Ask an Edina Realty Lawyer: Can non-US citizens buy real estate here?

Homeownership can be complicated, but we also think it's one of the most rewarding ventures out there. In our series, Ask an Edina Realty Lawyer, we are hoping to demystify some of the trickier aspects of buying, selling and owning a home.

In this edition, one of our lawyers discusses legal issues involved when non-US citizens buy or sell property in the country.

Dear Edina Realty Legal,

Is it legal for a person who is not a US citizen to buy and sell real estate in the United States?

As a general rule, a foreign person is permitted to purchase and sell real estate in the United States. Some states have adopted laws that may minimally limit a non-citizen's right to acquire property. For example, Minnesota has a law that prohibits non-citizens from acquiring an interest in agricultural land unless they hold permanent resident alien status.

There are some considerations when a foreign individual is involved in a real estate transaction.

If a non-citizen is buying real estate:

• Obtaining a mortgage loan to purchase property is possible, but the process can be more difficult than for a US citizen.
• The choice of how one owns the property can be important. As an example, if a non-citizen dies owning real property in the United States, that asset is subject to an estate tax and the deceased owner is not entitled to the significant tax exemption available to citizens. On the other hand, if the property is owned by a corporation, it may avoid certain tax issues.
• Federal and state laws prohibit discrimination against a person in the sale of real estate on the basis of their race, religion and nation of origin.

If a non-citizen is selling real estate:

• There is only one significant issue and that is a federal law called the Foreign Investment in Real Property Tax Act (FIRPTA). When real estate is sold, the gain on the sale may be taxable. FIRPTA is designed to ensure that the federal government captures its tax revenue from non-citizens.
• Under FIRPTA, if a foreign person sells real estate, the buyer may need to withhold 15% of the purchase price and send it to the IRS.
• Many transactions involving a non-citizen seller will not require this tax withholding. The rule does not apply to sellers who are permanent resident aliens, which you may think of as someone holding a "green card."

To ensure they have considered all legal ramifications and bypass any unforeseen issues, buyers and sellers who are not United States citizens may wish to consult with an attorney or accountant before entering into a real estate transaction.

The Edina Realty Legal Department serves as in-house counsel for Edina Realty and does not represent private clients. This Insight is not intended to provide legal advice.