Buyers from all over the globe, but mostly from Canada, South America, and Europe, are progressively purchasing second homes in Southwest Florida. How to buy a home in Naples FL or buy a house on Marco Island and the purchase process is sometimes completely different, sometimes there are parallels with what needs to be done in which order. Some of the things that may be different are listed below:
The “MLS”
“MLS” is the abbreviation for Multiple Listing Service and describes an electronic database in which all brokerages share their properties for sale, including all available information about features, taxes, etc. Brokerages do that because they access an incredibly big pool of salespeople, not only domestically through the MLS, but also internationally through a huge variety of platforms, cooperative websites, and social media channels. MLS listings Marco Island and Naples Florida MLS listings contain all available properties of the region.
As basically every Broker and Realtor® is connected to the MLS and advertises their listings, everyone has access to all listed properties, be it homes, condos, lots, etc. and can show these to and purchase them with clients. This is different to other countries, where Realtors® and Brokers are often restricted to selling only the properties listed by their own brokerage. In the U.S. the compensation can be paid by sellers and split 50/50 between the listing and selling brokerage but this can vary and each party has to compensate their own agent. If there is a commission split it is determined by the seller through the listing agreement before the property is advertised on the MLS.
If you do not want to miss out on properties by looking on websites that have incomplete information make sure you use our Marco Island Florida MLS listings and Naples Florida MLS listings.
Realtor vs. Broker
In the U.S., real estate professionals are called differently, this can include “Real estate agent”, “Real estate broker”, “Realtor®”, “Listing agent”, “Selling agent”, “Seller’s agent” or Buyer’s Agent”. A real estate professional is an individual who has a state issued license and can help anyone sell, buy, or rent different types of properties. They must complete a training process and pass a school and state exam before they are allowed to work with members of the public. A licensed individual is called “Realtor®” if he belongs to the National Association of Realtors. The Realtor has sworn to abide by the code of ethics and standards of the association. The title “Broker” describes someone who has some additional education beyond the agent level and passed a broker’s exam and therefore can open his own real estate office. They both can sell the same type of property without any restrictions.
A listing agent or seller’s agent represents a seller and assists with a variety of tasks like determination of the listing price, coordination of showings, contract negotiations, inspections, and the closing process. A buyer’s agent represents a buyer and assists the client with finding the right property, preparing an offer and negotiating it, using their network of professionals such as attorneys, home inspectors, mortgage brokers, C.P.A.’s etc. Generally both brokerages only get paid when the property sells. The best real estate agents in Naples Florida or best real estate agents in Marco Island do not necessarily have to be brokers.
Working with several agents?
Because the MLS is this all-encompassing tool for all Naples Florida real estate companies, and every Naples Realtor and Marco Island Realtor can access the same properties it does not make sense to work with multiple Naples real estate agents or Marco Island real estate agents. To keep the process easy and prevent delays and problems between different relationships a buyer’s best interest is to work with just one buyer’s agent in Naples or one real estate agent in Marco Island Florida – find out who is the best match for you and strategize with one agent.
Are there any specific requirements?
Generally, there are no requirements or restrictions for foreign buyers to buy and own real estate in Florida. They are subject to the same laws as U.S. citizens. However, there is a new law that came into existence in 2023. On May 8, Governor Ron DeSantis signed into law Senate Bill 264 (“SB 264”) (codified Fla. Stat. Ann. §§ 692.201-205), which seeks to restrict certain foreign Buyers’ purchases and investments in specific types of real property located within the State.
Effective July 1, 2023, this Florida law prohibits the purchase of certain types of Florida real estate by “foreign principals” from “foreign countries of concern.” Violation of the new law can result in criminal penalties. It is also a crime for a person to “knowingly sell” property in violation of the law.
This was added to the latest contract language:
CONVEYANCES TO FOREIGN BUYERS: Part III of Chapter 692, Sections 692.201 – 692.205, Florida Statutes, 2023 (the “Act”), in part, limits and regulates the sale, purchase and ownership of certain Florida properties by certain buyers who are associated with a “foreign country of concern”, namely: the People’s Republic of China, the Russian Federation, the Islamic Republic of Iran, the Democratic People’s Republic of Korea, the Republic of Cuba, the Venezuelan regime of Nicolás Maduro, or the Syrian Arab Republic. It is a crime to buy or knowingly sell property in violation of the Act.
