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| Canadians Buying Property in Arizona |
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Tips for Canadian when buying property in the USA
Buyers Advisory
The state of Arizona has put together a Buyer’s Advisory for all buyers that includes many information resources – click here to visit the link on our website for this Advisory. Paying Cash
If you plan to purchase an Arizona home using cash, be prepared to have your local Canadian banker or investment portfolio manager prepare a letter that states you have liquid funds in excess of the amount you plan to spend as cash for the home. As your Arizona Buyer’s Agent we will need to ask for this verification of funds document which we will include with your purchase contract when an offer is being made. Getting a Loan Note- we can refer you to a lender who can walk through all these lending steps with you well in advance of when you come to Arizona to actually buy a home. A loan process does take a bit more time for our Canadian friends to the north, so apply in advance. Also applying in advance will allow you to have an idea of the exact price of home you should be searching for. We can make referrals to you of top quality, ethical lenders who can assist you. When purchasing a vacation home (second home) a minimum of 25-30% down will be needed. For the purposes of obtaining a loan the definition of a vacation home is that it will be used for recreational/vacation purposes during a portion of the year and there will not be any monetary benefits from ownership. This means the home can’t be rented to a tenant during the time is it not being used for vacation. A disclosure statement to this effect will be required during the loan process.
Two-three months of bank statements will be required by the lender as well as documentation of the needed funds for the down payment. Additional reserves of about 3-6 months available will need to be substantiated. Note – if bank accounts show large depositions beyond regular income these amounts will have to be explained. Credit will checked through an international credit reporting agency. The credit report needs to come up with squeaky clean credit. (Any credit issues may make it next to impossible to obtain a loan from a lender in the USA.) Full income verification will be needed which may mean a letter verifying employment, relevant bank statements and a Canadian passport (or driver’s license) copy. (Note some lenders will require both, so come prepared.). The lender will need to verify all of this information before they can then make a credit decision.
Our lender affiliates tell us that as of Sept 2008 Canadians can expect to pay interest rates between 6.5% -7.5% for 30 year fixed or ARM loans when buying second homes here in the USA. (With the current volatile credit markets, all of these guidelines are obviously subject to change at a moment’s notice.)
Buying more than a second home in Arizona puts the person into the category of an “investor”. Subsequent third, fourth and more homes would be considered as “investment homes” and additional requirements, including the amount of down payment, and interest rates may vary, including additional down payment amounts, and possibly reserves of up to 12 months. One of the main differences with purchasing property in Arizona involves the process called “Escrow”. The time between the mutual acceptance of an offer to purchase and the date set for closing and the title actually transfers is called Escrow in Arizona.
Typically in Canada when one buys Real Estate a lawyer is hired to protect the interest of the buyer. The seller normally hires their own lawyer to represent their interests. Both lawyers work on instructions they receive from their respective clients and on the sales agreement to prepare the paperwork necessary to complete the title and transfer the money.
In Arizona real estate transactions, this process typically uses a neutral, disinterested third party, such as an escrow/title company instead of attorneys. The title company holds documents and transaction funds while they carry out the instructions that both the buyer and seller have agreed to. The escrow company takes care of processing the transfer of funds, as well as handing issues such as Title Insurance, and any of the other specifics that are needed to make sure there is a lawful transfer of property ownership.
There are a number of ways a person or persons, can take tile of property in Arizona. The escrow company can provide a list of possibilities. Each possible way of obtaining title has legal or tax implications which the buyer will want to check out thoroughly.
The insurance industry has developed a database system in recent years that keeps track of claims of people and the homes they own. When someone files an insurance claim this information is put into this national database. The system acts a little like a credit report, but it relates to insurance. It is called a C.L.U.E. report. In “traditional sales” (not short-sale or foreclosure) it is customary for the buyer to receive a C.L.U.E. report through their Buyer’s Agent from the Seller’s Listing agent. This report helps the buyer to determine issues of insurablity of the home. However in this current market with short-sales and foreclosures being a large portion of the Arizona inventory, these C.L.U.E. reports are not usually available – the banks who are holding the foreclosures do not provide this data. Regardless, it is important for a buyer to check with their insurance agent of choice to determine the insurablity of the home they plan to buy along with the rates. This insurance due diligence must be checked out by the buyer during the inspection period.
