A European investor acquires a commercial building in Florida through a wire transfer from a foreign account. Eighteen months later, the property is sold – and a substantial federal withholding is deducted at closing. The investor had no US entity, no tax identification number, and no title insurance. The transaction itself was legal. The planning was not. For foreign buyers, real estate acquisition in the United States is operationally accessible but legally intricate. The intersection of federal tax legislation, state property law, and county-level recording requirements creates a system that rewards careful preparation and punishes structural gaps.
Real estate acquisition in the United States by foreign buyers involves several distinct legal layers: state conveyancing rules governing the property transfer itself. Federal tax legislation that applies to foreign-owned property and disposals. Additionally, entity structuring decisions that affect both liability and annual compliance. The process from signed offer to recorded title deed typically takes between 30 and 120 days depending on transaction type and financing. The primary legal requirement for completing a transfer is the recording of a valid deed in the county land register where the property sits.
This guide walks through each stage of the acquisition process. from initial due diligence through closing and post-acquisition compliance. with specific attention to the structural choices and procedural risks that most affect international buyers in the US market.
Understanding the US property law system before you buy
The United States does not have a single national property law. Real estate legislation is a state-level matter. This means the conveyancing rules, disclosure obligations, deed requirements, and title insurance practices in Texas differ materially from those in New York or California. Federal legislation intersects primarily through tax law, foreign investment reporting rules, and certain agricultural land restrictions.
Within each state, property records are maintained at the county level. The county land register – referred to variously as the recorder's office, register of deeds, or county clerk – is the authoritative record of ownership. A transfer of real property is not effective against third parties until the relevant deed is recorded there. This is a critical difference for buyers accustomed to civil law systems, where a notarial deed simultaneously evidences and perfects the transfer.
In the US system, the deed is a document of transfer, but it is title insurance – not notarial authentication – that protects the buyer against defects in the seller's chain of title. Title insurance performs a retrospective search of the land register going back decades. It identifies encumbrances, liens, easements, and competing claims that are not visible on the face of a deed. For foreign buyers, skipping or underweighting title insurance is one of the most consequential errors made in residential and commercial transactions alike.
There is no single national property register. The absence of a centralised cadastre (unified land registry) means that a buyer's counsel must search county records directly. In states with a Torrens system – a minority – title is guaranteed by the state upon registration. In the majority of states, title derives from the historical chain of recorded instruments. The practical implication is that due diligence is indispensable, not optional.
Foreign buyers should also be aware of federal agricultural land legislation, which imposes reporting requirements on foreign persons acquiring agricultural land beyond defined thresholds. This applies to a broader category of land than the name suggests and is administered at the federal level through the US Department of Agriculture. Non-compliance carries monetary penalties and, in some cases, mandatory divestiture proceedings.
Step-by-step: the acquisition process for international investors
The acquisition of US real estate by a foreign buyer proceeds through a relatively standardised sequence. Each step carries its own legal exposure, and the timeline depends heavily on transaction complexity, financing structure, and the buyer's preparation before entering the US market.
Step 1 – Structuring the acquisition vehicle. Before signing any offer, a foreign buyer must decide whether to acquire directly or through a US entity. The most common vehicle is a Delaware LLC (limited liability company organised under Delaware state law). A Delaware LLC offers liability insulation, pass-through tax treatment, and administrative flexibility. It can be formed in five to ten business days and requires a registered agent in Delaware regardless of where the property is located.
The alternative is direct individual ownership. This is simpler at the outset but creates significant exposure under federal estate tax legislation for non-resident aliens, where the exemption threshold is considerably lower than for US citizens and residents. A common planning error is to assume that the estate tax rules familiar from the buyer's home jurisdiction will apply to US-sited property. They do not. Federal estate tax legislation applies to US real property regardless of the owner's nationality or domicile.
For buyers seeking to hold multiple properties or combine real estate with operating activities, a layered structure – typically a US holding LLC owned by a foreign entity – may be appropriate. The details of this structure have direct consequences under federal tax legislation and should be confirmed with counsel before formation.
Step 2 – Obtaining a US tax identification number. Any entity or individual acquiring US real property must obtain a federal tax identification number before closing. For individuals, this is an Individual Taxpayer Identification Number (ITIN). For entities, it is an Employer Identification Number (EIN). The EIN application for a foreign-owned LLC can take several weeks if filed by mail. Online filing is available for entities with an authorised person who already holds a US Social Security Number. Foreign buyers who do not plan ahead frequently discover at closing that they lack the required tax identification, causing delays of four to six weeks.
Step 3 – Negotiating and signing the purchase agreement. The purchase agreement (also called a contract of sale or sales contract) is the binding commitment between buyer and seller. In the US, this document is negotiated before any notarial involvement and is typically drafted by a real estate broker or counsel. Key negotiation points for foreign buyers include: the due diligence period (typically 15 to 30 days for commercial property), financing contingencies, representations regarding title, and the allocation of closing costs.
The purchase agreement in most US jurisdictions does not itself transfer title. It creates a contractual obligation to transfer, which is fulfilled at closing when the deed is executed and delivered.
