Editor’s note: This is the first of a four-part series.
Are you marketing to global buyers and sellers not only in your local market but also internationally? If not, incorporating this niche in your business is a great way to expand your business in 2012.
Working with global buyers is one of the best opportunities to grow your business in 2012. The magnitude of this opportunity is huge, both in terms of making more money with less effort and in terms of the size of the potential customer base that you can serve.
Make more money with less work
One of the best-kept secrets in the real estate industry is that agents who work with global clients make more money than those who work exclusively with domestic clients. To illustrate this point, domestic clients have a 33 percent closing ratio. The closing ratio for global clients is 50 percent. In other words, if you made $50,000 in commissions working with domestic clients, you would have earned $84,000 working with the same number of global clients. Furthermore, agents who work with global clients earn on average 50 percent more than those who work exclusively with domestic clients.
The domestic opportunity
Many global investors actually reside here in the United States. According to the 2010 U.S. Census, 1 out of every 5 Americans speaks a language other than English. The largest group of foreign-language speakers in the U.S. are the 35 million who speak Spanish, and the second-largest group comprises those who speak a Chinese dialect such as Mandarin or Cantonese (2.6 million).
Other large groups include Arabic (845,000); French (1.3 million); Indic languages, i.e., those spoken in the areas surrounding India and Pakistan, (2 million); other Indo-European languages (2.6 million); Korean (1.03 million); Portuguese (1.1 million); Tagalog, one of the official languages spoken in the Philippines, (1.5 million); and Vietnamese (1.25 million).
The international opportunity
According to the National Association of Realtors Profile of International Home Buying for 2011:
"1. Of the approximately $1.07 trillion in existing-home sales between March 2010 and March 2011, approximately $41 billion worth were purchased by foreign buyers.
"2. Recent immigrants, those who have moved to the U.S. within the past two years, and individuals with visas for more than six months, purchased an additional $41 billion.
"Therefore, total purchases by foreign or foreign-born buyers were $82 billion, up from $66 billion reported in 2010."
What’s interesting is that 28 percent of the Realtors reported that they did business with an international client. When working with buyers, there is a high correlation between the agent’s foreign-language capabilities and the global buyers they attract. However, "this type of expertise does not appear to be required on the seller’s side of the market."
To take advantage of this trend in your business, it’s important to understand which countries find your area to be most attractive. For example, "the East Coast attracts Europeans. The West Coast is attractive to Asian purchasers. Mexican purchasers are active in the Southwestern markets. Florida appears to be attractive to South Americans as well as Europeans and Canadians."
Furthermore, "The top five sources for international buyers are Canada, Mexico, China, U.K., and India. They account for 53 percent of all transactions."
Clearly, this is good news because most residents of Canada and the U.K. speak English. Also, because India and Hong Kong were ruled and influenced by the British for many years, many of these buyers speak English as fluently as most Americans.
In terms of which states are the most attractive to global buyers, "58 percent of all international transactions are concentrated in Arizona, California, Florida and Texas." If you work in one of these states, global buyers already have a history of purchasing in your area, so why not capitalize on it?
Other factors that influence where international buyers purchase include proximity to the home country, the convenience of air transportation, and climate.
An important point to note is that you will often find people who speak the same language clustered in various communities in the same geographic region. For example, in Southern California, there are a large community of Chinese speakers in the Pasadena/Montclair area.
Korean speakers are also clustered just southwest of downtown Los Angeles. Beverly Hills and Santa Monica have large clusters of Farsi (Iranian) speakers. Huntington Beach has a large Vietnamese-speaking population, while West Hollywood has a large Russian community. And Spanish is spoken in many areas throughout the region.
Look for explosive growth in the Chinese sector
According to estimates from the Red Circle Group and the Global Chinese Real Estate Congress, Chinese foreign investment globally will leap from a total of $50 billion in 2011-12 to a whopping $114 billion by 2015. The U.S. is the top choice for Chinese nationals investing outside of China. Within the next two years, they are predicting a whopping 100 percent increase form the $7.2 billion investors spent in 2011.
One major barrier that stops agents from working with global clients is language. See Part 2 of this series on Thursday to learn why language is no longer an issue if you want to add this important niche to your business.