International Real Estate – Buying A Home In The U.S If You Are Not A U.S. Citizen

I have mentioned it many times before. Often, my newsletter topics come from real-life situations and clients.

A few weeks ago, an agent who reads my newsletter came to me with a challenge. He represented a man from Japan, who didn’t speak English. This man is buying a non-warrantable condo, as a second home, with stated income, and his lender had just turned him down on the day of closing. He came to me and we got his loan closed.

He was very happy and he said, “Aaron, you should write a newsletter about Foreign National homebuyers, because not many people understand it.” He was right!

The American dollar is weak today compared to many other foreign currencies. In addition, American banks offer very creative loan financing and low interest rates. As a result, many foreigners are looking to invest their money in American real estate and Las Vegas is one of the most popular markets for them.

People who are not American or who are not legal resident aliens are classified as Foreign Nationals.

In Las Vegas, experts say the high-rise condo industry would not be able to survive without the Foreign National buyer. According to a recent article in Fortune Magazine, foreign buyers have purchased as many as 30 percent of the condo units in the new Mandarin Oriental, part of MGM CityCenter, that is supposed open in late 2009. The entire Mandarin Oriental building is nearly sold out.

Some people estimate that close to 10% of all purchases in Southern Nevada are Foreign National buyers. When you are talking about Florida, some say this number is as high as 15-20%.

These clients come to the States to purchase both Second Homes and Investment Properties. However, the recent challenges in the lending guidelines have made investment loans difficult for Foreign Nationals. However, primary resident and second home purchases are very easy for the borrower to obtain.

There is a real marketing opportunity for real estate agents who can promote themselves to this niche and you don’t have to be from their country to do so. It’s important to understand how they will secure financing however.

Although many loan programs have different requirements, here is a pretty standard list of what they will need:

o A credit score helps. Many companies now can offer foreign credit reports but if they have one domestically that will work too.

o If they don’t have a credit score, they will likely be asked to provide three letters of reference from financial institutions in their home country that shows they are in good standing. Or they can sometimes show one credit reference letter from a large internationally known banking institution that also attests they are a good client.

o A valid unexpired passport or visa. If the visa will expire within six months from the date of the loan application, they will likely have to provide a copy of their extension.

o Many banks want the borrower to have opened an account in a U.S. based bank and have at least a two month history there.

o Employment verification. This can be a very short, simple letter from a CPA or other third party in the borrower’s home country verifying the employment and line of work.

o If the property is being purchased as a second home, plan on a down payment of 20-25%. If it’s a primary residence, and he has lived here less than two years, plan on 20% down. If the he has already been living in the U.S. for at least two years, he may be able to qualify for up to 95% financing, regardless of country of origin. If he has lived in the U.S. less than two years and he is a citizen of Canada, UK or Mexico, he may be able to qualify for 90% financing.

It’s important to note that when a non-U.S. real estate owner sells the real estate he has bought here, the IRS requires that 10% of the sales price be withheld at closing for an estimate tax payment.

There are exceptions to this. If the non-U.S. real estate owner sells the property to someone who plans on using the property as his primary residence, and the sales price is $300,000 or less, the seller is exempt from the withhold. You can also request that less be withheld if you believe the tax liability at the end of the year will be less.

According to many experts, there are 10 things you will want to consider when working with foreign real estate buyers.

1) You need to be able to overcome the language barriers, if they exist. If you are marketing to European buyers or Canadian buyers, this won’t be as big a challenge however if you choose to market to other areas like Asia, the buyers may not speak fluent English. Plan on having an assistant who can speak the language of the area of the world you want to try and market or securing the services of a company like translators.com.

2) You should have a great understanding of the local market conditions and legal issues. These buyers are usually very well educated and successful in their country. However, they may not understand our market. They will look to you for your expertise.

3) Be very respectful, even when there are communication challenges, and be very careful not to demean or talk down to anyone.

4) Focus on a single country you want to market to when you first get started. It’s important that you become familiar with the culture in order to start to build a network of contacts and referrals.

5) Be patient. There are many cultures that believe that some important decisions require more time and thought.

6) Develop a networking group of resources for them to deal with on any of their questions like a group of tax experts, attorneys, lenders, escrow agents and others who understand the laws and intricacies of foreign ownership.

7) Understand the foreign currency conversion tables. Be able to tell the client that 300,000 U.S. dollars is 223,441 euro. And if you need help, use this website. http://www.xe.com/ucc/

8) Understand there could be challenges and delays. Not many lenders have experience in dealing with Foreign Nationals. Due to the nature of the documentation the borrowers are asked to provide, you can expect there to be more requests from the lender than normal. Because the client is sometimes out of the country and not readily available, this can create untimely delays.

9) Communicate the process. It’s important that you clearly communicate the entire real estate purchase process from start to finish. Its likely that our process here differs from that in their country and you want them to understand ours as well.

10) Stay on top of foreign currency exchange rates and market conditions. Let’s say you had a buyer from the U.K. who thought the $300,000 home you showed him last month was “a bit too pricey.” But let’s say that next month, the dollar drops further compared to the Euro and now this $300,000 is actually costing him $292,000 compared to the Euro, you may be able to make a sale without the market moving at all.

The National Association of Realtors even has a certified designation for international property specialists through their International Division. In today’s tighter market, it may make sense to expand your niche marketing and Foreign Nationals provide an area where there is not as much competition. How do you begin to find these buyers? Developing a presence in the international market can often start with local contacts.

