International buyers are entering the U.S. housing market at a rapid pace, according to a recent NAR report, the 2013 Profile of International Home Buying Activity. In fact, international buyers accounted for 7 percent of all residential purchases in the U.S. in the 12-month period ending in March 2014, with a volume of $92 billion in sales. “That’s good news for real estate brokers,” says Nancy Suvarnamani, president of CENTURY 21 S.G.R. Inc., and chair of NAR’s Global Business & Alliances Committee. “Global is local now.”
“Each year, there is growth in global trade, which immediately brings more interaction across the borders,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “Furthermore, economic growth and income growth in some emerging countries are rising very fast.”
As international buying activity rises, agents and brokers across the country are preparing to work with these out-of-country clients. But how does working with an international client differ from a domestic one, and why is it so important to work with foreign buyers?
Why Work with International Clients?
“The U.S. market is wide open for international buyers,” says Senior International Real Estate Specialist David Lauster, U.S. State Department. “The continued interest of international buyers will soak up any excess in the U.S. market and push prices up, which is good for property owners and for real estate agents who are able to connect with these global clients.”
As many Americans are currently choosing to rent instead of buy, foreign buyers are helping to snatch up inventory and keep the economy flowing. “The seller can sell, the broker is successful, and everyone wins,” says Suvarnamani.
Below are a handful of tips for expanding your reach and working with international buyers.
Know the Differences and Learn the Culture
One of the most notable differences in working with international versus domestic clients is the financial side. According to Yun, many foreigners tend to buy in the upper price points. Additionally, 65 percent of purchases involving international buyers are all-cash transactions. This means that these cash-only international buyers don’t have to qualify for a mortgage, leading to a faster sale and simpler closing. However, this doesn’t mean it’s easier all around.
According to Lauster, international buyers are less emotional about the buying process, particularly when buying income-producing property. This tends to result in a tougher and less transparent negotiation process.
Language is also perceived as a barrier to international transactions, but as both Lauster and Yun point out, it can be overcome. “Contrary to what many agents believe, one doesn’t need to speak a foreign language to work with persons from other countries, because English is the worldwide language of business,” says Lauster. One does, however, need to be culturally knowledgeable and sensitive.
“Trying to understand cultures and habits of foreign buyers will be a well-spent investment,” says Yun.
Understand Why They’re Buying
Knowing why your client is buying will help you meet their needs more efficiently. While this is true for domestic clients as well, understanding your international clients’ motives will help build your connection faster. According to Lauster, it’s a common misconception among many U.S. real estate practitioners that the majority of international buyers are looking for commercial real estate, yet the vast majority of international purchases in the U.S. are of residential property, whether for personal use or for income purposes.
Yun notes that many non-U.S. citizens want to have a property in the U.S. not only for vacation home use, but also for gaining status and safety. According to Suvarnamani, many international buyers purchase homes for their children, or to be near their children while they attend American colleges.
While international clients may be more financially sound, they tend to have less of an understanding in terms of what goes into a real estate transaction in the U.S., and what it will entail from a legal standpoint. This means as their agent or broker, you will be required to do a bit more hand-holding and make sure they understand everything from property taxes to closing costs and mortgages, if they need one.
Suvarnamani stresses the importance of directing foreign buyers to a knowledgeable tax attorney to advise the buyer on tax and title issues. She also notes the importance of building a solid support system. “The agent must have a strong team to work with the buyer and answer all of their questions.” If your client is not purchasing with cash, you will need to know where to direct them so that they can obtain a mortgage. “The Bank of China, HSBC and Citibank all work with international clients, so you have to be able to direct them to that source and make sure they can get qualified,” says Suvarnamani.