Key legal points Koreans should check before buying a home in the United States

Homes in the United States broadly fall into single family homes, condominiums, townhouses and multi-family homes. Unlike Korea, where apartments dominate, the ownership structure, management rules and contract terms differ considerably depending on the type of home.

In particular, single family home communities, condominiums and townhouses are often subject to the rules of a homeowners association (HOA). In that case, the following should be checked before buying.

• Whether the property may be rented out
• Restrictions on short-term rentals (such as Airbnb)
• Restrictions on remodeling and additions
• Association dues and the possibility that the rules will change

If you learn about these matters only after signing the contract, you will have practically no options left.

Most U.S. real estate contracts use a state-specific standard form. It is therefore easy to assume that a standard form is safe, but in practice, precisely because it is a standard form, the clauses often need to be read carefully. Problems tend to arise in the following areas.

• Contingencies: when, for what reasons and in what manner the contract can be terminated
• Inspection and financing conditions: missing a deadline can mean losing the right to terminate and incurring liability
• Earnest money: the difference between when it is refunded and when it is forfeited

Even with the same contract, the outcome can be entirely different depending on how the clauses were understood and on what assumptions the buyer acted.

In a U.S. home purchase, areas connected to Korean law cause problems as often as the contract itself. Questions that come up frequently in practice include the following.

• How the purchase funds should be remitted
• Whether the transaction must be reported under the Foreign Exchange Transactions Act
• How individual title differs from joint title between spouses
• Whether it is acceptable to buy in the name of a U.S. company (LLC)

These issues rarely appear in a U.S. contract, but they repeatedly become problems in Korea after the fact. There are many cases in which the contract itself seemed fine, but the structure of the remittance or the choice of titling led to foreign exchange, tax or liability problems in Korea.

Misunderstandings that recur in practice include the following.

• Assuming that the agent's explanation is the same as a legal right
• Believing there is no need to read each clause because the contract is a standard form
• Concluding that anything lawful in the United States will also be fine in Korea

When a buyer says after signing, "I didn't know this clause meant that," it is in most cases a problem where the buyer would have had far more options with a little more understanding of the structure before signing.

Signing the contract does not settle everything. On the contrary, that is when questions start to arise, such as whether the home may be rented out, how a later sale will be taxed in Korea, and whether the structure can be changed even though the contract has already been signed. The problem is that after the contract, changing the structure is often difficult or considerably more expensive.

What matters in buying a U.S. home is not the approach that "it's enough to read the contract carefully" or "we can solve problems when they come up." Realistic risk management means reviewing your understanding of the contract's structure together with the funding, titling and reporting issues connected to the transaction, at the same time and in the same context.

Related U.S. practices: Contracts & Business Transactions