Buying a home in U.S. could land you in a legal minefield

Monday, June 30th, 2008

Ray Turchansky

EDMONTON — A recent column mentioning that the next nine months could be an optimal time to buy a house in the United States caused a couple of readers to warn of pitfalls.

RBC Asset Management senior portfolio manager Brad Willock suggested Canadians should thoroughly research U.S. properties, and noted that planeloads of Europeans are also arriving there with chequebooks in hand, anxious to take advantage of a depressed housing market.

Most people buying U.S. property find that if they do their due diligence they have a satisfactory experience. Many even marvel at how efficiently and cheaply they can hire people there to do renovations, ranging from landscaping to changing appliances.

But there have been problems with some U.S. purchases. People who made a down payment on a house in a planned development have had the developers walk away from the project as local market conditions or credit availability deteriorated. Some U.S. sellers have tried to change the deal at the last minute. And some Canadian owners of U.S. rental property have run afoul of U.S. labour laws.

Reader Michael from Vancouver warns that buyers of U.S. property should be aware of various laws and regulations.

He writes: “Let us assume you can find a renter with a solid income stream who will happily rent your new U.S. property and help you with your investment. Once you rent out this property, you must not be tempted to even so much as cut your grass or paint a fence as, according to federal law, you must hire a U.S. citizen to do any work on your income property. You will be in for a nasty surprise if you believe your unemployed or jealous neighbours will not contact the IRS.”

An Edmonton resident recently completed his purchase of a Phoenix property without any problem, but cautioned that if a person is trying to buy a home that has been foreclosed, there can be holdups at the bank while the i‘s are dotted and t’s crossed on the paperwork. He also noted that some U.S. developers, in a move to avoid speculators, have a clause in their contracts that if you go to sell within the first year or two of possession, the developer has the first right to buy the house.

And buyers are forewarned that America is the land of class-action lawsuits, where you could fall victim to one or be seduced into joining one. That being said, you will likely make your house purchase using an escrow agent rather than a lawyer.

If you are buying a U.S. house with the idea of moving there permanently, a good reference book is The Canadian in America, by Brian D. Wruk with Terry F. Ritchie. It discusses everything from Canada-U.S. differences in medical coverage to auto ownership to rules for pets. Among foods you’ll likely have to live without in the U.S. are Tim Hortons coffee and Boston Pizza.

© The Vancouver Province 2008


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