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Cover story: International buyers a local submarket

- The Washington Times - Thursday, September 9, 2010

Washington, D.C., once known as a sleepy Southern town, has developed into a global city with residents from around the world working in international organizations such as the World Bank, at embassies and for corporations.

The comparatively stable economy of the region has attracted new residents from around the world, many of whom opt to buy homes. The Federation for American Immigration Reform estimates that the foreign-born population in the Washington region increased from 13 percent in 2000 to approximately 20 percent in 2008.

Interest in residential and commercial real estate investment has grown along with the international population. The Association of Foreign Investors in Real Estate surveys its members each year to determine where they intend to invest. According to the 18th annual survey, conducted at the end of 2009, the District is the No. 1 city in the world for commercial real estate investment.

On a national basis, the 2009 National Association of Realtors (NAR) Profile of International Home Buying Activity shows approximately 4 percent of existing-home sales across the U.S. involved nonresident foreign buyers.

NAR surveys report that residential real estate transactions involving international buyers occur for a wide variety of reasons, including foreign expatriates with international corporations needing housing while working in the U.S., foreign residents buying second or vacation homes in the U.S. and foreign-born nationals looking for a permanent U.S. residence once they have immigrated here. About 50 percent of buyers intend to use the home as a primary residence, while the other 50 percent are split between investors and vacation-home buyers.

Foreign residential real estate buyers in the Washington region tend to buy here because they are relocating for work for a long period or are immigrating permanently to the U.S.

"Washington, D.C., is a place where people come to live and stay because of a job or for family reasons, not for vacation homes or second homes," says Guy-Didier Godat, a Realtor with Evers & Co. Real Estate in the District. "While some international buyers may choose to have a home in New York City or Miami for frequent visits or a place in Florida for vacations, the D.C. area tends to attract long-term residents."

Mr. Godat and other Realtors suggest international buyers in the D.C. area are so diverse that there are few generalizations to be made about them. Home sellers who may want to make their homes more attractive to international buyers may simply need to rely on the same techniques that attract American buyers. In general, this means presenting a clean home in excellent condition, in a good location with a reasonable asking price.

"There are as many different tastes and desires among homebuyers as there are people," says Miguel Avila, a Realtor with Long & Foster Real Estate in McLean, Va. "About the only thing I can think of that buyers from Europe, the Far East and Latin America appreciate that Americans don't usually look for is a bidet. It would be an asset to have one in the master bath of an upper-end property."

Mr. Godat says many buyers from other countries think American homes have too many bathrooms.

"There is an element of culture shock for buyers from other countries because they are not impressed with a home that has five bedrooms and five or six bathrooms," Mr. Godat says. "Of course, there isn't much a homeowner can do about that, since you cannot hide an extra bathroom."

Sari Dajani, an associate broker with Weichert, Realtors in Vienna, Va., says that while American homes tend to be larger than many European homes, sellers can identify individual features that may appeal to foreign buyers.

"Sellers and their agents can find certain features to emphasize, such as, if the property is located in the city, the cosmopolitan atmosphere and proximity to embassies and international organizations," Mr. Dajani says. "Homes located near one of the airports could be marketed as a place to easily reach other parts of the country, which is important to people who travel a lot."

Mr. Godat says many international buyers are concerned about energy efficiency, so sellers can emphasize green features in their homes.

When it comes to marketing a home to international buyers, Mr. Avila suggests sellers work with a Realtor who will include as many photos as possible and a virtual tour, especially if the potential buyers are still overseas and will be searching online before coming to the area.

"Most of the international buyers I work with already live in this area and are either renting or already own another home, so they will be shopping for a home in the same way as any other local buyer," Mr. Avila says.

Mr. Dajani recommends that home sellers work with a certified international property specialist, a Realtor who has taken classes to learn how to promote homes to international buyers and work with those buyers in the U.S.

"Foreign buyers often feel more confident when they are working with someone who has a special certification, especially because these buyers need extra guidance to understand the American real estate market," Mr. Dajani says.

Mr. Godat, who says about 75 percent of his customers are from other countries, recommends home sellers work with a Realtor and standard methods of marketing if they want to attract international buyers.

"Buyers who are relatively new to this country are wary of for-sale-by-owner properties because they don't trust anything that isn't standard," Mr. Godat says. "These buyers do not have a lot of knowledge about how the local real estate market works, so it is very important to them to work with a real estate agent and that the seller works with a real estate agent, too."

One issue that may be different for an international buyer is financing. Mr. Avila says the ability to qualify for a mortgage depends on the type of visa the buyers have.

"Some categories of visas will not allow any type of financing at all," Mr. Dajani says. "Diplomats cannot qualify for a mortgage if they have diplomatic immunity, since the lender would not have any recourse if the borrower defaulted."

Michael Devlin, a certified mortgage planning specialist with George Mason Mortgage in Fairfax, Va., was born in Ireland and works with many international clients to arrange financing.

"There are several issues with financing that are different if you are an international buyer," Mr. Devlin says. "Most diplomats cannot get a loan, although some lenders may sometimes qualify a diplomat who has a large down payment and is willing to pay two points or more and a higher interest rate, such as 8.5 percent or more."

Mr. Devlin says non-diplomats who have a work visa lasting more than two years or the ability to renew their visa will have an easier time qualifying for a loan.

"A resident alien is treated just like an American citizen for FHA loans and conventional financing," Mr. Devlin says. "The difficulty is often the credit report for people who are new to the U.S. and have not built an American credit score. In many cases, lenders will require established credit, although some will allow applicants to have nontraditional credit, such as a cell phone bill, a utility bill or a rental history."

Mr. Devlin says individuals who are new to the country and have an international credit report can request that report be sent to Experian, TransUnion or Equifax to be translated into an American credit score.

"Obtaining an international credit report can be expensive and arduous, but for individuals who have been in the U.S. for six months or less, this can be the only way sometimes to qualify for a mortgage," Mr. Devlin says.

Mr. Dajani says many international buyers will offer a down payment of 25 percent or more to make it easier to qualify for a loan.

According to the NAR 2009 Home Buyer and Seller Survey, 92 percent of American buyers financed their homes with a mortgage, while just 44 percent of international buyers used a mortgage. Fifty-five percent of foreign buyers paid cash for their U.S. property.

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