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April 16, 2014

Reaching Across the Globe

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Reaching Across the Globe

International buyers are increasingly eager to invest in U.S. properties. Are you prepared to guide them?

Interested in taking your business global—without getting on a plane? Many United States–based practitioners have forged close and lucrative ties with international clients in a steadily growing segment of the real estate business. The foreign buyers Connie Antoniou works with generally move to the United States for professional reasons. Whether she’s establishing a connection with a corporate executive from Japan or helping a Russian hockey player recruited by the Chicago Blackhawks, her responsibility goes well beyond the mechanics of a transaction. “You become their conduit,” says Antoniou, CIPS, CRS, broker-owner of Hunter’s Fairway Sotheby’s International Realty in North Barrington, Ill. “They don’t know our ways, so they have to be able to trust you.”

Where They’re Looking
The most-searched U.S. cities by non-U.S. consumers are:

1. Chicago
2. Los Angeles
3. New York
4. Miami
5. Las Vegas
6. Orlando, Fla.
7. Houston
8. Fort Lauderdale, Fla.
9. San Diego
10. Atlanta

Source: REALTOR.com, Nov. 2012

Antoniou was introduced to the international niche serendipitously in the mid-1980s. Her first sale ever was to a Finnish couple who showed up at an open house and bought the seven-bedroom, eight-bath home she was showing. Today, about half of Antoniou’s sales involve international clients. Most are generated by word-of-mouth or her company’s Web site. She closed nine deals in 2012—a 44 percent jump over the prior year—with an average list price of $1.04 million.

A survey of REALTORS® released in June 2012 showed that sales to international clients accounted for nearly 5 percent of all U.S. sales. NAR Research estimates those sales—made in the 12 months ending in March 2012—totaled $82.5 billion in volume. Even at only 5 percent of all sales, that’s still a big chunk of business. Just over 25 percent of REALTORS® say they’re working with international clients. Are you one of them? If not, maybe it’s time to arm yourself with information you need to serve the global  market.

‘That House Needs to Rock and Roll’

International buyers fall evenly into two main categories: those who will live in the home they buy and investors who will continue to live abroad.

Antoniou’s foreign clients who plan to live in the United States want newer, low-maintenance, high-end homes, she says. That’s partly because they don’t know whom to turn to—and don’t feel they’ll have time for—renovations and repairs. They’re moving to a place where they don’t know many people, if anyone. And like any buyer, they’re looking for qualities like good schools and close proximity to people they have something in common with. It’s important to put yourself in their shoes from the outset, she says.

CIPS instructor David Lauster puts it this way: “Imagine being led blindfolded through an obstacle course by a stranger. That’s how most first-time foreign buyers feel.” Lauster is an international real estate expert who now helps the U.S. State Department with overseas property purchases. “You, as their real estate guide, can make that obstacle course far less daunting by preparing them for the buying process,” he says.

For example, make sure you explain the role of attorneys in U.S. transactions and in your state. In many Asian countries, attorneys are associated with being in trouble, Lauster says. “Since most foreign buyers are buying in the United States for the first time, their only frame of reference for doing business is whatever they have experienced in their own country,” he says.

To meet the unique circumstances clients face as they move from another country, Antoniou’s brokerage offers a concierge service, finding everything from childcare to contractors for clients. She once found a justice of the peace for an impromptu wedding.

International buyers almost always shop online first, and they’ll sometimes buy without seeing the house first, say Antoniou. Her Sotheby’s Web site is translated into 20 languages and allows buyers to search by lifestyle. Online, “that house needs to rock and roll,” she says. “If they don’t like the pictures and they’re thousands of miles away, they’re not going to come see it.” Photos are so important that Antoniou has a staff videographer and photographer.

Snapshot of a Global Market: Raleigh, N.C.

Research Triangle Park, in Raleigh, N.C., includes more than 170 technology and science companies employing nearly 40,000 people. Those businesses, coupled with three local universities, are drawing a steady stream of foreign home buyers to the Raleigh and Durham metro areas.

Helen Tam, abr, cips, moved to Raleigh from her native Hong Kong in 1978. Her company, Prudential York Simpson Underwood Realty, does a brisk relocation business for area companies. Tam says 40 percent of her personal business consists of Chinese nationals living in the United States, but she has also worked with clients from the Philippines, Indonesia, Vietnam, Cambodia, Korea, Canada, Taiwan, the United Kingdom, Italy, and France. Many came to the United States to study, found jobs with a local tech company, and decided to stay. Others immigrated with H-1 work visas and eventually acquired permanent residency. These foreign buyers are very value-driven, Tam says. They tend to shop around for the best value and gravitate toward real estate professionals who can speak their language and understand their culture.

