The following information is provided by the Center for REALTOR® Development (CRD).
Global real estate involves moving money between countries and converting currencies. Getting involved in these types of transactions requires a general understanding of how varying currencies can impact a deal. After all, this seemingly small factor in an international transaction can have a huge impact. Luckily, we have answered a few questions to help you get started:
Why do currencies fluctuate?
Currency values fluctuate for a variety of reasons, such as investors’ view of a nation’s economic health, speculation and government actions. Currency value correlates closely with other indicators of economic strength. In simplest terms, stable exchange rates inspire investor confidence.
What’s the impact of a weak or strong currency?
A weak currency increases the cost of imports for consumers and cross-border investments for domestic investors, but creates opportunities for investors from strong-currency countries. For commercial and investment clients, exchange rate fluctuation adds another element of risk to transactions.
Why is this important to my business?
By monitoring exchange rates, real estate professionals can help clients plan ahead to manage value fluctuations and transfer transaction funds. Availability of funds for a purchase and repatriation of income and sales proceeds are major factors for successful completion of transactions. Furthermore, expressing values in a client’s home currency aids comprehension of properties’ comparable and relative values.
What’s the bottom line?
The state of the global economy is constantly changing. Markets fluctuate within the blink of an eye, bringing currency values around the world with them. These changes matter whether they are big or small. Even a seemingly minor change in a currency’s value can have a substantial impact on both you and your client in terms of:
- Sale proceeds
- Buying power
- Return on investment
- Gain or loss on sale
- Transaction costs
- Payment of loans, closing expenses, operating costs and upkeep
- Rental income
- Commissions and referral fees
What can I do?
By monitoring currency rates you can help mitigate any surprises along the way. Make sure your clients can easily understand the values and express the cost of a property or service in your client’s home currency. Here are a few places that can help you monitor the rates, many of which also offer mobile apps so you can access the information on-the-go:
To learn much more about global exchange rates and how they impact your efforts to expand your business internationally, consider taking the Global Real Estate: Transaction Tools online course. This course can be used towards earning NAR’s Certified International Property Specialist (CIPS) designation. This entire month of January, all online CIPS courses and bundles are 25% off.
This adapted article originally appeared on NAR’s The Global View blog on Feb. 6, 2018.
Charlee Gibson is the Real Estate Business Institute’s (REBI) director of Marketing & Communications. REBI is an affiliate of the National Association of REALTORS® and confers the Certified Real Estate Brokerage Manager (CRB) and Seller Representative Specialist (SRS) designations, and Certified Real Estate Team Specialist (C-RETS) and Real Estate Negotiation Expert (RENE) certifications. Learn more at rebinstitute.com.
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