According to the National Association of REALTORS® (NAR) 2016 Profile of International Home Buying Activity, foreign buyers spent over $102 billion on homes in the United States last year. States in warmer climates were popular destinations for foreign buyers, with 42 percent of properties purchased for investment or vacation purposes. If last month’s column prompted your agents to consider working with investors, they might want to look abroad for potential clients. Foreign buyers may be interested in investment properties, but could also want a residence while working in the U.S., or a home for their children attending school here. Regardless of the reason, foreign buyers spend an average of $477,500 (compared to the average of $266,683 for all existing-home sales), representing an excellent opportunity.
Begin by identifying markets that tend to attract foreign buyers, as well as the countries from which buyers most often originate. The U.S. Census Bureau’s American FactFinder and maps from the Migration Policy Institute contain data on homeownership rates, country of origin and migration patterns, all of which can help pinpoint a potential client base. NAR is another great source. The annual 2016 Profile of International Home Buying Activity mentioned above provides information on popular markets, buyer motivations and average purchase prices. For a more locally-focused perspective, your agents should read NAR’s State-by-State International Business Reports.
After the initial research is complete, your agents should seek out opportunities to connect with potential leads face-to-face. Investigate whether your local or state REALTOR® association hosts a global business council, as these groups provide educational and networking opportunities for agents who do business internationally. Your agents might also reach out to local companies that employ guest workers from abroad. Other resources to consider include local cultural centers or expatriate groups. With 47 percent of international leads coming from previous client contacts and referrals, these personal connections are vital to your agents’ business.
Since real estate laws and practices differ significantly from country to country, your agents should be prepared to educate foreign clients on the basics of the U.S. real estate industry. They’ll want to explain licensing requirements, agency relationship and commissions, and the fact that real estate laws are all state-specific. It’s also important for your agents to understand the various government regulations that are required of foreign buyers. For example, if it’s an investment property, the owner will need to report any income received on U.S. properties to the U.S. government, and may also be liable for taxes in their home country. For this reason, it’s important to establish relationships with attorneys who are conversant with foreign tax laws and treaties.
Last year, 50 percent of foreign buyers paid cash for their properties. Be aware that the U.S. requires that all cash transactions over $10,000 be reported to the federal government. Agents will also need to help their clients understand how to obtain financing. Establishing credit history can be difficult, and many banks require a large down payment to qualify for financing.
While working with foreign buyers requires substantial time and research, the market is full of opportunities. Expand your educational repertoire with REBAC’s new investing course, Real Estate Investing: Build Wealth Representing Investors and Becoming One Yourself. Agents might also consider taking courses via NAR’s Global department. To learn more and to find a course, visit www.training4RE.com.
Marc Gould is vice president, Business Specialties, for NAR and executive director of REBAC. A wholly-owned subsidiary of NAR, The Real Estate Buyer’s Agent Council (REBAC) is the world’s largest association of real estate professionals focusing specifically on representing the real estate buyer. With more than 30,000 active members, REBAC awards the Accredited Buyer’s Representative (ABR®) designation to REALTORS® who work directly with buyer-clients.
For more information, please visit REBAC.net.
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