At time of purchase, Buyer must provide a signed Affidavit which complies with the requirements of the Act. Seller and Buyer are advised to seek legal counsel regarding their respective obligations and liabilities under the Act.
Financing
If you need financing, you should consult with either a mortgage broker or bank directly to see what they can offer you. Internationals often must go through so-called foreign national financing and not all the lenders offer this type of program. Sometimes banks in your home country will be able to help.
To go shopping for a home you need to be pre-approved by either a domestic or international lender to show the seller that you are a qualified buyer.
This way you know the budget you have and can get all necessary details on loan expenses and monthly payments etc.
In general a foreign buyer must have about 25-30% of their own capital to get financed, when it comes to new construction this may go up to 35%.
Any Florida real estate for sale in Naples or Marco Island can be financed. Here you can get more detailed information.
Local bank account
To purchase a property in Southwest Florida you do not necessarily need an account at a local bank. All monies can be wired from abroad to the escrow account of the title company or attorney and will be disbursed to the parties that are supposed to get them.
Property insurance
Insurance, especially after hurricane events is always an important factor when you purchase a property that is located on the water, be it a canal, beachfront or even an island. Coastal areas are always more expensive but properties right on the water pay a premium that you should know about ahead of time.
When you finance most of the time flood insurance is mandatory by the lender, if you are a cash buyer this is at your own discretion, as well as the homeowner insurance.
If you buy newer homes that meet recent building codes or are built higher off the ground, insurance companies will honor the building standards and features and premiums may be lower. If the property is not located in a designated flood zone, commonly called X zone, homeowner and flood insurance may be lower as well.
If you own a condo, townhouse or similar property, the association’s master insurance policy covers the exterior of the building plus any common areas. Whatever is inside the unit, be it furniture, appliances, or an A/C handler, will have to be insured by the unit owner. In the case of a home in an HOA, the owner is responsible to have coverage for everything on his property. Any insurance agency in Naples or Marco Island will be able to send you a quote for a property
Here you can get more detailed information.
Property tax
Property taxes play a crucial role in funding local government services and infrastructure development. Below you can read how property tax is assessed, its purposes, exemptions, and the process of payment.
Property tax rates can vary based on several factors, including the location, the assessed value of the property, and any applicable exemptions or deductions.
It is important to note that property values and tax rates may change over time. In case you plan to move here, buy a property and call it your primary residence, there will be a cap on the yearly increases that property may face.
In order to be able to make it your primary residence you will have to have to become a U.S. citizen, be a green card holder or have a Visa to live here. Let me know if you need help exploring the options of permanently staying in the United States.
Here you can get more detailed information.
Rental income and taxes
Simply owning a property in Southwest Florida or using it for yourself does not require you to file a tax return. However, if your second home serves as a rental property, you will need to file a federal tax return in the U.S. on any rental income. While you have to declare the income you can at the same time deduct any costs and fees for management, maintenance, utilities, the mortgage, and the interest etc.
As the state of Florida does not impose a state income tax, you will only be paying tax to the federal government. Even if you have filed your U.S. tax return, you may still have to report this income in your home country as some tax treaties with other countries require that.
Consult a Certified Public Accountant (C.P.A.) to represent you when filing and have them connect with your tax professional in your home country to make sure everything is taken care of.
Especially when you want to sell, a C.P.A. will be necessary to guide you through the tax process.
Selling Your property in Naples, Florida
There is a tax law that concerns foreign nationals at the time of disposing of real estate in Naples Florida or real estate in Marco Island Florida. The FIRPTA law (Foreign Investment in Real Property Tax Act) which was initiated in 1980, mandates that 15% of the contract price of the owned property must be withheld at the time of the closing. This serves to cover taxes on any potential gain and “forces” the seller to file a tax return to get the overage, beyond what is owed, back. The C.P.A. will review your original purchase numbers and find out the difference is to your proceeds from the sale, also applying paid property taxes etc.
