The United States real estate market offers lucrative investment opportunities that attract interest from all over the world. According to the National Association of Realtors (NAR), foreign U.S. home sales have jumped by 49 percent over the last year. If you would like to take advantage, there are a few things you should know about working with international home buyers.
What to Expect
For many agents, the most difficult part of working with international buyers is making a connection. It can be tricky to get in touch with foreign buyers, because they have usually either already established connections with representatives from their home countries or choose agents who speak their languages.
If you are able to connect with a foreign buyer through a reference or sheer luck, you will need to work hard to sell yourself and your capabilities. When working with international buyers, agents need to exercise due diligence. The real estate professional should research the client’s background and become familiar with his or her nation’s economic situation, as it relates to that of the US.
Is the nation’s currency weaker or stronger than the US dollar? How will that affect the buyer’s view of a property purchase as an investment? Odds are the buyer will already know the answers to these questions; however, as a professional, you will need to understand all of this to adequately represent the client’s best interests and fulfill your fiduciary duties.
You will also need to familiarize yourself with the financing intricacies that surround foreign buyers. Many international clients choose to pay cash to avoid the difficulties of mortgage financing. That said, if the buyer does need to acquire financing, he or she will also need to obtain an Individual Tax Identification Number (ITIN).
Although foreign buyers can bring lucrative opportunities, they can also come with some serious baggage. Many times, agents get blindsided by unexpected last-minute difficulties that occur after they have spent countless hours arranging deals.
While they are subject to many of the same regulations as U.S. citizens, international buyers can come with unusual circumstances that can impede real estate transactions, including:
- Verification issues surrounding a buyer’s identity and status
- Clearance of foreign funds into the US, especially in amounts over $10,000
- Valid power of attorney provision for remote buyers
- Nonstandard purchase agreements, different from board-certified or NAR contracts
Sometimes, transactions can get held up during financing, while lenders confirm international assets and prove creditworthiness. Some sellers are also hesitant to work with international buyers, because they worry it will be difficult to take legal action against someone in another country, if the buyer defaults on a sales contract.
Should I Work with Foreign Buyers?
According to the NAR, 31 percent of real estate professionals have worked with international clients at least once. While some continue to target foreign buyers after one profitable experience, others avoid these buyers due to difficulties and impediments. You can improve your odds of a successful transaction by familiarizing yourself with the ins-and-outs that comes with international real estate purchases. If you don’t have the time or background to do so, it may be in your best interest to focus exclusively on domestic clients.
2-10 HBW offers comprehensive Systems and Appliances Home Warranties to help protect your clients from unexpected repair and replacement costs. Contact us to learn more.