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2 Copyright 2013, 2016 NATIONAL ASSOCIATION OF REALTORS IMPORTANT NOTE: The National Association of REALTORS, its faculty, agents, and employees are not engaged in rendering legal, accounting, financial, tax, or other professional services through these course materials. If legal advice or other expert assistance is required, the student should seek competent professional advice. NATIONAL ASSOCIATION OF REALTORS Commercial and Global Services 430 North Michigan Avenue Chicago, Illinois USA Telephone: Toll-free: (U.S.) Fax:

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4 Contents Introduction... 1 Course Learning Goal... 2 Course Overview... 2 Learning Objectives... 3 Exam... 3 Activities and Class Procedures... 4 Earning the CIPS Designation... 4 Are You Global? How the Global Economy Shapes Your Market... 7 Global Economy, Local Markets... 8 Some Viewpoints on Globalization A Shrinking World? Capital What Flows Influences on Capital Flow Monitoring Trends and Indicators Excerpt from NAR Local Market Assessment Case Studies Key Point Review Your Hometown Global Market Do I Have to Leave Home? Gateway Cities and Beyond The Top 5 Countries of Origin Working with Foreign Buyers Prospecting Glocally Tap Into Association Resources Three-Step Brainstorm: Market Outreach Target Marketing Key Point Review Cultural Literacy for Business High Context and Low Context Cultures Cross-Cultural Business Skills Negotiations and Decision Making Gender Issues... 56

5 Religious Traditions in Business Active Listening Cultural Snapshots Hablas Hispanic Consumers? Where in the World Is? Key Point Review Serving the Global Market Adapting Your Core Real Estate Skills Qualifying Foreign Prospects Checklist for Qualifying an International Client Real Estate Practices Around the World Does It Have to Be in Writing? Are We Speaking the Same Language? Key Point Review Networking Power Is Global Networking Different? Networking as a Business Strategy Finding and Making Contacts Start a Business Roundtable and Build Your Team A Networking Information System Social Media Connecting to Your Sphere s Spheres Global Perspectives, Build a Better Website Referral Networks Best Practices for Making a Referral Best Practices for Receiving a Referral Will Local Business Lead You Abroad? U.S. Expatriates Purposeful Travel Trade Shows and Expositions Trade Missions Reaching Across the Globe Key Point Review Planning > Action > Results Planning Builds Business Confidence Identify Your Market Niche

6 Setting Goals REALTOR Association Resources and Tools Promoting a Property Globally Business Planning Quick Start Measuring Results Exercise: What Will You Do Next? Key Point Review Resources Websites Cultural Snapshots: Asia Pacific Cultural Snapshots: Europe Cultural Snapshots: South America Cultural Snapshots: North America and Caribbean

7 Introduction 1

8 Global Real Estate: Local Markets Course Learning Goal Upon completion of this course you should be aware of how the global economy impacts your local real estate market and be prepared to serve foreign clients and customers in your local market. Course Overview Chapter 1: How the Global Economy Shapes Your Market As a global real estate professional, you need to know about the economic forces that send capital flowing around the globe and impact your business. Transforming the voluminous amount of data into useable knowledge can be a challenge. Which trends and indicators are significant? This chapter focuses on major trends and indicators for global real estate business. Chapter 2: Your Hometown Global Market You don t have to leave home to be part of the global real estate market. This chapter focuses on identifying opportunities, tapping into the global market in your hometown, and prospecting glocally. Chapter 3: Cultural Literacy for Business Beyond everyday good manners, how can you be sure your behavior is appropriate when working with diverse clients and customers? This chapter focuses on developing cross-cultural business skills. Chapter 4: Serving the Global Market Real estate professionals who serve the global market use the same core real estate skills as you. This chapter focuses on building on your foundation of core skills to serve a diverse and global clientele. Chapter 5: Networking Power Building a global network doesn t have to rely on chance events; you can make networking part of your business plan. This chapter focuses on developing the connections that lead to transactions. Chapter 6: Planning>Action>Results This chapter focuses on adapting your planning skills to set goals and develop strategies for your global hometown real estate business. 2

9 Introduction Learning Objectives Monitor trends and indicators of the global economy, flow of capital, and the impact on local real estate markets. Synthesize market trend information into meaningful knowledge for business plans and decisions. Identify local market opportunities and prospect for global business in your local market. Take advantage of association resources. Adapt your core real estate skills and knowledge base to service foreign and diverse clients and customers. Demonstrate professionalism by serving clients and customers in culturally appropriate ways. Follow a standardized process for preparing for a transaction and working with clients and customers. Develop a network of contacts that can lead to referral business. Derive maximum professional benefit from business and personal foreign travels. Recognize available visa statuses for foreign real estate owners and investors and guide foreign clients and customers to seek expert advice. Set business planning goals in achievable increments. Implement planning actions, measure progress, and adjust plans when needed. Integrate your plan with your broker s business goals. Exam At the end of the course, participants will be given a 30-question openbook (unless closed-book is required for continuing education credit) multiple-choice exam to test and reinforce achievement of the course s learning objectives. Successful completion is 80 percent, a total of 24 correct answers. 3