You can also apply for a withholding certificate with which the withheld amount is not being sent to the IRS immediately but is kept at the title company until the IRS decides on the owed tax amount. Foreign sellers can also defer the tax on gains when they utilize a process, called 1031 exchange, in which they use the proceeds from one sale to purchase another property in a specified time frame.
To follow the specific rules for either the FIRPTA or 1031 exchange process you need to involve professionals that can help you navigate those.
If you are looking to buy a Marco Island home or a Naples estate, you should familiarize yourself with terms that may be unknown to you like:
The HOA
HOA stands for Homeowner’s Association and is an organization within a residential community, run by a board of directors, that designs and enforces rules and guidelines for a community, subdivision, or condo building. The task of an HOA is to provide the structure and funds for a well-maintained community. When you purchase a property in one of these communities, you become a member of the HOA. Most HOAs make it mandatory for owners to become members. Generally this is a good thing, however it usually comes with obligations.
HOA’s need all owners of a unit to pay a monthly, quarterly, or annual maintenance fee for common area maintenance and the upkeep of facilities. These could include community swimming pools, tennis courts, a guard house, elevators or even garbage disposal. Beyond that they may require you to shoulder one-time assessments to pay for larger expenses, which could be the construction of a new building or the extension of the existing clubhouse.
Being a member of an HOA means you agreed to abide by the association’s rules and restrictions. That could be the exterior paint color of your unit or what you can place in your yard. The HOA will financially manage reserves which cover unforeseen expenses like repairs due to a hurricane or simply an aging roof. These expenses differ depending on where the unit is located and how large it is. Talk to the HOA beforehand and get a history of assessments and reserve usage to understand how well the HOA manages the community.
Documents that a buyer has to be provided with before he can be locked into a purchase agreement for a condo in Naples Florida for sale or a condo for sale in Marco Island Florida are among others: Declaration of Covenants, Conditions & Restrictions (CC&s), Articles of Incorporation and Bylaws, Rules and Regulations, Financial Records of the Association, and a statement of the current periodic assessment (or homeowner’s dues) amount.
The Master HOA
When it comes to larger developments the chances are high that a property owner is a member of their single-family homeowner association or condo association and at the same time a member of a master association. That development would then have multiple single-family home and/or condo neighborhoods and therefore the master HOA would govern and maintain the shared areas and amenities such as boulevards, tennis courts, fitness clubs, entry gates, etc.
HOA vs. Condo association
The most notable difference between an HOA and a condo association is the ownership of the units. While homeowners individually own their parcels and homes, and the HOA only owns the common areas like the clubhouse or swimming pool, in a condo association, each member owns his unit but also has joint ownership in the building and its grounds.
So you can say condo fees are generally used to maintain one’s own property, however HOA fees support another’s property.
The condo association’s fees are usually higher than HOA’s fees, as maintenance and repairs of the condo building and common areas like pools, parking lots and other areas, are higher. Homeowners pay the expenses of upkeeping their properties, which therefore do not show in any fees.
Before you buy any of the condos in Naples Florida for sale, condos in Marco Island Florida for sale or townhomes for sale in Marco Island Florida you should get all the details on association fees, assessments and other expenses that are needed in order to compare the purchase price of these properties.
General restrictions
If you have a pet, make sure you understand what the restrictions are. Even if a community is allowing you to bring pets there may be certain rules considering the breed, size or weight of a dog or the number of cats you can keep. Exotic animals like snakes or rats are commonly not allowed.
Parking
In some cases you can purchase a home with an attached garage, in some cases your condo may not have a dedicated parking space. Deeded parking means you are the owner of a certain spot to park your vehicle at, whether it is under a carport or in a garage, and this spot is assigned to your unit. Sometimes this is part of the purchase, sometimes a space can be bought in addition. If you do not have deeded parking, you will most likely have a parking area where spots can be used on a first come – first served basis.
