Characteristics of Foreign Buyers

Each country differs in language, religion, ethnic and racial identity – even distinctive culinary tastes. Business practices are no exception. The countries or cultures you choose to focus on will largely determine what characteristics you need to pay close attention to. But over time, and after many transactions, international specialists have observed some commonalities among foreign buyers. As a global agent, be prepared to encounter some (or possibly all) of the following characteristics and preferences when working with foreign buyers in your local market.

Long-term perspective

Even among domestic buyers, real estate tends to be a long-term investment. This is especially true for foreign buyers, as the process to buy and sell a home requires a good deal of effort. The timeframe of buying and selling is never rock solid – a property might sell in a day, or it could take a year. When purchasing a house, the sellers might already be out of the house and ready to close in under 30 days, or they could request 90 days. Last but not least, the high rates imposed by capital gains taxes discourage short-term investment. For these reasons, be prepared to answer detailed questions about market pricing and investment yields. Resources to help answer these questions: NAR’s Local Market Reports, Metropolitan Median Area Prices and Affordability, REALTORS® Property Resource.

All-cash or high-equity transactions

60% of foreign buyers paid in cash for their U.S. properties, a trend that has been steadily increasing for more than a decade. In contrast, only about 1/3 of domestic sales have been all-cash. There are several reasons for the uptick in foreign cash purchases: some buyers pool family money, mortgages can be difficult to obtain, some cultures or religions prohibit the acceptance of loans, and some buyers simply wish to invest their liquid assets in a long-term, safe and secure investment without unpredictable interest rates and exchange rate fluctuations. The CIPS course, Global Real Estate: Transaction Tools, provides information on preparing for all-cash buyers.

Acceptable, predictable returns

While some foreign buyers purchase properties in the United States because they are relocating permanently or for a second-home property, others are strictly purchasing it as an investment. Unlike domestic investors, foreign buyers are not necessarily looking for bargains. They are most interested in a favorable rate of return and assurance that future income streams will remain steady or increase.

Quality properties

Buyers from outside the United States paid nearly $75,000 more (median price) per property than domestic buyers, indicating an interest in higher quality residences. They are usually not interested in fixer-upper properties, as they have a limited amount of time they may spend in the United States (whether by immigration law or personal time available), and logistics of working with contractors can be challenging with time zone differences and the inability to meet in person.

Desirable locations and familiar markets

Florida, California, Texas, and Arizona are consistently the top four states for foreign buyers, making up 55% of total reported international sales. Proximity to the home country, the presence of relatives, friends and associates, job and education opportunities, and climate and location appear to be important considerations to prospective buyers. They also tend to seek out markets where there are established communities of compatriots, which include not only major gateway cities, but also many suburban areas as well. Proximity to air transportation is important as well. NAR’s Profile of International Home Buying Activity has more information about the types of properties and areas where foreign buyers search most.

Detailed research

All buyers want detailed information about the properties they plan to purchase. But given the distance and unfamiliarity with the market, foreign buyers are at an information disadvantage. They do not know where to go for reliable information, and will look to you as a trusted advisor. Be prepared to present detailed information on the property, climate, market conditions, and nearby amenities. REALTOR® Property Resource is one of the most comprehensive tools at your disposal to provide this information, as it provides hundreds of datasets on over 160 million U.S. properties and markets (and it’s included in your NAR membership dues!).

Specialized advisors

Nearly every foreign transaction will require the involvement of specialists in other areas. Building a team of international specialists in law, taxes, immigration, property management, financing, and other areas will be integral to a conducting a smooth transaction. Check out this recent post from The Global View to find out who you’ll want on your side when an international buyer comes calling.

Cynthia Fauth

Cindy Fauth (RCE, AHWD, CIPS, ePRO,) is Director of Global Marketing & Business Development for the National Association of REALTORS® Commercial & Global Services team. She joined NAR in September 2009, helping real estate agents and associations "go global" by promoting the programs and tools of NAR Commercial & Global Services.

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  1. It really can be a different ball game when selling real estate to foreign investors.