If you remember my article from a few months ago (4 Reasons Why You Need To Be An International Real Estate Agent), I gave a hard push for agents to become comfortable with international real estate transactions. That comfortability starts with a C.I.P.S. (Certified International Property Specialist) designation and continues with ongoing education. For those of you who have headed my advice and begun adopting global expertise in your practice, let’s discuss what proper preparation looks like for someone thinking about buying internationally. Here are 10 questions to ask your clients before they buy abroad:
1) Vacation, Investment or Retirement?
Find out what your clients' primary objectives are. Do they strictly want a return on investment or do they plan to retire there? Clarifying their objectives will provide a reality check to see if what they want can actually be attained.
2) A Party Pad or Quiet Sanctuary?
Ask your clients what the intended use of the property will be. Do they plan to host bachelor parties there or are they looking for a quiet cottage to write their next book? Knowing the answers to these questions will help frame your clients' preferences in regards to floor plan, amenities, location, etc.
3) Have They Visited The Destination? Multiple Times?
The most prudent buyers will make several extended trips to their preferred destination to get very familiar with the local market. Ask your clients how well they know the area in which they plan to buy.
4) New Home or Old Home? Attached or Detached?
Many buyers will insist on a newly-built home, but newly-built often comes with a higher price tag. Do your buyers enjoy the charm of an older home or would they prefer new? In addition, is standalone essential or would they be interested in an attached unit?
5) What Are Their Rental Goals?
Do your clients plan to rent their property at all throughout the year? Better yet, do they have to rent it out a certain amount of weeks/months to afford the payments? If so, what are market rents and how often do they need to rent for the proper income?
6) What Are The Country's Laws?
Does the country honor private property rights? Make sure you understand the laws of the land before you invest!
7) Any Hidden Fees?
What will the professional assistance cost? Depending on the country this may include real estate agents, attorneys, inspectors, financial/tax professionals, etc. In addition, what will the closing costs be? Are there any sales/transfer taxes or notary fees to include?
8) Any More Hidden Fees?
Look into every possible ongoing expense that may exist: utilities, community fees, taxes, insurance, security, maintenance, etc.
9) What Is Their Exit Strategy?
Make sure your client has a solid understanding of their exit options and related expenses. Some things to consider:
- When the property is sold, can the proceeds be freely moved out of the country without taxation?
- What are the tax implications of repatriating an investment back to the home country?
- If a property moves into an estate, how will ownership and taxation be treated among the heirs?
10) Did We Cover Everything?
Final variables to explore with your client are currency fluctuations, transportation options near the property, medical facilities near the property, and the overall climate of the country's government in regards to foreign investment.
I don’t recommend actually conducting real estate in other countries. Frankly, I don’t recommend practicing real estate in any area that you are not an absolute expert in; whether that is abroad or only 20 minutes away. My emphasis within my international push is to 1) educate yourself so that you can intelligently communicate with foreign buyers/sellers and 2) create a platform of relationships with real estate agents in other countries that you can refer business to. This specific article focuses on the former: educating yourself so you can properly prepare your current clients for a possible international purchase. Because remember, you need to be a real estate expert for your clients and real estate experts know no bounds (or borders).
(Information from National Association of Realtors C.I.P.S. mailer dated 8/2015 labeled "Global Perspectives: Top 10 Considerations For Cross-Border Buyers")