Editor’s note: This is the first of a two-part series.
Sooner or later you will probably work with a buyer or seller from another country. If you handle the transaction well, you can have a steady stream of referrals for many years to come. The key is how to avoid the cultural pitfalls that could cost you the deal.
With the worst of the real estate downturn behind us, the United States continues to be an attractive place for offshore investors to purchase property. Establishing a niche serving global buyers and sellers can be a smart move for a variety of reasons.
First, when a global buyer trusts you to handle his transaction and you do an excellent job, there is a high probability that he will refer other people to you. Second, agents who work with global clients earn 50 percent more on average as compared to those who work with domestic clients. Finally, global clients have a closing rate of 50 percent as compared to the domestic closing rate of 33 percent.
In other words, working with 10 global clients will net you the same amount as working with 15 domestic clients.
Agents are often reluctant to work with people from other countries because they are intimidated by the language barrier and are sometimes put off by cultural differences. For example, many cultures have a "haggle" mentality. Negotiating prices is a core part of their culture. To work successfully with these clients, the agent must have strong negotiation skills that will allow the client to "win" and still have the transaction close.
A key point in working with global clients is to be curious. Inquire about their country, their food and their customs. Be genuinely interested. Nevertheless, you must walk a fine line between being curious vs. asking questions that will cause the clients to go elsewhere. To avoid having this happen to you, here are some of the most common pitfalls that you may encounter when working with global clients.
1. Confidentiality is everything
Many agents are surprised when a global client elects to work with an American agent who doesn’t speak their language as opposed to another agent who is fluent in their language. While this is not always the case, a common reason for this occurrence is that most global clients are intensely private. If you don’t speak the same language and you lack a presence in their community, there is no way you will be able to discuss their transaction with their friends or family. In fact, the quickest way to kill your global business is to talk about your clients.
When it comes to working with global clients, never discuss them or their transaction with anyone.
2. Money discussions are taboo
While it’s a common practice to ask American buyers how much they can afford (and this may include questions about how much they make), discussions about income are totally inappropriate with most global buyers and sellers. In fact, even with clients from the U.K., not only is it inappropriate to ask about their income, it is also inappropriate to ask about what type of work they do. This can be an especially challenging issue when you work with Asian clients where saving "face" is a core cultural value.
The best way to handle this challenge is to show your global buyers several different types of homes with different price points. The next step is to ask, "Which of these areas and homes do you like best?" They will almost always choose properties that are in the right price range.
Another particularly difficult issue is preapproval. Depending upon how fluent your clients are in English, you can explain that in your local market, it is customary for buyers to obtain a letter from their bank or financial adviser stating that the bank will either give them the loan they need to purchase a specific property or that they have the funds on hand to pay cash. Since many foreign buyers pay cash, your buyers will often have to substantiate their source of funds. The primary concern from the U.S. side is money laundering.
The best way to handle this is to see if they have a financial adviser who is familiar with handling U.S. purchases and who can supply the required documents. If they don’t have someone, you can either do your best to negotiate a deal without a preapproval letter or to locate an attorney or someone at the title company who is accustomed to dealing with offshore clientele.
Finally, in many cultures, wives have no idea how much their husbands earn. Under no circumstances do you discuss income, price range, or any other such questions pertaining to money. This is especially true for people from the Middle East as well as for many of the ultrawealthy, regardless of where they were born.
What other cultural pitfalls do you need to avoid? See Part 2 of this series to learn more.