Market very appealing to foreign buyers

Buyers from many other nations are pouring into the U.S., seeking bargains now that prices have dropped and the security of knowing that our government won't confiscate their property after they pay for it.

Q. We have been shopping for a condominium in some resort areas that we would like to use as a vacation getaway now and then convert to our primary residence when we retire in a few years. We are shocked by the fact that so many of the other buyers we see at open houses appear to be foreigners. What gives?

A. Although the housing slump that has affected much of our nation has prompted many Americans to postpone buying a primary residence or second home, the downturn has actually helped to encourage foreign buyers to look for property here -- especially in popular second-home markets -- partly because U.S. prices are now a lot lower than many foreign buyers would have to pay for a comparable property in their native land.

According to a recent survey by the National Association of Realtors, nearly one-third of its members reported that they had sold a second or vacation home to a foreign buyer in the past 12 months alone. The trade group calls these clients "international buyers," which it defines as someone "who has legally entered the United States to purchase a home."

While the study credited America's softer home values as a key draw for foreigners, it noted that other factors are at work too. Global monetary fluctuations have left the U.S. dollar relatively weak when compared with other currencies, which allows people from other countries to stretch their buying power when their own money is converted into American greenbacks. Most of our resort areas also offer better weather and more year-round recreational activities than other parts of the world do.

Foreign buyers also like the fact that we have a stable government that they trust will not suddenly decide to take away their ownership rights and confiscate their real estate, unlike what Mexico and some other countries have done to their noncitizens in the past.

Q. We signed a contract to purchase a home in a new housing development in July of last year and will take title to the property when construction is completed next month. All of the lots have already been sold, and a buyer recently offered us $40,000 more than we agreed to pay the builder last year if we sell him the home when it is finished. If we accept his offer, would the Internal Revenue Service tax our profit at the long-term capital gains rate of only 15 percent because we signed the original contract with the developer more than 12 months ago?

A. Sorry, but no. Although the IRS levies its minimal 15 percent tax on profits from assets that are sold after at least one year of ownership, your letter states that you won't actually take title to the property -- and thus become its "owner" -- until construction is completed next month.

The fact that you signed the purchase contract with the builder last summer is irrelevant; your 12-month "ownership clock" won't start ticking until you get title to the home in a few weeks. That means that federal taxes on your $40,000 profit would be based on your overall income-tax rate, which could be more than 30 percent. Consult an accountant or similar tax pro for details.

Q. I filed for bankruptcy last year, and most of my debts were discharged. I recently obtained a copy of my credit report and found that most of those discharged debts are still on my report. Shouldn't the accounts have been deleted from my report shortly after the bankruptcy was completed?

A. No, completing a bankruptcy case will not automatically result in the discharged debts being removed from the consumer's credit report. Instead, the bankruptcy filing is added to the report and the status of each account is usually updated by the creditors themselves to show that they were included as part of the bankruptcy filing.

Unfortunately, creditors sometimes fail to notify the bureaus that their accounts were included in the consumer's bankruptcy case. If this has happened to you, you should contact the nation's three large credit bureaus -- Experian (www.experian.com), Trans Union (transunion.com) and Equifax (equifax.com) -- to see how you can have the accounts updated yourself. It's usually simply a matter of sending the bureaus a copy of your bankruptcy filing's Schedule A, which lists all the accounts that were included in the court case.

Updating the status of each account won't immediately remove them from your report, but will at least make it clear to other potential creditors that the old accounts have been legally discharged.

If you filed for Chapter 13 bankruptcy, it will stay on your report for seven years from the initial filing date. If you instead filed using Chapter 7, it will remain on your report for 10 years from the filing date.

© 2007, Cowles Syndicate Inc.