Not every real estate professional or seller should market their home to foreign buyers.
I can understand that you would like to increase your sales by also targeting buyers from abroad.
Who doesn’t want to increase sales and grow a business further?
However, there are certain factors that will influence your chances of success in marketing homes to foreign buyers.
So, what are these factors and how do you market to these foreign buyers?
The best way to market to foreign home buyers is to run a real estate business in a state with high diversity and a high popularity as a tourist destination, such as Florida, California, Texas, Arizona, and New Jersey, so you have a higher chance of getting referrals from your local clients that you acquire by common real estate marketing methods, and that have frequently a migratory background than other states.
So, in today’s article you will learn about the benefits of targeting foreign home buyers, the statistics and the demand of the international real estate market, and which overall strategy is the most effective to market to them.
Benefits to Also Targeting Foreign Buyers
There are several reasons and benefits directly to homeowners and real estate professionals (e.g. investors, realtors, brokers) to also target foreign buyers in order to sell their homes.
By doing that, you can increase the number of leads generated, and especially real estate professionals can increase their sales.
In fact, 44% of real estate professionals are convinced by that and another 39% of real estate agents say that also targeting foreign buyers helps to secure more listings (source).
Another benefit is that by also serving foreign buyers you can diversify your general risk of doing business, so you are not completely depending on the national or local market.
The last benefit I presume, although probably not very significant, is that due to different individual perceptions of value from foreign buyers, you might be able to sell some homes at slightly higher prices.
This might result from the foreign buyer not having complete access to all the local market information.
Statistics and Demand of the International Real Estate Market
The National Association of Realtors conducted a survey from April 5 to May 3, 2019, which was sent to 150,000 randomly selected realtors.
These are the results of the study:
The median purchase price for the majority of the foreigners is $280,600, and 8% of these foreigners made a purchase of $1M or more.
Almost half (41%) of the foreigners paid all-cash, and the Chinese ($13.4 B), Canadians ($8.0 B), Indians ($6.9 B), Britons ($3.8 B), and Mexicans ($2.3 B) were among the top 5 foreign buyers.
In 44% of the cases, they buy in suburban areas.
Florida (20%), California (12%), Texas (10%), Arizona (5%), and New Jersey (4%) were among the five most demanded locations.
In 76% of the cases, the preferred types of homes were single-family homes and townhomes.
The major purchase purposes were for residential investments and vacation purposes.
Only 17% of the purchases came from leads generated by websites and online listings.
The large majority (60%) of the leads came from personal contacts, former clients, and referrals from former clients and business contacts.
Foreigners financed their homes in the following ways:
|All-Cash||U.S. Mortgage||Home Country Mortgage
Another situation to consider is that foreign purchases of American homes declined by 36% in 2019 (source), which doesn’t mean that there is no market for foreign buyers anymore, but some of the demand has changed.
So, when dealing with international markets, you are more dependent on political changes related to immigration and tourism or international travel.
The latter can be restricted due to various circumstances, such as Covid.
Not directly related to foreign buyers, but in 89% of the cases, buyers purchased homes through a real estate agent or broker (source).
We can assume the same percentages or even higher ones for foreign buyers, because in international transactions more hand-holding is needed and buyers likely prefer to go on a safe route with a real estate agent or broker than to mess up a real estate transaction because of stumbling over some legal, cultural or communication pitfalls due to a lack of knowledge or experience with the respective local market.
Which Strategy Is the Most Effective to Market to Foreign Buyers
From the statistics above we might gather that the main targets should be especially China, and then Canada, India, the United Kingdom, and Mexico.
But the main focus on foreign buyers from China might not be the best idea anymore, because of political constraints and, of course, the decline in demand (36% in 2019).
Since only 17% of the purchases came from leads generated by websites and online listings and 60% from personal contacts, former clients, and referrals from former clients and business contacts, you might conclude at first glance that the focus should be on the 60%.
But this could be a classical fallacy.
What do these numbers actually say?
Yes, because 60% of the leads came from those networking activities, it could mean that this is the best way.
But it could also mean that polled realtors have mastered those networking activities to generate foreign home buyer leads the most, but haven’t yet mastered to do the same through websites and online listings.
It could also mean that the realtors who were up to participating in the poll from the National Association of Realtors are, in their large majority, using networking to generate leads.
So the likelihood of getting to 60% of leads coming from networking activities is quite high.
The better question would rather be the following:
If 60% of foreign home buyer leads came from personal contacts, former clients, and referrals from former clients and business contacts, how were these personal contacts or former clients generated?
Let’s look again at the major destinations with the most demand from foreign home buyers, which are Florida (20%), California (12%), Texas (10%), Arizona (5%), and New Jersey (4%).
What do all these states have in common, that could influence the ability of a realtor to network through to potential foreign buyers?
First, they belong to the most diverse states of the U.S. (source).
Second, they also belong to the most popular tourist destinations of the U.S. (source).
It appears that there is a high correlation between the state you are operating in as a realtor or broker and the chances of being able to market also to foreign buyers.
Taking this into consideration, what is the most likely scenario happening when it comes to acquiring foreign buyers then?
Because of the higher diversity of the mentioned states, there are more local buyers or tenants with a migration background living already in the respective state.
These real estate clients are mainly acquired by the usual real estate marketing methods (my article) used locally.
For example, you generate a buyer lead already living in your state from let’s say Canada via Facebook Ads or Content Marketing with SEO, that purchases a house with your help.
If you did a good job, and have a satisfying after sales service nurturing this past client in place, there is a high likelihood that this former client refers you further to a Canadian friend who is still living in Canada also looking for a home.
Then, this friend buys a home with your help as well and by that you successfully made a sale in the international real estate market.
By just having your real estate business in the above mentioned states, you increase your chances of meeting potential buyers with international connections.
If you are a real estate agent or broker also active in the vacation rental industry, you also happen to come across tourists that might fall in love with your local area and start considering the purchase of a second residence for vacation purposes.
Again, if you do a good job, these vacationers may refer you to friends who are also looking for properties.
Well, as you can see, I could go on and on with examples that show that in the end the respective state from where you are operating is a large factor in acquiring foreign buyers.
It appears that marketing to foreign buyers up to now is rather done by indirect methods such as networking and that results from a primarily locally run real estate business in a favorable state.
Due to having a local advantage by operating in a high diversity state, which at the same time is also a very popular tourist destination, foreign buyers are generated as a result by doing a good local job and having more access to potential foreign buyers with friends abroad already living in the state.
So, one thing you could do is getting even better in this networking part to acquire even more foreign buyers (not easy to test and to measure from a marketing perspective).
But I see also a good opportunity in taking advantage of your location and targeting them directly, using the, as it seems, not fully mastered methods of generating foreign buyer leads via your website, online listings and other online marketing channels (remember that only 17% of purchases came from these methods).
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