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
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