1. 5. What You Need To Know Page 75

2. What You Should Know About Government  Federal government  Executive, Legislative, Judicial  State governments similar structure  States must abide by federal law, enact laws within the state  Federal court system, court decisions create precedent Page 76

3. Federal Reporting Requirements  U.S. business enterprise in which a foreign person or company owns a 10% voting interest  Foreign or domestic development that involves subdivision of 100 or more lots  Purchase of agricultural land by a nonresident alien, foreign company, or government Page 77

4. State Regulation  Real estate licensing and regulation  Much uniformity, little reciprocity  54 different sets of laws and regulations  State law defines agency relationships  State and federal frequently overlap Page 76-78

5. Municipal and Community Regulation  Zoning: how municipalities regulate usage  Residential, Commercial, Industrial, Agricultural  Variance: one-time waiver from zoning requirements  Building permits  Environmental regulations  Covenants, conditions, and restrictions (CC&Rs) Page 78-79

6. Taxpayer Identification Number  Needed for U.S. real estate transactions  Citizens, residents use Social Security Number  Allow 8 to 10 weeks for processing of TIN  No close without ID number  Go to www.irs.gov Page 80

7. Antitrust  Intended to prevent unfair competition  Price-fixing, monopoly arrangements, boycotts  Makes setting “standard” commission rates illegal  Competing brokers should not discuss commission rates or percentages, or fees  Consequences: triple damages and prison Page 74

8. RESPA  Bars kickbacks, closed business arrangements, and hidden referral fees between settlement service providers  Requires lenders to provide borrowers with timely disclosure of loan, closing costs  Closing disclosure: good faith estimate of the amount due at closing Page 81

9. FATCA  Applies to U.S. taxpayers with foreign accounts  More than $50,000 single/ $100,000 married filing jointly at the end of the tax year or  More than $75,000 single/$150,000 married filing jointly at any time during the tax year  Must report assets to IRS  FFIs required to report account information Page 81

10. FinCEN Regulations  Prevention of money laundering through real estate transactions  Applies to all-cash transactions of:  $1 million or more in Miami-Dade County  $3 million or more in Manhattan  Title companies must record and report ownership —the natural person Page 81-82

11. Fair Housing  Prohibits discrimination on the basis of race, religion, color, familial status, gender, handicap, or national origin  States. cities may define additional protected classes  Steering, denial or difference of services, exclusionary preferences  Seller or landlord cannot instruct a agent to limit showing, sales, or rental to a particular group or exclude a group  Advertisements cannot express or imply a preference Page 82

12. Consumer Contact  Businesses cannot call consumers on do-not- call registry  Exceptions: customer relationship, inquiry  CAN-Spam Act  Unsolicited e-mail must be identified as advertising, include e-mail and postal address, provide opt-out mechanism Page 82-83

13. Property Tax  State and municipal  Based on assessed value  Paid in arrears  Mortgage company pays tax for borrowers from the escrow account  Important part off cost of ownership and ROI Page 83

14. Transfer Tax  State, county, or city tax  Assessed when real property changes ownership  Based on the sales price  Specified amount per $100, $500 or $1,000 of the purchase price  Paid at closing by buyer, seller, or both Page 84

15. FIRPTA Withholding Page 84-85  When foreign seller sells U.S. property  Buyer, or withholding agent, must withhold percent of the sales price, send to the IRS within 20 days  Handled at closing Residential Commercial/Investment Less than $300,000NALess than $300,00015% More than $300,00010%More than $300,00015% More than $1 million15%More than $1 million15%

16. Tax Resident  U.S. Citizen, residents taxed on worldwide income; credits are allowed for foreign taxes paid  Nonresident foreigner: taxed only on U.S.- sourced income Page 85

17. Substantial Presence  Nonresidents are U.S. tax residents if in U.S.  183 days in current and 2 preceding years, counting:  Number of days in the U.S. in current year, plus  1/3 of the days present in immediately preceding year, plus  1/6 of the days present during the second preceding year Page 86

18. Capital Gains  Applies regardless of residency status  Capital gain = sales price less selling costs and adjusted basis  Tax rate 0% to 20% based on taxpayer income level Page 87

19. 1031 Tax-Deferred Exchanges  Solution for greatly appreciated property  Both the exchanged and relinquished properties must be located in the U.S 1.Property must be held for investment or productive use in trade or business; no dealer property 2.Exchanged for like-kind property 3.Replacement properties identified within 45 days 4.Exchange completed by the earlier of 180 days or the tax due date Page 88

20. Estate Tax  Foreign owners subject to federal estate tax on U.S. assets  Substantial presence test does not apply  No exemptions and credits available  Non-citizen surviving spouse not eligible for marital deduction  States may impose estate tax or inheritance tax on bequests Page 89

21. Visa Waiver Program  Applies to citizens of specific countries  Travel to the U.S., business or pleasure, no visa, stay 90 days, no extensions  Requires:  Machine-readable passport with digital photo  Completion of ESTA application online  Electronic I-94 Arrival/Departure Record  Biometric screening upon arrival Page 89-91

22. B-1 Business Visa  Variety of purposes  No direct management of a business or U.S. salary, wages, or consulting fees  Expense reimbursement allowed  Maximum of 6 month stay, 1 extension allowed up to 1 year  Spouse and dependents must apply separately for a B-2 visa Page 91-92

23. B-2 Pleasure/ Tourism Visa  Touring and sightseeing  Visiting relatives and friends  Undergoing medical treatment  Attendance at a conference or convention  No business activity, no salary, wages, consulting fees, or expense reimbursement Page 92

24. L-1 Intracompany Transferee  Company can send an executive, manager, or employee with specialized knowledge to the U.S. to establish or help establish an office  Maximum stay 3 years plus 2 year extensions up to 7 years  Spouse, unmarried children under age 21 may accompany Page 92

25. E-1 Treaty Trader E-2 Treaty Investor Treaty Trader  individuals from countries with treaty of trade and commerce  Do a lot of trade  2 year stay with extensions, no maximum stay  Spouse, unmarried children under age 21 may accompany Treaty Investor  Permits U.S. residence while actively investing in, operating, and managing a U.S. business  Spouse, unmarried children under age 21 may accompany Page 92-93

26. EB-5 Immigrant Investor  $1 million investment or $500,000 in designated target employment area  Must benefit the U.S. economy  Create 10 full-time jobs for U.S. workers for at least 2 years  Investor must actively manage day-to-day  Spouse, unmarried children under age 21 may accompany Page 93

27. EB-5 Regional Centers  Facilitates the visa process by pooling investors’ funds  U.S. Customs and Immigration Service (USCIS) approves regional centers  Approval does not guarantee the quality or safety of the investments Page 74

28. Other Visas Working in the U.S. Other Visas  H-1B Specialized Occupations  H-2B Temporary Non- Agricultural Workers  O1 and P1 Extraordinary Working in U.S.  H-1B, H-2B  L1  Allow employment  Do not confer permanent residency Page 94

29. Insurance Coverage  Errors and Omissions Insurance  Insures business professionals against liability from negligence or mistakes  Health Insurance  Federal law requires all legal residents to have health insurance  Auto Insurance  Required by law in all states Page 95-96

30. Working with Developers  State laws require developers to register properties  Agents liable when representing the developer to market several units  Applies to in-state, out-of-state, out-of- country properties  Global real estate professionals should be aware of legalities Page 96