In addition, the largest ethnic groups have a local Chamber of Commerce.

Finally, your Internet sites should definitely and prominently market your expertise in understanding and assisting the Foreign National.

Ravet – PCNTDA Delivers the Ultimate Real Estate Investment Destination

With many tempting locations featuring properties for sale in Pune, what does it take to make a new one stand out? Aundh, Wakad, Baner, Pimple Nilakh, Pimple Saudagar and similar areas have had their heyday.

Now, it is the turn of Ravet, which lies on the North-West side of Pimpri Chinchwad Municipal Corporation and Pune. This location is set to become the new paradigm of investment property in Pune. Various significant real estate market drivers have combined to make Ravet the most promising destinations for Pune residential property.

Superior Location

With its development masterminded by the Pradhikaran-Pimpri Chinchwad New Township Development Authority (PCNTDA), Ravet enjoys the benefit of an extremely strategic location on the Pimpri Chinchwad map. It is, in fact, the first town that appears on leaving the Mumbai-Pune Expressway.

This has resulted in it becoming known as the Gateway to Pune; but that is not all there is to it. Ravet is a junction of the old NH4, the Katraj-Dehu Road bypass and the Mumbai-Pune Expressway and is placed advantageously close to the Hinjewadi IT hub and Pimpri-Chinchwad industrial belt.

The residential property investment potential at Ravet is further enhanced by the fact that J.N.N.U.R.M has begun construction of a 45-metre, grade-separated, non-signaled four-lane BRT (Bus Rapid Transport) road at this point. This road, with 40% of the work already completed, will ensure that key area such as Aundh, Pimpri, Chinchwad, Chakan and Talegaon are in easy access from Ravet.

Developer Activity Picking Up

Two major development companies active in the PCMC area are now collaborating on a highly modern integrated residential township at Ravet’s focal centre. In Pune, township properties are definitely the lifestyle wave of the future. Spread over 2.5 million square feet, this integrated township – which features futuristic facilities aimed at making it entirely self-sufficient – is going to be developed in three phases.

Since the highest demand in Pune is currently for affordable housing, the first phase targets the middle-income group with 2/3BHK flats ranging in size from 800 to 1200 square feet. These flats are currently priced between Rs. 24 to 34 lakh at the initial offering phase. Taking a cue from this pioneering project, other developers have also acquired land in Ravet, although their projects are yet to be announced.

The Trappings Of A Pune Real Estate Legend

While Ravet’s accessibility is certainly one of its biggest real estate market drivers, it also has a number of very important establishments in its immediate vicinity. These establishments will ensure that any township properties in this area will thrive.

Among them are the famous Aditya Birla Hospital, industrial giants such as the Bajaj Auto manufacturing plant, SKF and Telco, as well as important education establishments like the Indira Institute of Business Management, D.Y. Patil College and Mercedes Benz School.

Of course, the fact that Ravet is so close to the Hinjewadi IT hub is a major factor in terms of property investment potential. Ravet, with its upcoming integrated township, will now offer affordable residential property options for software employees from this software hub, as well as to those from the Talegaon MIDC and Chakan MIDC.

As of now, property rates at Ravet are still extremely rational. Rates at such township properties tend to be slightly higher owing to the fact that they provide their own infrastructure. Because of this, the appreciation potential for properties in such townships is also much higher than in other projects.

Issues in Real Estate

When we speak of the real estate economy, we use national statistics but speak locally. On the other hand the stock market is based on the national or even the world economy. The real estate markets are based on local or even micro-local economy. What is happening in LA may not directly affect what is happening in Toledo.

What affects all real estate markets together are the interest rates. There is no single barometer to measure the entire housing industry in US.

So, while statistics calculations and economic factors are relevant, equally important is using one’s common sense. We must keep our eyes wide open and take a look around and see what is happening. Talking to real estate agents, investors and lenders in a particular area can be a big help to access a market.

These are certain issues one must consider while dealing in real estate.

One major issue facing corporate real estate managers is how to effectively manage the real estate assets in the current market environment.

Secondly, real estate agents provide information about utilities, zoning, schools etc. But two common issues a buyer faces while buying are-

i. Will the property provide the right environment we want for a home?

ii. Will the property have a good resale value when we are ready to sell?

Another important issue that any buyer/investor faces is the legal issue. Real estate laws vary from state to state. One must consult an attorney licensed to practice law in the state in which the property is located.

At times, the property a buyer is seeking is available but not properly advertised. It may take you some time and effort to search for and locate the right property.

The important issue of finance. We must know our financial reserves plus our borrowing capacity. If we know about our current savings, income and debt, then we can take help from lenders; banks and mortgage companies, which offer some choices according to your financial capability.

In America, some real estate association and commissions have sponsored regulation that require all real estate brokers to provide a minimum level of services which forces sellers to buy services they do not want or need.

There is the issue of rebates on transaction fees. Some states in America allow rebates of commissions or fees on real estate transactions but some states have legislated regulations which prohibit rebates.

Next is the issue of consumer participation. The consumer federation of America released a study that real estate boards and commissions are dominated by real estate practitioners and they recommended greater participation by consumers; which is opposed by practitioners – this works against the interest of ordinary buyers and sellers.

Last but not the least, a lot of hoopla has been floating around in the news media about the ‘bubble’ theory of real estate and that the real estate market is going to burst – this may have a psychological impact on the potential buyer or seller.