Today’s “Ask the Expert” column features Cindy Fauth, Global Marketing Manager with National Association of REALTORS®.
Q: While there are many differences among foreign buyers, what are some of the common characteristics?
A: Each country differs in language, religion, ethnic and racial identity—even distinctive culinary tastes. Business practices are no exception. The countries or cultures you choose to focus on will largely determine what characteristics you need to pay close attention to. Despite the many differences, over time and after many transactions, international specialists have observed some commonalities among foreign buyers.
For foreign buyers, the process to buy and sell a home requires a good deal of effort. From extensive market research pre-purchase, to the high rates imposed by capital gains taxes after the sale, it’s an involved process that discourages short-term investment. Be prepared to answer detailed questions about market pricing and investment yields. Resources to help answer these questions include NAR’s Local Market Reports, Metropolitan Median Area Prices and Affordability, and Realtors Property Resource® (RPR®).
All-Cash or High-Equity Transactions
Sixty percent of foreign buyers paid in cash for their U.S. properties, a trend that has been steadily increasing. In contrast, only about one-third of domestic sales have been all-cash. The CIPS course, Global Real Estate: Transaction Tools, provides information on preparing for all-cash buyers.
Acceptable, Predictable Returns
Foreign buyers are most interested in a favorable rate of return and assurance that future income streams will remain steady or increase.
Buyers from outside the United States paid nearly $75,000 more (median price) per property than domestic buyers, indicating an interest in higher quality residences. They’re usually not interested in fixer-upper properties, as they have a limited amount of time they may spend in the United States (whether by immigration law or personal time available). In addition, the logistics of working with contractors can be challenging with time zone differences and the inability to meet in-person.
Desirable Locations and Familiar Markets
Florida, California, Texas and Arizona are consistently the top four states for foreign buyers, making up 55 percent of total reported international sales. Proximity to the home country, the presence of relatives, friends and associates, job and educational opportunities, and climate and location appear to be important considerations to prospective buyers. NAR’s Profile of International Home Buying Activity (at realtor.org/global) has more information about the types of properties and areas where foreign buyers search most.
Given the distance and unfamiliarity with the market, foreign buyers are at an information disadvantage. Be prepared to present detailed information on the property, climate, market conditions, and nearby amenities. Realtors Property Resource® is one of the most comprehensive tools at your disposal to provide this information, as it provides hundreds of datasets on over 160 million U.S. properties and markets.
Building a team of international specialists in law, taxes, immigration, property management, financing, and other areas will be integral to conducting a smooth transaction. Check out past issues of Global Perspectives newsletters (at realtor.org/global) to find out who you’ll want on your side.
For more information, visit www.realtor.org/global.