RISMedia, May 27 2011—International buyers are driven to own property for investment purposes, or as a temporary residence while visiting the U.S. for business or pleasure. For the former example, think a European business executive with a co-op in Manhattan, for the latter, a Canadian snowbird seeking Florida weather in winter.
You’ll find these smart, savvy, computer-literate clients hail from Europe (30.8 percent), North America (27.5 percent) and Asia (25.2 percent), with the remainder being from Latin America, Africa and Oceania. They speak their native language. They embody their culture and follow their customs. Their money gets transferred and converted to U.S. dollars. You’ll need to address these and other factors from the initial meeting or showing right on through closing.
A Thumbnail Sketch of the International Buyer
Analyze recent sales data on the international client, and you can identify parallels with domestic homebuyers. REALTORS® reported 69 percent of their foreign clients purchased single-family homes, while 18 percent opted for condominiums. The balance was in townhomes and commercial real estate. Suburban communities were the most sought-after, followed by rural or small town communities and large urban centers.
Four warm-weather or Sunbelt states—Arizona, California, Florida and Texas—accounted for the most sales, with Florida generating nearly a quarter of foreign purchases. But keep in mind, you can find opportunities in every state and in virtually every market.
One distinct difference in the buyer profile centers on price. The international buyer on average paid nearly 20 percent more than the domestic buyer, $247,100 versus $198,100, according to the REALTOR® survey that covered late 2008 to early 2009. Expect housing to remain an attractive investment as the declining value of the U.S. dollar versus other currencies offers more buying power. From another perspective, naturalized citizens pay with U.S. currency and may seek properties listed at lower price points.
The factor that really sets the international buyer apart, however, is how they finance the purchase: More than 45 percent pay cash, where some 93 percent of U.S. homeowners secure a mortgage. Reasons for this trend include difficulty in getting a mortgage due to varied financial reporting practices between the U.S. and other nations, the inability of foreigners to gain tax benefits, and availability of pooled money that covers the purchase price.
Since many foreign buyers pay cash; transferring large amounts of money into the U.S. may prove difficult unless the funds are unencumbered. Be prepared for lengthy time periods to get documents notarized if the client is outside the country, as the process often requires a trip to the U.S. embassy. Display patience: even in today’s global economy, many foreigners just don’t comprehend American business practices.
If you have questions regarding global buyers, customs, and business practices, explore the many resources offered through NAR’s Global Business and Alliances group. Better yet, reach out within the CIPS network, which is comprised of more than 2,000 real estate professionals who hold the CIPS designation and 300 who are working toward the designation. Use this network, as well as your own, to do business through the global marketplace right next door.
Cindy Fauth is the Global Marketing Manager for the National Association of REALTORS®.