Rental restrictions
If you are looking to buy an investment, be it a Naples townhome for sale or one of the homes for sale in Marco Island Florida with pool, and generate rental income with it, you need to study the rental restrictions of the City of Naples and Marco Island.
At the time this article was written the current regulation states a 30-day minimum rental restriction which HOA’s may even make worse by adding their own rules on top, limiting rentals anywhere from a 30-day to 90-day minimum and with a maximum number of rentals allowed per year.
You can still rent it out but the task is to find seasonal tenants that will stay the required minimum time.
It is very important to study the HOA documents in order to understand the rules and restrictions there may be and how they affect a potential rental property.
Commonly, HOA’s set these strict regulations to have less turnovers which can disturb the character of the community, decrease the property values, and even increase insurance costs.
What are CDD’S?
CDDs or Community Development Districts are found throughout the state of Florida as they pertain to all the new construction that is happening. A CDD refers to a developer who purchased a bond to cover the fees for infrastructure and amenities within the community. The CDD fee may cover amenities like pools or parks, infrastructure such as roads and sidewalks, general maintenance or sewer and water.
CDD’s vs. HOA’s
Homeowners might be attracted to a CDD because the home prices within these communities are typically lower, due to deferred infrastructure costs. HOA fees continue as long as you own the property and tend to be levied monthly or quarterly whereas CDDs are typically an annual assessment that is included in the annual property tax bill and are paid off in a foreseeable amount of time, such as 20-30 years. CDDs are shaped by two contents:
1. The bond or debt, which is a fixed amount covering the development and
2. The operations and maintenance portion maintaining the community and operating its amenities. These may fluctuate yearly.
If you buy in a community where you find a CDD and HOA, the CDD is responsible for the maintenance of the infrastructure such as roads and sewers, while the HOA enforces community standards and pays for the upkeep of common areas. CDD fees are also tax deductible, while HOA fees are not. CDD communities may also have more lenient rules compared to an HOA.
MSTU and MSBU
An MSTU (Municipal Service Taxing Unit) is a funding mechanism for community members to create a special taxing district to make improvements to their neighborhood or community. It is approved through the Board of County Commissioners and is funded by the collection of ad valorem taxes, which are based on the assessed value of the subject property. Therefore these taxes are levied once a year with the property tax.
An MSBU (Municipal Services Benefit Unit) is a non-ad valorem assessment district established to be funded by the collection of special assessments or charges and to be used for improvements in a specific geographic area within the county. An MSBU is a group of properties that share in the cost and benefit of that improvement. The assessment may be applied in different ways such as per linear foot of road frontage, per parcel or per lot etc.
Florida tax advantages
Florida offers some nice surprises when it comes to living in the Sunshine State. It is one of just nine states in the U.S. that does not levy an individual state income tax. If you become a Florida resident this can provide some immediate financial benefits with a higher disposable income.
Domestic buyers can declare their home as their primary residence, whereas foreign buyers need to go through a visa application or own a green card in order to benefit from that. If you announce your homestead in Florida, you will see two tax benefits:
1. The “Save Our Homes” Act, which is an amendment to the Florida constitution that took effect in 1995. It limits the annual increase in the assessed value of homesteaded properties to 3% or the change in the National Consumer Price Index (CPI), whichever is less. For Naples Florida mansions or luxury properties on Marco Island FL this can make a huge difference in property tax increases for many years down the road.
2. You may be eligible to receive a homestead exemption that would decrease the taxable value of your property in Marco Island Florida or Naples by as much as $50,000.
For retirees it is an advantage that Florida doesn’t impose any tax on retirement benefits. There are exemptions however, which may include income from social security, part-time work, IRA, 401k, or pensions. Another benefit is that since 2006, changes in federal law eliminated the estate tax completely. That means there is no tax charged on the transfer of the estate or any assets of an individual who deceased. Moreover Florida is highly interested in attracting businesses and has no payroll taxes. It also does not tax limited partnerships or LLCs.
All details given on this webpage are not meant to be legal or tax advice by any means and only serve general information. Please consult your C.P.A. or attorney to verify or gather the required information.