Step 4 – Due diligence and title search. During the contractual due diligence period, the buyer's counsel orders a title search from a title company. The search examines the chain of recorded instruments in the county land register, identifies all liens, encumbrances, easements, and pending litigation affecting the property, and produces a preliminary title report. The buyer reviews the report and may request the seller to cure defects before closing.
For commercial acquisitions, due diligence extends to environmental assessments, zoning compliance, lease review, survey, and – for income-producing property – financial and operational review. A Phase I environmental assessment is standard for commercial transactions and is typically required by lenders. A Phase II assessment may follow if the Phase I identifies conditions of concern. Environmental liability under federal legislation can attach to owners regardless of fault, making this step non-negotiable for commercial buyers.
Step 5 – Obtaining title insurance. At or before closing, the buyer obtains an owner's title insurance policy. The premium is a one-time payment calculated on the purchase price. The policy covers losses arising from title defects that existed at or before the date of the policy, including defects not found in the title search. Lenders in the US universally require a separate lender's title insurance policy as a condition of financing.
For our services supporting international investors through US acquisitions, see our real estate legal advisory for the United States, which covers both residential and commercial transactions across major US markets.
Step 6 – Closing. Closing is the event at which the deed is executed, funds are transferred, and ownership passes. In most US states, closing is managed by a title company or escrow agent rather than a notary in the civil law sense. The notary public present at closing performs only an acknowledgment function – confirming the identity of the signatory – not the substantive authentication role familiar in continental European systems. The property transfer is effected by delivery of the deed, not by the notary's act.
At closing, the buyer must also satisfy any federal withholding obligations. Under federal tax legislation governing foreign investment in US real property. A buyer acquiring property from a foreign seller is required to withhold a portion of the gross sales price and remit it to the federal tax authority. This obligation falls on the buyer, not the seller. A buyer who fails to withhold correctly becomes personally liable for the amount that should have been withheld.
Step 7 – Recording the deed. After closing, the deed must be filed with the county recorder's office to be recorded in the land register. Recording is not instantaneous – processing times vary from same-day to several weeks depending on the county and volume. Until the deed is recorded, the buyer's title is vulnerable to subsequent liens, judgments, or encumbrances filed against the seller. Counsel typically manages recording immediately after closing.
Step 8 – Post-acquisition compliance. Foreign-owned US real property triggers ongoing compliance obligations. These include annual federal and state tax filings, reporting of foreign ownership under applicable legislation, and – for agricultural land – periodic reporting to the US Department of Agriculture. Entities holding US property must maintain registered agents, file annual reports with the state of formation, and keep the entity in good standing. Failure to maintain good standing can result in the entity losing its liability protection.
Common errors by foreign buyers – and their consequences
A substantial number of disputes and losses in cross-border US real estate transactions trace back to a small set of recurring errors. These are not obscure technicalities. They are well-known to US practitioners. Foreign buyers encounter them because the US system differs structurally from civil law property regimes in ways that are not immediately visible.
Skipping the entity decision. Buying in one's personal name without analysing the tax and estate consequences is the most expensive planning omission. Federal estate tax legislation applies to US-sited assets of non-resident aliens at rates that can consume a significant share of the property's value. The exemption available to non-resident aliens is a fraction of that available to US citizens. By the time the issue surfaces – typically at the owner's death or during estate planning – restructuring the holding is costly and may trigger its own tax consequences.
Underestimating the federal withholding system. Many foreign buyers are unaware that the buyer in a US real property transaction bears withholding liability when purchasing from a foreign seller. The withholding applies to the gross sales price, not the gain, and at rates set by federal tax legislation. Buyers who miss this obligation in the contract negotiation phase face liability that can exceed their anticipated profit margin on a resale.
Relying on foreign legal concepts. Buyers from civil law jurisdictions sometimes assume that a signed purchase agreement has the same binding and title-transferring effect as a promessa de compra e venda (preliminary sale agreement in civil law systems) followed by a notarial deed. In the US, neither assumption holds. The purchase agreement is binding but does not transfer title. The notary present at closing does not authenticate the transaction in the substantive sense. Understanding these differences prevents misaligned expectations about what has and has not been legally completed at each stage.
Ignoring state-specific disclosure rules. Each state imposes its own seller disclosure obligations. Buyers who fail to insist on full compliance with state disclosure requirements may find themselves without recourse for defects that a disclosure would have revealed. The buyer's counsel should review applicable state legislation before the due diligence period expires.
Failing to open a US bank account before closing. Wire transfers from foreign accounts to US escrow are subject to bank compliance review and can be delayed or rejected. Foreign buyers who have not established a US banking relationship before the due diligence period expires sometimes find themselves unable to fund closing on time, triggering breach of contract claims. Opening a US business bank account for a foreign-owned entity now routinely requires in-person branch visits, extensive documentation, and several weeks of processing time.
