What do I need to know about international buyers and sellers?
According to a report by Beauchamp Estates, in association with Leslie J. Garfield & Co., foreign investment into the U.S. luxury residential real estate market has jumped to a new record high of $7.48 billion – a 72% increase from just one year prior. And of these transactions, 44% were all-cash purchases.
Whether foreign citizens are buying and selling pied-a-terres, vacation or second, even third homes here in the States, they are, quite clearly, a highly valuable target segment in the luxury home market.
To make the most of these lucrative opportunities when working with international buyers and sellers, real estate professionals should always consider these important points:
Culture is key. Too often, foreign investors become frustrated and turned off by American parties to a transaction that are unaware of, or just simply ignore their particular cultural practices. And while this may be entirely unintentional, it’s a mistake to assume these clients will automatically confide in you. Trust is built differently in different cultures and being oblivious to those distinctions can jeopardize your relationship with a foreign client.
The true ‘time’ difference. Contrary to popular belief, non-U.S. investors can be eligible for financing, but they shouldn’t count on being able to do so in the same timeframe as U.S. citizens. Various U.S. laws designed to prevent money laundering and other criminal conduct can complicate money transfers to a U.S. title company. Foreign buyers should be counseled to prepare well in advance.
As well, and just as with American buyers, foreign nationals may wish to consider taking title through a business entity to avoid personal liability. This, too, can be more difficult and time-consuming for them.
Other obstacles. Foreign sellers face IRS reporting and withholding requirements. And if they owned the property in a U.S. corporation or other business entity, they may need to dissolve that entity and wind up its business affairs, first. With knowledge and planning, these won’t come as a surprise at the closing table and may even be remediated.
While there is great reward to working with foreign buyers and it’s imperative to know the risks. Over the last twenty-five years, Erwin Law LLC has counseled international real estate clients from Asia, Europe, Africa, the Middle East, Canada, Mexico, Central America and South America. As a result, we have a wealth of experience that makes us highly-suited to guide you and your international clients through successful real estate transactions. For more information visit http://erwinlawfirm.com or call (773) 525-0153.