Using the Web and social media to sell real estate

An international investor who is looking to purchase real estate in the US is often not familiar with the peculiarities of the market and its systems, therefore it the duty of his Realtor or consultant to familiarize her with some key concepts like how the MLS works, the concept of agency, the agent and broker cooperation, the listing agreements, the elements of an offer and negotiations, the steps that involve the parties at closing and how she can perform them while being far away.

International real estate buyers require special attentions and information.

Many US real estate professionals give for granted that every body knows how things work, but the majority of other countries have totally different systems and very, very few of them have something which resembles the MLS and don’t allow cooperation amongst multiple agents and brokers. So the best way to explain the system is to put it into context with how it works in their original country, if you can, or at least don’t give anything for granted and be as clear as possible.

In my personal experience with foreign investors, the explanation of these concepts is usually the most difficult task to familiarize them with the process and the market. And they will never buy anything unless they feel reassured and in control.

The MLS system is the biggest change for them

It is extremely difficult to find, outside of the US, a country with a common system for marketing real estate and exchanging commissions. The typical rule is that you are shown only the properties that are being sold by a particular broker who will not cooperate in any way with any other broker in the land, except some few exceptions that are mostly based on personal relationships and are in no way regulated by some system. There are no listing agreements because the is no official list to advertise real estate.

When somebody wants to sell a house, the contact usually several local brokers and sign a non-exclusive selling agreement, letting each one the them market the property to their own private clients or to the clients who happen to walk by their offices. It is very similar to what happened in the US before the MLS became widely used.

Therefore, when a foreign buyer comes to you, he will suppose you will be showing him only the properties that you direct control and you will have to explain him carefully how the MLS works, what is a listing agreement and how the commission will be split. You don’t need to give them a figure, but they need to understand that you will be compensated for whatever property you will sell to them (if you are a licensed Realtor of course) and that gives her the opportunity of looking at the whole market with your help.

Abroad it is also common that the buyers pays commissions and not the seller, so it is usually a nice surprise to them to find out here it works the opposite way. And you also have the opportunity of becoming their agent and collecting a commission also on the buyer side by explaining them how the agency relationship works and the fact that, by becoming their agent, you can show them not only the properties that are on the MLS but also all properties which are being sold by their owner without a broker (for sale by owner).

The elements of the negotiation

Submitting and offer and signing a purchase contract is very similar from country to country. The wording of the contracts might be different, but the process is the same. What changes here is the way people approach the negotiation and what they expect out of it. A US buyer or seller is typically very direct and pays attention to what is written in the contract and to the contingencies that will allow her to get out of the contract if something goes wrong in the negotiation process. For the US buyer/seller the contract is the point of arrival, the end of the negotiations process and the fixed framework on which the closing will be performed.

An international buyer coming from South America, South Europe or Asia, considers the contract often just a starting point, that is the point where the negotiation BEGINS not when it ends. So be prepared in giving concessions as you move along the process and don’t be surprised or put off by the fact that they now want more concessions after you have a signed contract in your hand. Be rather prepared to have your seller willing to give concessions after the signing and even at closing! This will make life easier.

Comparable sales and closing steps

The US have a very transparent real estate market as compared to other countries world wide. You can check on the selling prices of comparable properties and you have a very detailed description of every expense in the closing statements. This is very unusual for an international buyer and it is a very good sale argument that will make her more comfortable in purchasing in the US, but you need to explain what the numbers mean and how you selected your comparable sales and why they are relevant.

Roberto Mazzoni

The Miami Association of Realtors states that 60 percent of home sales in South Florida involve a foreign buyer these days. It is a dominating figure that shows how the stage has been taken by foreigners who are taking advantage of extremely low prices and, sometimes, favorable currency exchange. Most of the buyers are coming from Europe and South America and are taking advantage of the constant flow of foreclosures that keep the prices low and will keep them that way still for some time.

The vast majority of houses sold in South Florida go to international buyers.

Being cash buyers, they usually have more negotiation power and can secure the purchase of the home even when there might be competitive offers from local buyers who need to go through the complex and unpredictable lending processes that are now common in the US (read the original article here).

To developing a direct correction with these international buyers you need to have more than just low prices, but you must be able to provide them qualified assistance on tax and immigration issues that are peculiar to their status and their country of origin.

This can mean the difference between making a sale and simply losing it. There are plenty of properties to choose from and there is only a correct way to buy them if you are an international buyer and most often the correct tax setup for an international customer is quite different from what you would do with a US citizen or corporation. Unfortunately, even in Florida, there are very few CPA’s that understand international taxation issues and that can save tens of thousands of dollars to your client. Make a specific effort to find them and to network with them if you want to be accessible to the 60% of the buyer market.

Roberto Mazzoni

The steady wave of foreclosures in the residential US market is tempting some legislators into enacting a special type of laws that have already been used in dealing with land.

Cramming down house values.

They technically call it bifurcation or more simply “cramdown” and it consists on evaluating a property at today’s value and modifying the loan so that is now composed of two parts: a conventional secured loan that is in line with the new value of the house and a second non secured loan for the remainder. It would basically consist of forgiving the loan amount that exceeds that current market value and it would allow owners to stay in their house while it would give the bank the same value that it could gain by foreclosing and selling the property on the current market.

Banks are expected to fight this concept very heavily if it ever gets to the stage of becoming an actual law because it makes a difference of course to have a discounted cash sale now as compared to a new loan balance adjusted to current values that will then be paid off on the long term when these values will have have changed. Also, understandably, this could be a threat also for an investor holding mortgages since they would be forced to lose some of their capital even though they had other plans for the house.

See the original article from Realtor Mag.

Roberto Mazzoni

The special tax exemption for first time home buyers is over and this has slowed down house sales in July as compared to the previous year (see the statistics information provided by the Florida Realtors organization). There  has been a national recovery in August, according to the National Association of Realtors, but we are still below the sales figures we had in summer 2009. The market is moving ahead slower now that the effect of the tax break is ended and the researchers at NAR estimate it is going to be a long recovery.

Nice house in Florida.

Yet the general affordability of houses and the cost of borrowing money have never been better so the market has now the opportunity to stabilize in its own right without support or intervention by the federal government. Getting loans is still somewhat difficult, but people with good credit and a solid economical situation can still do it.

Changes have also been introduced in the foreclosure negotiation process in Florida in order to slow down the flow of foreclosures, on the other hand the national government has provided additional $208,437,144 in funding to Florida communities to reverse the effect of the foreclosure crisis through neighborhoods stabilization programs (see here the full article).

Roberto Mazzoni

A research published by CNBC shows that Florida has become in 2010 the number one state in the US for hiring qualified workforce (see the report data here). Florida has still to improve its economy and its access to capital that worsened since 2009, but has the potential of attracting companies that wish to develop their activities under the sun.

Quality of workforce is top in Florida according to CNBC.

The “workforce” indicator measures the educational level of the workforce as well as the number of available workers and the success of the state’s worker training program in placing their participants in job positions. Arizona is number #2 for workforce and Georgia is #3.

Florida now ranks in position #28 in the general assessment of States for business (the same as 2009), with Texas being in the leading position for 2010 and Virginia being #2.  Florida is now just above Wisconsin and just below Maryland and shows a positive trend for the cost of doing business (in which is gained two positions but is