After the buyer’s offer is accepted there is a ten day period when the buyer can have inspections done. The ten day time frame can requested when the contract is written. The buyer’s request for a change might or might not be approved. (Expect in this current market of foreclosures that the lender will sometimes only allow five days instead of the traditional ten days.) During the inspection period a buyer can hire structural inspectors, termite inspectors, mold inspectors, swimming pool inspectors, or any type of inspector they want to inspect the property. (As your Buyer’s Agent we have a complete list of competent, Arizona licensed inspectors for you to select from.) Note - if a buyer is funding the property with a loan, the lender will require that a termite inspection is done.
If a home is a foreclosure or a short-sale the property is sold “as-is”. No repairs will be made if there is something found in the inspections that the buyer does not like. Sometimes an exception to this is if evidence of termites is found. Sometimes the lender will provide a termite treatment for the property – but this is a case by case situation.
If the home is a “traditional sale” after the inspections are completed there is a document that is filled out called a “Buyer’s Inspection Report and Sellers Response (BINSR)”. On this form the buyer indicates they have made their inspections and either 1) they are happy with the home as it is 2) they are asking for some repairs to be made and giving the seller the opportunity to make the repairs before the home closes or 3) they are not happy with what was found in the inspections are withdrawing their offer. Items a buyer wants done cannot be just “cosmetic”, they need to be something materially deficient with the home. The seller does not have to agree to make any repairs. If there is not agreement the sale will not be completed.
Arizona law requires all funds be cleared by the escrow company prior to the actual closing. Out of state, out of country, cashier’s checks most often take five or more banking days to clear. Because of this it is highly recommended that a buyer wires the needed funds to the escrow company. But funds sent by wire are not instantaneous; therefore the escrow company will recommend the a buyer’s funds be wired several days before a property is expected to close.
Closing Escrow
In Arizona the buyers and sellers do not meet to close on a property. In fact neither the buyer nor the seller even needs to be in Arizona when the transaction happens. If the buyer or seller is in Arizona they can certainly go into the escrow office to sign closing documentation paperwork. But in many cases we arrange with the escrow company to have a mobile signer to come to you. You can be in Canada, or elsewhere in the USA when you are buying (or selling), and a mobile signer can be sent, or the documents can arrive via FEDEX and you can go to a bank or other acceptable facility where a notary will notarize your signing. After being signed the paperwork is returned to the escrow firm. As your Buyer’s Agent we always work with the escrow company to double check all documents that pertain to your property and the closing.
Title changes in Arizona when the deed is recorded with the County. Only after property has been recorded with the County can the actual keys be turned over to the new owner.
Helpful Links Buying a home sounds like a lot of tasks you say. It is a lot of tasks - and that is one of the many reasons why it is critical, for you, as a buyer, to have a full time, experienced, licensed, Arizona real estate agent acting as your Buyer’s Agent to help you through the process. The Benjamin Team is experienced and ready to help you.
Call the Benjamin Team at 480-201-3001 or click here to Contact us |
Many Canadians consider Arizona a great place for a second home. When Canadian weather is blustery and cold and Canadians are shoveling snow, Arizona weather is warm and pleasant. There is a multitude of Phoenix area golf courses, spring baseball training camps, restaurants, shopping and general all around good weather and Arizona is only a short plane trip away for Canadians. Is it time for you to consider a second home here in Arizona? In this current “2008 buyer’s market” there are many terrific buying opportunities, whether you are looking for a single family home, gold course communities, active 55+ communities, or town homes.
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