In addition to having the state’s highest number of CIPS designees, Raleigh takes its international outreach a step further: In 2001, the Raleigh Regional Association of Realtors® established the Triangle International Council of Realtors® to provide networking and educational opportunities for members specializing in international clientele. “We mingle with members from different ethnic backgrounds and share our experiences working with foreign buyers and marketing properties overseas,” says Tam, a TICOR charter member, past president, and current treasurer.

The World’s Most Transparent Process

Fragile economic recovery notwithstanding, the United States still provides the most stable and secure real estate investment environment in the world, ranked higher than that of Germany, Canada, France, Australia, and the U.K., according to research by the Association for Foreign Investors in Real Estate. The political system is well-organized and reliable, and the real estate system is one of the most transparent.

“Without a doubt, we are the safest environment to purchase a property and ensure you own it. It’s recorded at the courthouse and your ownership is protected,” says Tony Macaluso of Palm Beach Gardens, Fla., who has been a CIPS instructor for 15 years. Macaluso and his wife Nancy, broker-owners of Portside Properties Inc., estimate that 30 percent of their business in the fourth quarter of 2012 was from international clients.

Favorable exchange rates against the dollar have enabled bargain-hungry foreign buyers to get a lot more home for the money. “Compared to Europe where the average apartment is 700 square feet, our properties are twice the size, and often for half the price,” Macaluso says. Miami had 23,000 vacant condos at its peak inventory in 2008. Since then, most have sold, largely due to the eager lineup of international investors from Central and South America.

And while Florida may be a mecca for Europeans and South Americans, Macaluso’s not discounting the people of China. Today, there are at least a million millionaires in China, with an average age of 39, he says. “They’re young and rich and looking for alternative places to live and invest.”

As of March 2012, China (including Hong Kong), Canada, Mexico, India, and the United Kingdom accounted for 55 percent of all international transactions in the United States. Canada accounted for 24 percent of international sales, while China accounted for 11 percent, up from 9 percent in 2011. Mexico was third with 8 percent of sales, and India and the U.K. each accounted for 6 percent.

These countries dominate the market for a reason. For the first time in 2008, Canada’s dollar hit par with the U.S. dollar. China has seen a proliferation of new trade agreements that favor Chinese investors, and the country’s slower growth rate is still a robust 9.5 percent, remaining quite high compared to the 1.5 percent rate in the United States. Mexico has $26 billion flowing into its economy from abroad, much of which comes from the remittances of migrant workers, many of whom are in the United States.

“Investing in real estate is great for individuals and for sovereign nations,” says CIPS instructor David Wyant of Wyant Realty and Across Borders School of Real Estate in Ormond Beach, Fla. “Real estate has its ups and downs, but it’s never worth nothing. It’s tangible, it holds its value, and it’s around for a long time.”

More Online
Some global transactions may pose legal risks. Learn more and watch a video on the topic on our Speaking of Real Estate blog.

Surmounting Financing Hurdles

As hard as it is for many Americans to qualify for mortgages these days, the obstacles facing foreign buyers are even steeper. Since U.S. credit reporting bureaus do not accumulate credit histories on people outside the United States, banks won’t even consider lending to such buyers. In fact, for the 12 months ending in March 2012, 62 percent of buyers from outside the United States paid cash, up from 28 percent in 2007, according to NAR research.

Five years ago, foreign buyers could provide U.S. lenders with letters from banks in their home country to verify creditworthiness and get financing, Macaluso says. It’s not that simple today. In addition, some countries have laws that impose punitive fees and taxes on citizens who take assets out of their own country and invest them abroad. Thus, buyers from such countries may not want a bank or mortgage company back home making inquiries into their financial matters, Lauster says. The Chinese government, for instance, makes it very hard for its citizens to wire money out of the country. Some end up bringing bundles of cash with them, says Helen Tam, abr, CIPS, a Hong Kong native and a broker at Prudential York Simpson Underwood Realty in Raleigh, N.C.

The best advice you can give international clients who want to obtain mortgage financing is to get their funds into a U.S. institution and “season them for at least six months,” Lauster says. Or they can open an account with one of the large international banks, such as HSBC, UBS, Standard Chartered, RBS, or Citi. “It makes the verification of accounts simple,” he says, “particularly if the client goes to that same bank for a mortgage.”

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