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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2016

Foreign Homebuyers Like to Feel at Home

Cross-border partnerships and cultural awareness can help you capture international business

Foreign Homebuyers Like to Feel at HomeFlocks of Canadian snowbirds travel annually to the U.S. to seek refuge from the frigid winters and to enjoy activities like golf, sightseeing and tennis. A National Association of Realtors report — the 2016 Profile of International Activity in U.S. Residential Real Estate — found that Canadians are the second largest international buyer group in the U.S., spending $8.9 billion on U.S. residential property for the year ending March 2016.

With millions of Canadians traveling to the U.S. each year, there is a significant opportunity to help guide these and other niche buyers as they purchase vacation and investment properties. Obtaining a mortgage in the U.S. can be a complicated process, especially for international buyers such as Canadians — who are unfamiliar with the differences between buying a home in Canada versus the U.S.

For mortgage originators seeking to serve foreign homebuyers, it is especially important to collaborate with experts such as attorneys, Realtors, accountants and mortgage lenders with cross-border expertise. It’s important to have a deep bench of experts with a unique understanding of Canadian culture. They can offer the latest advice and expertise tailored to the differences between the Canadian and U.S. mortgage process.

Know the culture

In addition to leveraging experts, it also helps to educate potential Canadian buyers by drawing on the experience of other Canadians who have purchased homes in the U.S. It can be helpful to monitor trends to identify and address potential recurring issues that clients are facing.

A recent survey conducted by RBC Bank, for example, found that many Canadian homebuyers were unaware of the lengthy time it takes to apply for and secure a mortgage in the U.S. — typically 45 days in the U.S. compared to a significantly shorter time frame in Canada. Research and communication can make the process much smoother for potential Canadian buyers.

By immersing yourself in the culture of a niche buyer group — Canadians in this case — you will gain greater insight into their unique needs. Whether or not members of your target market are in immediate need of your services, joining relevant associations and organizations along with networking and pro-viding key decisionmakers with helpful information will make you a go-to resource if needs arise in the future. While learning about the unique needs of a niche community is critical, remember it’s equally important to enlist the help of experts catering to the specific niche you are trying to serve.

Understand buyer profiles

Just because a group of niche buyers has a specific profile, it’s still important to understand the unique motivations and goals of specific buyers within the group. The financial landscape is constantly evolving, and mortgage originators have an opportunity to help buyers maximize their real estate investments. Retired snowbirds, for example, aren’t the only Canadians looking to purchase U.S. property.

Canadians in their late 40s and early 50s are becoming increasingly interested in buying U.S. properties as long-term investments. Rather than using the property for immediate retirement, they may opt to visit the property for a few weeks out of the year and generate rental income for the remainder of the year. Renting out their property during the off-season can cover mortgage payments, U.S. taxes and more. Vacancy rates also are at a 20-year low, according to Moody’s Analytics.

In contrast, some Canadian retirees who purchased a U.S. home between 2009 and 2013 (when the Canadian dollar was at or around parity with the U.S. dollar) may benefit from refinancing. Over the years, these same homes have appreciated by as much as 12 percent to 15 percent a year in popular snowbird markets. Canadians who are U.S. homeowners are in a unique and favorable position to take advantage of appreciation on their homes and the strong U.S. dollar.

Understanding specific buyer profiles within a niche group will enable you to provide them with a more informed recommendation. If buyers’ needs fall outside your area of expertise, understanding their profile will also enable you to make an appropriate referral.

Anticipate financial concerns

While many buyers have questions about financing properties, niche groups have unique concerns that should be addressed upfront. The Canadian dollar, for example, experienced a 16 percent decline against the U.S. dollar over the past year.

Consequently, Canadians are cutting spending on shopping, dining and entertainment when in the U.S. Despite this change in spending habits, it’s actually a good time for them to buy U.S. property — as long as they finance the property.

Financing U.S. property is a cost-effective alternative to paying cash and can potentially lessen the one-time, upfront impact of foreign exchange for Canadian buyers. In this instance, understanding the nuances of Canadian spending habits and currency concerns is critical to articulating the benefits of a U.S. mortgage.

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Targeting niche groups comes with inherent challenges, but thorough research and cross-border expertise can differentiate your business among Canadians who are looking to purchase residential property in the U.S. In addition, don’t forget the importance of collaboration with specialists who “speak Canadian” and can help smooth the cross-border process.


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