10 Global Real Estate: Local Markets Activities and Class Procedures This course incorporates a variety of activities designed to involve students, such as work group assignments, exercises, and discussions. Participants are strongly encouraged to ask questions and engage in class discussions and group exercises. Due to the range of experience levels among students, there is great opportunity to learn from one another. Your active involvement will only enrich your learning experience over the course of the program. Earning the CIPS Designation The NATIONAL ASSOCIATION OF REALTORS awards the Certified International Property Specialist (CIPS) Designation to REALTORS who complete the required coursework and demonstrate global real estate experience. The CIPS course curriculum is the foundation for a worldwide network of real estate professionals in over 50 countries. Course Requirements To be eligible for the CIPS Designation, you must complete five of the courses listed below, including the prerequisite Global Real Estate: Local Markets, and complete an application demonstrating 100 points of international experience. From the time the first course is taken, you have three years to complete the coursework and apply for the designation. Global Real Estate: Local Markets (Both U.S. and non-u.s. students) Global Real Estate: Transaction Tools (U.S. students only) The Business of U.S. Real Estate (Non-U.S. Students only) Three of the following elective courses: Europe and International Real Estate 4

11 Introduction Asia/Pacific and International Real Estate The Americas and International Real Estate At Home with Diversity One of the following courses can count as one elective option: CRS 200: Business Planning and Marketing for the Residential Specialist CRS 204: Creating Wealth through Residential Real Estate Investments CCIM: Residential Real Estate Financial Analysis One Real Estate Advanced Practices (REAP) module from the Council of Residential Specialists (CRS) (Non-U.S. students) International Real Estate Experience For up-to-date information on experiential requirements and a designation application form, go to 5

12 Global Real Estate: Local Markets Are You Global? Are you already on the way to becoming a global real estate professional? Check yes or no next to the following statements. Yes No 1. Can you commit to long-term goals? 2. Can you describe why you are or want to get involved in global real estate? 3. Are others in your firm involved in global real estate? 4. Is your firm part of an international network? 5. Are you sincerely interested in learning about other countries and cultures? 6. Do you try to reach out to others in culturally appropriate ways? 7. Are you creative in seeking out new market opportunities? 8. Do you have a website, blog, , and social media pages? 9. Do you speak a foreign language (not mandatory, but helpful)? 10. Do colleagues in your firm speak other languages? 11. Do you participate in community international organizations? 12. Are you able to travel internationally (not mandatory, but helpful)? 13. Do you have personal ethnic community ties and connections (not mandatory, but helpful)? 14. Do you read or listen to global news reports? 15. Are you interested in international sports or cultural events? 16. Do you enjoy trying other cuisines? 17. Were you or your parents born in another country? 18. Have you lived in or traveled to another country? 19. Have you worked with a foreign or immigrant client or customer? 20. Does your local or state association provide a global council, committee, or forum? How many Yes boxes did you check? 20 to 15: Bravo! You are well on the way to becoming global. Others can learn from you. 9 to 14: You have a head start. This course will enhance your knowledge. 8 or fewer: Others may be more global, but don t worry. You will really benefit from this course. 6

13 1. How the Global Economy Shapes Your Market 7

14 Global Real Estate: Local Markets In This Chapter Global economy, local real estate markets Global flow of capital and wealth Real estate as an investment Trends and indicators How to use the information in this chapter Monitor trends and indicators Synthesize the information into meaningful knowledge for business plans and decisions Global Economy, Local Markets As a global real estate professional, you should know about the economic forces that impact your business: forces such as capital flow, currency value, migration, and the search for safety, value appreciation, and wealth augmentation and preservation. For example, what happens when too much, or too little, cash seeks investment around the world? Real estate is a storehouse of a major portion of a country s wealth. In the United States, building permits, housing starts, and home sales are closely watched as leading economic indicators a signal of economic direction in the near future. In fact, the real estate market has a direct impact on the vitality of an economy. A major contributing factor to the boom in the U.S. economy in the post-wwii years, when the country positioned itself as the economic superpower it remains to this day, was the expansion of the mortgage market, allowing millions of people to build unprecedented wealth. Today, housing accounts for more than 15 percent of the GDP, and home sales in the United States contribute more than 2.5 million private sector jobs to the economy in an average year. 1 The rise of developing economies across the world coincides with similar expansion of their housing markets, as financing becomes more available and new members of the middle class purchase homes. 1 NATIONAL ASSOCIATION OF REALTORS, Homeownership Matters: The Benefits of Owning a Home, 8

