Based on the National Association of Realtors, China remains the top foreigner buyer for US real estate. Popular states among Chinese people include California, New York, Texas, Washington, and New Jersey. A recent study also indicates that President-elect Donald Trump is driving now more Chinese to invest in the US real estate.
Besides the typical East Coast and West Coast locations, Chinese buyers have become more widely geographically distributed across the US. Second-tier or third-tier cities gain traction with some Chinese house buyers. Over the last 12 months, East-West Property has seen more than 30% of all inquiries for cities outside of the three typical destinations (New York, San Francisco and Los Angeles). As we have seen for the major cities, the main reasons behind this trend are education and investment. There’re about 300,000 Chinese students coming over to the US to study every year. And this number keeps growing, resulting in more Chinese people interested in buying a house across more American cities that offer good education options. Furthermore, as the Chinese are maturing in their investment style, they are keen to look for houses all over the United States that produce good rental returns.
American real estate Agents often ask us about how to prepare best for these overseas foreign buyers and how to close deals. We can provide more insights by giving some examples of Chinese buyers of US real estate.
In 2015, Mr. Li from Beijing decided to send his son to study in a private boarding high school in St. Petersburg, Florida. However, it turns out that his son cannot get accustomed to the food in the boarding school, and his health is deteriorating. Mr. Li is worried and, realizing that his son still has another two years to study, Mr. Li decided to move to St. Petersburg himself so that he can cook for his son every day.
The school is in St. Petersburg, which is not one of the top destinations for Chinese home buyers, and there’s little information available in China about the real estate market of St. Petersburg. Mr. Li reached out to East-West Property for help. Our team in China informed him about the different practices of real estate market between China and the US, the local market in St. Petersburg, what he needs to prepare before he flies over, etc. As the time difference between Beijing and St Petersburg is 12 hours, Mr. Li is appreciative to talk to a team that is based in China and can address his questions.
As his son will start the new semester in September, Mr. Li booked flights to visit St. Petersburg in May with the plan of viewing condos and houses. Agent Wu, one of our member Agents and who lives close to the school, was introduced to Mr. Li before he traveled to the US. With knowledge of Mr. Li’s purpose, budget, type of property of interest, distance requirement from the school, Agent Wu was well prepared and chatted with Mr. Li over the conference call organized by us. Renting versus purchase option was also discussed over the phone. Mr. Li sees the benefit of purchase, and then a list of selected listings that were meeting Mr. Li’s requirements were sent to him for review. After several discussions, Agent Wu made appointments for Mr. Li and organized a schedule of viewings.
When Mr. Li arrived in St. Petersburg, Agent Wu accompanied Mr. Li for viewing houses for one week. Finally, Mr. Li selected two properties of interest close to his son’s high school. One house had already a contract that was pending, but the other one was still on the market and was a bigger and newer property.
Agent Wu assisted Mr Li with making the offer, negotiating the price for the second property. The offer for the second home was not accepted. However, two weeks later, the first property which was pending for sale was released and Mr. Li successfully got the deal.
The main takeaways for US real estate agents are to build a relationship with the prospective buyers before they actually arrive and have deep knowledge about the schools in the town that you cover.
Building a relationship can be done different ways but using tools that Chinese buyers typically are using is increasing your chance of closing that deal. A tool that is popular in China right now is WeChat. Wechat is the most popular social media tool currently being used in China and allows instant text messages, voice calls and many other functionalities right from your phone. As such, setting up a WeChat account is one practical step that can help in communicating with buyers before they arrive and start building that relationship.
Gaining deep knowledge about the school systems in your city is the other takeaway. Spending time with families who have children and listening to their stories about their school life will be helpful to gain more information. Looking up school ratings and understanding the application process would certainly be beneficial as well.
Mr Yu, based in Shanghai, has been investing in real estate over the last fifteen years. He owns two properties in Shanghai and one in Tokyo. He is now considering to invest in the US as the rental returns can be attractive.
Mr. Yu had heard about Detroit as an investment option but had many questions and concerns that he wanted to address before buying a house there. There is a large amount of information available on the internet about Detroit but he also noticed that there are many sources that cannot be trusted. Struggling with this lack of trust, Mr. Yu asked East-West Property many questions about the city, the risks, rental returns, property management and taxes.
Our team in Shanghai and our member Agent Will were able to address his questions promptly and professionally. The time difference and language was dealt with successfully and turns out to be the key differentiator in closing the deal for Mr. Yu. While it is a small investment (40,000 USD), Mr. Yu has already indicated his interest of buying another investment house if things go well.
Education and investment remain key reasons for Chinese to buy houses in the US. As their quest for good schools or good investment returns picks up, more second tier and third tier cities likely will start receiving more interest from overseas Chinese buyers. As such, it is the right time for American Agents to become an expert in the local schools and investment returns.
Source: originally written by Sam Van Horebeek and published on Inman on Dec 19 2016
Copyright © 2013 -2020 East-West Property US LLC. All Rights Reserved.
Fair Housing and Equal Opportunity
