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| 7 Tips for Working with Foreign Real Estate Buyers |
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With immigrants and foreign business entities looking beyond the coasts, the opportunity to work with foreign buyers isn’t limited to certain markets or to practitioners who travel overseas. Here’s how to succeed.
1. Remember that foreign clients may know real estate but not U.S. real estate. You need to explain local market conditions and U.S. legal issues. But be careful not to talk down to them, cautions Gustavo Lumer, CIPS, CRS®, with Lumer Real Estate in North Miami Beach, Fla.
2. Focus on clients from one or two countries, especially when you’re just getting started, suggests Carmela Ma, CCIM, CIPS, president of CJM Associates Inc. in Beverly Hills, Calif. In that way, you can become more familiar with the culture and establish a wider network of contacts, more rapidly.
3. Recognize that factors such as currency fluctuations and a need for market stability may influence buying decisions, says Pius Leung, CCIM, CIPS, president of Charter Equity in Houston. Leung recalls a client who bought a building, left it vacant for three years, then sold it for about what he paid originally. Yet, the client was happy because the currency in his home country had devalued by 50 percent over that period. So just by parking the money in the United States, the owner had made a profit, says Leung.
4. Take it slowly. Recognize that some cultures require more consultation and time to make a decision.
5. Develop a group of tax, legal, and other experts in foreign ownership of U.S. real estate you can offer foreign buyers as a resource, suggests Ma. Once you’re seen as a trusted adviser, offshore clients will often look to you for assistance in other parts of the transaction, such as finding legal advice.
6. Help bridge differences, suggests Alan Berger, CIPS, of Breslin Realty in Garden City, N.Y. Simple things such as converting a price from dollars to euros or square feet to meters can make a foreign buyer more comfortable, says Berger.
7. Get your Certified International Property Specialist designation from NAR’s International Division. It’s a great way to acquire skills needed to work with foreign clients and to network. “The CIPS network represents the best-kept secret around for making contact,” says Lumer.
More: Market to international buyers using the Distinctive Properties Advertising Service from REALTOR® Benefits(sm) Program partner WorldProperties.com.
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| New Immigrant Gateways |
Cities such as Chicago, Houston, New York, and San Francisco are still major gateways for immigrants, but U.S. Census Bureau data shows other metropolitan areas are becoming major points of entry for foreign-born individuals.
Emerging
(Very low percentage of foreign-born individuals until 1970, followed by high proportions in the post-1980 period.)
- Atlanta
- Dallas
- Ft. Worth, Texas
- Las Vegas
- Orlando, Fla.
- Washington, D.C.
- West Palm Beach, Fla.
Re-Emerging
Foreign-born percentage exceeds national average from 1900-1930, lags after 1930, then increases rapidly after 1980.)
- Denver
- Minneapolis-St. Paul
- Oakland, Calif.
- Phoenix
- Portland, Ore.
- Sacramento, Calif.
- San Jose, Calif.
- Seattle
- Tampa, Fla.
Source: “The Rise of New Immigrant Gateways,” Center on Urban and Metropolitan Policy, Brookings Institution, Washington, D.C.
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| International: 4 Important Rules |
The Internal Revenue Service has regulations that affect the sale of real estate by or to foreigners. Before you serve this niche
- Know what constitutes “foreign” for tax purposes. Individuals are U.S. residents if they have either a “green card,” which admits an individual into the United States as a permanent resident during the current calendar year, or a “substantial presence”in the country. A substantial presence is established when an individual either physically resides in the United States for 183 days or more during the year or meets the formula for residency over a three-year period.
- Know that 10 percent of the contract price of a sale made by a nonresident foreign owner must be withheld for tax purposes under the provisions of the Foreign Investment in Real Property Tax Act. This amount must be paid to the IRS within 20 days of the sale. A seller may obtain a qualifying statement from the IRS that reduces or eliminates this withholding requirement. Properties that sell for under $300,000 that will be used by the purchaser as a residence for a specified time period are also exempt. Sellers who’ve furnished a “nonforeign affidavit” certifying that they will pay the tax are likewise exempt from withholding.
- Ensure that foreign buyers and sellers have international tax identification numbers if they don’t qualify for Social Security numbers. These numbers, issued by the federal government, appear on all tax returns filed by nonresident aliens and on forms that show withholding from real estate proceeds.
- Don’t forget cash flow. If you collect rents or other income for rental properties owned by foreigners who aren’t engaged in U.S. business or trade, you must withhold 30 percent of the gross income (before expense deductions) for tax purposes before paying revenues out to the foreign owners. The withholding amount can be less if the country where the owner resides has an income tax treaty with the United States.
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