Will working with international buyers affect your real estate transaction? Every buyer and seller – and every transaction – is different. That is what keeps us as Realtors on our toes since it is so important to manage expectations on both sides of the deal. When you add to the mix an international buyer, it can take that roller coaster ride to a whole new level!
How Many Homes Do International Buyers Acquire Each Year?
According to the National Association of Realtors (NAR), about 209,000 houses were sold to resident and nonresident foreigners between April 2014 and March 2015. Foreign buyers spent more than $100 billion on U.S. homes, and realty agents who dealt with international clients reported an increase of 7 percent from the previous year.
International buyers purchased $153 billion worth of existing homes in the U.S. from April 2016 to March 2017. They bought 284,455 properties, a 32% increase from the previous year. However, despite how impressive that sounds, it represents only about 5% of existing-home sales.
“The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases,” Lawrence Yun, NAR’s chief economist, said in a statement. “Foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work, and invest.”
How Do International Buyers Get a Mortgage?
Different rules can apply to foreigners when they apply for a mortgage. Since verification of international credit and assets may be difficult, lenders often require a larger down payment or a guaranteed amount to be deposited in a U.S. bank as proof of the client’s ability to repay the loan.
What’s required for a foreigner to get a home loan can depend on residency status. Most international borrowers tend to be permanent residents (with a green card), nonpermanent residents (with a valid work visa), or “foreign nationals” (whose primary residence is outside the United States). For tax purposes, foreign buyers will need to obtain an ITIN (individual taxpayer identification number) if they do not qualify for a Social Security number.
Having said that, many international buyers are cash transactions.
Are International Buyers Different?
International clients often negotiate a deal differently based on their culture or tradition. While buyers from one country may be accustomed to negotiate right up to closing, another group may take a more personal or emotional viewpoint and accept the sales price with little or no haggling. Both sellers and Realtors should be prepared for the buyer to approach the transaction differently based on their cultural differences – and be prepared to respect those differences. After all, learning about a new culture and point of view can be educational and fun.
“International transactions are significantly different and more complex than domestic deals,” according to the NAR’s Web site, www.realtor.org, “and working with a Realtor who knows how to handle these differences can make or break the purchase or sale.”
International buyers may come shopping in the US with a list of potential properties in mind. They may have a limited time to spend in the United States and may need to make a decision quickly.
Foreign buyers will be subject to the same rules as U.S. citizens, but unusual factors — such as overseas currency transfers, nonstandard purchase agreements, and identity and credit verification — can complicate a sale unless carefully prepared for ahead of time.
Issues to Be Prepared for in Advance with International Buyers
Consider these complications, which are often involved in an international property sale:
●A nonstandard purchase agreement that may not contain all the provisions that a board-certified or NAR contract contains, such as a mandatory agreement to mediate in the event of a dispute.
●In the Washington metro area, approval by the US State Department will likely be required if the purchaser is a foreign embassy intending to use the property as housing for embassy personnel.
●Verification of the buyer’s identity and status.
●Clearance of international funds brought into the United States, especially amounts over $10,000.
●Provision for an out-of-town buyer of a valid power of attorney form or approval for electronic signatures.
●A request from the buyer for additional time to take advantage of a favorable currency conversion rate; for time to travel from overseas; or for time to process a foreign mortgage application that may involve added documentation to prove creditworthiness and confirm international assets.
If International Buyers Default
In the event of an international buyer’s default on a sales contract, sellers are entitled — under certain circumstances — to monetary compensation. Because it could prove difficult to take legal action against a foreign buyer — who may be out of the country or difficult to contact — sellers should consider asking for a sizable down payment or “good faith money deposit” to guarantee the sale.
If a buyer has no legitimate reason for canceling the sale — and backs out — the seller will usually be allowed to keep the deposit instead of resorting to legal action. Litigation can be expensive and a judgment can be hard to enforce when dealing across international borders.
For more information about the pros and cons of working with an international buyer, please contact the Lise Howe Group at 240-401-5577. If you are an international buyer planning to invest in the DC metro area please remember that it is very important to choose a Realtor with experience working with buyers from out of the US. Make sure that your rights are well protected under the terms of the contract and throughout the inspection process right up to closing. Please call us at 240-401-5577 or email us at firstname.lastname@example.org for an initial consultation.