According to a report by the National Association of Realtors, foreign nationals are actively buying United States Real Estate for their own use. The report had several interesting aspects that I would like to bring your attention to. The entire report is available at www.realtor.org/research/research/reportsintl.
Citizens of Five Main Countries Are Buying
Although there are representations of seventy countries in the data of buyers, there are five countries showing the highest interest in U.S. real estate – Canada, Mexico, China, U.K. and India. Those countries represent 53% of the transactions.
Buyers are Purchasing in Seven Markets Plus University Areas
The buyers are buying throughout the U.S. but there are seven primary markets -Arizona, California, Florida, Georgia, Nevada, New York and Texas. Those states represented 64% of the total sales to foreigners in 2010. Florida is by far the strongest representing 31% of the sales. California follows close behind with 12% of the sales.
They are buying single-family homes for the most part in the seven primary markets. Many foreigners buy in the U.S. so that their children who attend school here have a place to live while in school. That means that any property in or around a major university is a candidate for sale to a foreigner. We saw that in our project at 4900 Cedar Avenue, Philadelphia. At that building foreign families and students bought our condominiums at a surprising rate.
For the buyers other than university students and their families, who may buy anywhere around a major university in any city or state, the buyers are concentrated in different areas – Canadians buying in Florida and Arizona (likely to escape cold winters), Asian buyers purchase mostly in California, Mexicans in Arizona and Nevada. European buyers are purchasing mostly on the East Coast due to proximity to Europe.
The geographic differences should not come as a surprise. Buyers cite proximity to their home country, air transportation, and climate as their most important factors. The concentrations of buyers from different countries in different parts of the U.S. make sense given the proximity, air travel and climate factors.
Why Do Foreigners Buy Where They Buy?
The report also states that it is likely that existence of a population from their home country is also a factor – due to word of mouth from contacts already owning in the area and we think perhaps due to an established immigrant population as shown by social clubs, restaurants and specialized food markets. This provides some interesting facts we will talk about later in this article because it affects your marketing. Note that the existence of a native population of foreigners or social clubs, restaurants and specialized food markets is not emphasized or necessarily mentioned in the report but we believe those factors can help you know when to pursue a marketing plan to tap into this market.
They Pay Cash
Another interesting fact is that 62% of foreign buyers are buying with cash. The foreign buyers may have an aversion to borrowing (China), or they may simply be unable to qualify because they do not have a U.S. credit score (the credit scoring systems used in the U.S. are not the same as used in other countries) and thus cannot qualify for a loan because the loans are credit-score based.
Foreign Buyers Have Three Top Reasons For Buying
The buyers offer three top reasons for buying – 31% of the buyers view U.S. real estate as a secure investment, 27% view it as a profitable investment, and 43% view it as a good location. And these buyers put their money where their mouth is – paying on average $315,000 for a house. In comparison the average price paid by Americans was $218,000. This means the rich are seeing the value here in the U.S. This would lead one to question what is it that the average wealthy foreign national knows that the native U.S. population does not?
How to Use this Information
Here is what all this means – first sophisticated foreign nationals understand that compared to elsewhere in the world U.S. real estate is cheap, stable, and a good investment. That is why they buy here and pay for a really nice property. Second if you are in an area where there is a large foreign population you should market for buyers in that same ethic or international group.
This means that you may hire a real estate broker who is tied into that community to market your property, you might decorate differently if you are staging the property (use a native of the country you are marketing to stage the property), use different paint colors, and you may advertise by sending out an invitation to a neighbors open house so that other members of the foreign community already owning houses in the U.S. can refer a buyer to you. We do that with signage and with direct mail pieces to the local population.
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