Favorable immigration policies, relatively low prices, the American system of title insurance, and an attractive lifestyle make the United States a desirable location for real estate investment. How can you best serve this fast growing market segment?
Your international buyer or seller is ready to transact – now what? What is the best way to handle the negotiation? What pitfalls lie ahead? Being able to answer these questions will not only help you close the deal, it will help you generate more referrals as well.
An important step in understanding how to best work with global clients in an offer situation is to understand their cultural mindset when it comes to negotiation. Here are three important sets of factors to consider based upon your client’s native country.
Directness vs. implication: If you’re dealing with someone from the United States, Canada, Australia, Southern Europe or the Middle East, get to the point. They prefer directness.
In contrast, clients from China, Japan and India, usually respond poorly to a direct approach. For example, someone from Japan will not tell you “No.” Instead they will say, “It is difficult.”
Or perhaps you’re working with a buyer from India. You ask if he can have his money into the title company no later than the 15th of the month. Your buyer says, “Yes.” The challenge is that this “yes,” doesn’t mean that he is agreeing to your request. Instead, it means, “I will do my best to have it there.”
Follow orders or engage in debate: While there are major differences in this dimension depending upon the client’s home culture, there is a simple solution that works with virtually everyone. Outline the various options available to the client and then ask, “Which option works best for you?” That puts the client in charge and avoids confrontation.
Individualism or consensus: Australia, the United States and the United Kingdom are often individualistic and independent. Nevertheless, with members of Gen Y in these countries, they are often as likely to seek consensus from their friends and family as are people from Africa, China, Japan and Russia.
Paying attention to these factors can help you to avoid the frustrations that arise from being unaware of these major influences on your clients’ negotiation style.
Differences in lending requirements: Many international clients, as well as the agents who represent them, are unaware of how the requirements for domestic clients differ significantly from those for global clients. Lending requirements top the list.
To illustrate this point, only a limited number of banks will do business with foreign nationals. If you are working with this niche, it’s important to identify who those lenders are in your area.
Other differences include having a 30 to 40 percent down payment, having an additional $100,000 on deposit at the bank over and above the down payment, plus a full year of payment, taxes and insurance on deposit as well. They will also probably pay a higher interest rate.
Beware of tax traps: If you are working with an international buyer, it is absolutely critical that you advise them to see a tax attorney who specializes in international purchases prior to your clients making an offer.
The reason for doing this is that your clients can be liable for huge amounts of taxes if they don’t address these issues up front. On the other hand, if they set up the right structure for their purchase, they can deduct interest payments, take capital gains deductions, and avoid paying may federal, state and local taxes.
For example, if a buyer in California takes title as an individual, up to 46 percent of all his global income may be subject to California state income taxes. On the other hand, if he takes title using a LLC owned by a foreign corporation, normally he will have no tax.
Again, the buyer must take these steps prior to closing in order to avoid these taxes. They cannot do this after the property closes. A key point to note is that there is no exemption for the death tax on any property over $60,000 in value. Also, keep in mind that is illegal for you to give your clients tax advice. They must seek the advice of an attorney who specializes in this area.
We Want New
Many international clients want new, low maintenance properties that they can lock and leave. One speaker said that the best way to tell if Chinese investors have an interest in your area is to see whether there is a direct flight from Beijing to your location. When that happens, the investors will follow.
Working with international clients can be a highly profitable niche if you take the time to study cultural differences, are willing to adapt your style to fit your clients’ needs, and to guide them to avoid the numerous pitfalls that they will face.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author. Email: Bernice@RealEstateCoach.com
