthe buyer to a team of players that will take care of the foreign investors
7. Issues, Obstacles and Problems facing the Foreign Buyer and Solutions
8. Language barriers
9. Cultural barriers-Many foreigners investing in U.S. real estate are looking for lowest tax on rentals, no estate or inheritance taxes, simplified succession rights and anonymity
10. Legal differences- Need to know citizenship of person, direct ownership, indirect ownership, or ltimate beneficial ownership, intended use of the property and purpose of the investment
11. Currency exchange rates can affect the deal

V.The Education Process

1. Walk the buyer through the process
2. Avoid the element of surprise
3. Warn the buyer without intimidating the buyer
4. Explain the application process
5. Make board package part of the contract
6. Explain what a closing is
7. Explain the purchase process from due diligence to closing-like a movie preview of coming attractions.

VI.Condo v. Coop

1. Steer your buyers to condos
2. Sponsor sale
3. No board approval
4. Assets not necessarily required in the US
5. Explaining the intrusive nature of coops to foreign buyers is impossible
6. Condo’s can be rented
7. Financing for foreigners in coop is difficult
8. FinCEN Reporting on Ultimate Beneficial Ownership for Transactions over $3,000,000.

VII. Financing Obstacles

VIII. Estate Issues

1. Need to have a domestic will, avoid intestate succession
2. condos and coops can be treated differently for tax purposes (Condo is real property; Coop is intangible asset)
3. Structuring of the deal to avoid 40% gains tax in the event of foreigner’s death
4. Coordinate with foreigner’s local counsel and team in host country with US team

IX.Tax Issues

1. Tax at Date of Death is 40% of Fair Market Value
2. No Adjustment for Inflation
3. No Reduction for Mortgage Debt
4. Only $60,000 Exclusion Amount for Foreigners
5. The U.S. has Estate Tax Treaties with 18 Countries-Limited Benefit f.
6. Ownership Structures:
7. Sole Owner, Joint Owners, Joint Tenants with Right of Survivorship (assume first name paid the purchase price, need to have foreigners write separate checks) tenants in common, sole member LLC, multimember LLC, Foreign Corporation
8. Check the box election to be treated as Partnership, Corp, Individual (disregarded entity)
9. Section 1031 Exchange, must be held for investment or business, must put in extra cash due to FIRPTA

I.FIRPTA

1. Sales over $1,000,000 now withholding is 15%
2. Sales over $300,000 and under $1,000,000 is 10% if used as residence
3. Withholding for joint owners
4. Withholding Certificate

X.Know Your Client- Very Important to know the source of funds and references for client.

XI.Some Logistical Considerations

1. ITIN/EIN
2. Opening a Bank Account
3. Wire transfer
4. Advance planning very important
5. Transferring funds
6. Powers of Attorney
7. Corporate Resolutions
8. Purchase Time line Explain carefully
9. Manage Expectations
10. Post Closing Needs of the Foreign Buyer
11. Conclusion
12. It all comes down to establishing trust with the foreign buyer
13. Assemble team, lawyer, accountant, bank, management, landlord tenant attorney.
14. Make them feel as comfortable as if they are buying in the host country.
15. If you win with one foreign buyer your name will spread to all their friends in the host country.
16. Questions and Answers