Misunderstanding dispute resolution options. US real estate disputes are resolved in state courts, federal courts, or through arbitration depending on the contract and the nature of the claim. Many commercial purchase agreements include arbitration clauses specifying JAMS (Judicial Arbitration and Mediation Services) or AAA arbitration (American Arbitration Association) as the forum. Foreign buyers accustomed to litigation before a US District Court or to arbitration under different institutional rules may be surprised to find that their contractual forum selection is binding and that challenging it is both costly and rarely successful.
For a detailed analysis of the federal tax implications of US real property ownership – including withholding, reporting, and entity-level tax obligations – see our guide on tax law advisory for the United States.
Decision checklist and scenario framework for international buyers
The appropriate acquisition structure and strategy depend on the buyer's profile, investment horizon, and jurisdictional context. The following framework is designed to help international buyers identify the path that aligns with their situation before engaging in detailed legal planning.
Individual residential purchase – low-to-medium value. Personal use. A foreign individual purchasing a single residential property for personal or family use may proceed with direct individual ownership where the property value is modest and the estate tax exposure falls within acceptable risk parameters. Title insurance is mandatory. The ITIN must be obtained before closing. State income tax on any rental income must be filed annually. This scenario is the simplest structurally but still requires US counsel familiar with both federal tax legislation and state conveyancing rules.
Income-producing commercial property – medium to large scale. A foreign buyer acquiring office, retail, or multifamily residential property for investment purposes should hold the asset through a US LLC or a multi-tier structure. The Delaware LLC is the most common vehicle. Federal tax legislation requires the LLC to file annual returns and to withhold on distributions to foreign members. The buyer's home jurisdiction may impose its own reporting requirements on interests in foreign entities. A bilateral tax treaty – if one exists between the buyer's country and the United States – may affect the applicable withholding rates and reporting obligations.
Portfolio acquisition across multiple states. A buyer acquiring properties in more than one state must consider that each state has its own property legislation, transfer tax, and annual reporting requirements. A Delaware LLC may need to register as a foreign entity in each state where it holds property. This registration triggers state-level compliance obligations that accumulate with each new acquisition. Buyers underestimating this administrative burden frequently fall out of good standing in one or more states, creating exposure that complicates future financing or disposition.
Development and construction projects. Foreign investors financing or co-investing in US development projects face an additional layer of federal securities legislation if the investment is structured as a passive interest in a development entity. Depending on the structure, the offering may constitute a security under federal legislation administered by the SEC (Securities and Exchange Commission). Participating in an unregistered securities offering – even as a passive investor – carries civil and criminal exposure. Legal review of the offering documents before commitment is indispensable.
A comparable acquisition framework applies to buyers entering other common law markets. Our guide on real estate acquisition in Brazil outlines the parallel process in a civil law jurisdiction and illustrates how structurally different these two markets are for international investors.
Before initiating any US real estate acquisition, verify the following:
- Entity structure selected and formation documents filed before offer submission
- Federal tax identification number (EIN or ITIN) obtained or in process
- Title insurance ordered and preliminary report reviewed by counsel
- Federal withholding obligations assessed for the specific transaction
- US bank account open and funded in advance of the closing date
To discuss how the US real estate acquisition process applies to your specific investment scenario, contact us at info@ferrazwhitmore.com.
Frequently asked questions
Q: Can a foreign national buy real estate in the United States without a US entity?
A: Yes, foreign nationals may purchase US real estate directly in their own name. However, holding property through a US entity – such as a Delaware LLC – is often preferable for liability protection and tax efficiency. The choice of holding structure has significant consequences for federal withholding obligations, estate exposure, and annual compliance costs, so the decision warrants careful legal and tax analysis before signing a purchase agreement.
Q: How long does the real estate acquisition process typically take in the United States?
A: Residential transactions commonly close within 30 to 60 days of an accepted offer. Commercial acquisitions involving due diligence, financing, and regulatory review typically require 60 to 120 days or longer. Foreign buyers should budget additional time for entity formation, tax registration, and the opening of US bank accounts, each of which can add several weeks to the timeline.
Q: Is a notarial deed required to transfer real estate ownership in the United States?
A: The United States does not generally require a notarial deed in the civil law sense. Property transfer is effected through a deed – typically a warranty deed or a quitclaim deed – signed before a notary public for the limited purpose of acknowledgment. The deed must then be recorded in the county land register to perfect the buyer's title against third parties. Title insurance replaces much of the protective function that notarial authentication performs in civil law systems.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our real estate practice supports international buyers, institutional investors, and corporate occupiers acquiring, financing, and disposing of US property assets. We combine English common law expertise with deep familiarity with civil law property concepts, giving us a practical advantage when advising clients whose home legal systems differ structurally from the US conveyancing regime. Engaging a lawyer in the United States with cross-border experience is particularly important when structuring the acquisition vehicle and managing federal tax compliance. As an international law firm advising on United States real estate matters, Ferraz & Whitmore coordinates across US local counsel, tax advisers, and title companies to deliver a coherent, integrated approach to each transaction. Our attorneys have advised on property transfer and portfolio acquisition matters across both common law and civil law systems, and the firm participates in cross-border real estate practice groups focused on the Americas. To discuss your acquisition strategy, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.