Interesting Aspects of the Florida Real Estate Market from a Russian Perspective

A client recently asked us what we thought about the potential to sell their home to a Russian national.   My answer is that there is increasing demand from Russia.  Their question prompted me to write the following article about the contrast in the process of buying real estate in Russia vs.Florida.

Can Russian Nationals legally purchase property in Florida?   

The answer is yes – there are no restrictions on foreign nationals purchasing real estate in Florida.  Of course there are a number of visa issues which need to be considered depending on a purchaser’s objectives.

What are some differences in the process of buying property in the USA vs. Russia? 

Lending 

One significant difference is the ability to borrow money to purchase a property.  In Russia most personal residences are acquired with cash.  In the USA, it is probably the opposite – most buyers would incorporate some lending in most purchases.

Realtors 

In most places in Florida, there is a central database of properties for sale, which is accessible by all realtors.  In addition, in most cases real estate professionals who are marketing properties agree to share their compensation with other professionals should they bring a buyer.

 

In Russia, most properties are marketed by specific agencies who maintain their own personal database of properties.  Consistent with this approach, it is also less likely that an agent would share their compensation with another agent who brings a buyer.  The result is that buyer’s agents would generally make compensation arrangements with their buyers directly.

Title 

In most cases in Florida, the process of ensuring ownership and legal title to a property is relatively straight forward.  The use of title insurance is standard.  Title insurance is an insurance policy regarding title for the benefit of the buyer. As a consequence, the cost of title insurance is generally a transaction cost related to most sales in Florida.

 

As far as I am aware, there is no title insurance concept used in Russia.  In fact, confirming title can be an arduous task which takes time.

Costs 

We have already identified that title insurance is most likely an additional cost of acquiring a property in the USA (but would not be applicable in Russia).  Whether the buyer or the seller pays for the insurance policy will depend on the contract and the terms negotiated between the parties.

 

We also have certain types of taxes or stamps which must be purchased related to the sale of a property in Florida. These stamps are referred to as documentary stamps on the deed (the deed is the official legal document transferring title).  The cost of these documentary stamps is $.70 per $100 of purchase price.

 

One thing that does not cost much in Florida is the notarization of documents.  In Russia, this fee can be as much as 1.5% of the purchase price of the property.  In Florida, if you have to pay the notary at all, it is a nominal fee.

 

Yearly property taxes can also be much more significant in Florida vs. Russia.  As a rule of thumb in the greater Sarasota area, we use 1.5% or 1.6% of the purchase price as an estimate of yearly taxes.

 

Property insurance is also something that is readily available and in most cases recommended in Florida.

 

There are also additional taxes and/or stamps related to a transaction should the purchaser be borrowing funds to acquire the property.  Documentary stamps on a mortgage run $.35 per $100 of mortgage and the intangibles tax is $.002 of the mortgage amount.

In conclusion.

In summary, there is no doubt that the number of international buyers is growing.  I think we can also bet on an ever increasing number of these buyers from Central and Eastern Europe and in particular Russia.

 

So when you are at the beach the next time, listen to the different languages being spoken around you.  One of them may be Russian.

Contact
Joel Schemmel
50 Central Avenue, Suite 110
Sarasota, FL 34236
Phone: (941) 308-6497