As published in Scotsman Guide's Residential Edition, January 2010.
Foreign investors will play an integral part in the real estate recovery in many regions of the U.S., particularly in hard-hit resort areas. Mortgage brokers looking to pad their business during the ongoing market slump can work with these investors, many of whom also can turn into important referral sources when the market turns.
For numerous overseas investors, U.S. housing prices in today’s market are too good to pass up. The problem, however, is that lenders often require investor financing to carry loan-to-value ratios (LTVs) as low as 50 percent. Required LTVs can depend on the region in which a property is located. Moreover, many lenders quit lending to foreign nationals altogether. This leaves an opening for brokers to build these relationships.
Today’s U.S. housing market includes huge inventories in many popular resort areas nationwide. Popular states for foreign national investment include Florida, California, Arizona, Texas, New York, Washington and Nevada. Each of these states hosts strong vacation-home markets, and many are among the most-damaged locales of the recent real estate collapse.
Many foreigner investors see a prime opportunity to buy at what could be rock-bottom prices. In some cases, the deals are so good that buyers can afford 50-percent downpayments, especially in places where properties are selling for nearly half the asking price of three to five years ago.
Although a large number of foreign investors who make U.S. property purchases pay with cash, many others require funding solutions. This is especially true of middle-class buyers who seek vacation homes in markets once far outside their price range.
Lenders who work with foreign nationals, meanwhile, often give more importance to a property’s value than borrowers’ financial strength. Brokers looking to work in this niche should consider establishing relationships with foreign banks and community banks willing to work with brokers and foreign buyers. While foreign banks might be interested in lending to consumers from the same country in which the bank is located, U.S. community banks often only will make loans in their region of operation.
Brokers can research lenders that offer wholesale channels for foreign investors. It’s important to do your homework and to understand the programs, which you’ll need to explain to your clients. Often, the information you fail to uncover before it’s too late comes back to kill a deal after you’ve invested time and energy.
Network and referrals
A good way to find foreign investors and lenders willing to work with them is to join your local International Council of Realtors. These groups include many international real estate practitioners and offer education and support. They also can be a great way to meet industry service-providers who can offer important insights into working with foreign investors.
Your ability to build relationships with important players in your regional market can go a long way toward determining your success. For many lenders, it can be worth the risk to offer foreign-investment loans at LTVs of as much as 75 percent. Even if buyers default, property prices in many resort locations aren’t likely to drop further.
Brokers who find these lenders can market themselves to foreign buyers and may quickly find clients referring them to overseas friends and family who also hope to cash in on U.S.-property deals before it’s too late.
Working with foreign investors isn’t for everyone. But brokers who do it well can fill their business and referral pipelines while also helping lead regional recoveries in some of the most-depressed markets in the U.S.
Justine Assal has been the owner of ACM Financial since 1999 and a top originator in volume. She has obtained the National Association of Mortgage Brokers’ highest designation, Certified Mortgage Consultant, and served on its certification committee. She also is a finance instructor for the Florida Association of Realtors and vice chairwoman of the Orlando Regional International Council. Assal speaks frequently about mortgage-industry matters, international financing and international relations. Contact: (407) 397-7300 or email@example.com.