15 1. How the Global Economy Shapes Your Market More information on markets and economic performance is available today than ever before through online sources. Major international newspapers are published online, in English. National governments collect and publish online extensive economic data. Social media connect people and businesses in very personal and immediate ways. With complex intersecting forces and voluminous data, how can the real estate professional know which indicators and trends to monitor in order to stay informed and use the information in business planning? The amount of information can be overwhelming, and transforming information into useable knowledge is a challenge. There are trends, indicators, and theories that over time have proved valid. The good news is that based on your market and business goals, you can design a plan for information gathering and select the trends to monitor and authoritative sources to consult. This chapter will cover some of these major trends and indicators for global business and real estate.? Discussion Question Have you read these books (see following pages) which present aspects of globalization on economies and nations? What do you think of the authors viewpoints? 9

16 Global Real Estate: Local Markets Some Viewpoints on Globalization The potential value locked up in a house can be revealed and transformed into active capital by representing in writing in a title, a security, a contract, and in other such records the most economically and socially useful qualities about the asset The moment you focus your attention on the title of a house, and not on the house itself, you have automatically stepped from the material world into the conceptual universe where capital lives While houses in advanced nations are acting as shelters or workplaces, their representations are leading a parallel life doing economic things they could not have done before The connection between capital and modern money runs through property. Hernando de Soto, The Mystery of Capital The nation s geographic center of gravity has shifted away from traditional industrial regions toward new areas of creativity and innovation. Creativity has come to be the most highly prized commodity in our economy. Hiring for diversity has become a matter of economic survival because creativity comes in all colors, genders, and personal preferences. The Creative Class is moving to a set of places I call Creative Centers the economic winners of our age. Creative people are not moving to these places for traditional reasons What they look for in communities are abundant high-quality amenities and experiences, an openness to diversity of all kinds, and above all else the opportunity to validate their identities as creative people. Richard Florida, The Rise of the Creative Class What is this phenomenon of globalization that has been subject, at the same time, to such vilification and praise? Fundamentally, it is the closer integrating of countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flow of goods, services, capital, knowledge, and (to a lesser extent) people across borders. Joseph E. Stiglitz, Globalization and its Discontents 10

17 1. How the Global Economy Shapes Your Market It is now possible for more people than ever to collaborate and compete in real time with more other people on more different kinds of work from more different corners of the planet and on a more equal footing than at any previous time in the history of the world We are now connecting all the knowledge centers on the planet together in a single global network, which if politics and terrorism do not get in the way could usher in an amazing era of prosperity, innovation, and collaboration, by companies, communities, and individuals. Thomas L. Friedman, The World is Flat 3.0: A Brief History of the Twenty-first Century These four principles openness, peering, sharing, and acting globally increasingly define how twenty-first century corporations compete. Winning organizations will be those that tap the torrent of human knowledge and translate it into new and useful applications Globalization now extends from labor-intensive semiskilled manufacturing all the way to hightech design and services The future, therefore, lies in collaboration across borders, cultures, companies, and disciplines In the collaboration economy, the real advantage of global sourcing is not cost savings, but the endless possibilities for growth, innovation, and diversity. Don Tapscott and Anthony D. Williams, Wikinomics No one can pinpoint the precise mix of reasons why nations grow, or fail to grow. There is no magic formula, only a long list of known ingredients To identify breakout nations it is key to travel with an eye toward understanding which economic and political forces are in play at the moment, and whether they point to growth, and at what speed. In a world reshaped by slower global growth, we need to start looking at the emerging markets as individual cases to examine which nations are likely to flourish or disappoint in the new era of diverging economic prospects. Ruchir Sharma, Breakout Nations 11

18 Global Real Estate: Local Markets A Shrinking World? Do events and trends in other countries and continents make a difference in your hometown market? Is the world of your real estate market shrinking? Gateway cities and metropolitan areas probably feel the impact of global forces to a greater degree and earlier than smaller cities. But real estate professionals who are tuned into the global market can offer examples of how trends, forces, and events impact their local markets. Let s take a look at some of these trends and forces. Spread of Capitalism In his 2000 book The Lexus and the Olive Tree, author Thomas Friedman observed that countries that have McDonald s franchises do not go to war with each other. As a symbol of economic development, the presence of McDonald s franchises has little to do with the country s hunger for hamburgers and fries, but everything to do with safeguarding its world economic position. A few years later, Christian Science Monitor reporter Scott Baldau observed that the same phenomenon occurs between countries that produce salsa music. 2 Regardless of whether you believe either of these theories, there can be little doubt that, at the end of the twentieth century, a wave of capitalism swept across the globe transforming and interconnecting national economies and often transcending politics. Helped along by free trade agreements and new technologies that broke down walls of communication between individuals in private and public walks of life, this wave of capitalism was one of the first hallmarks of a globalized world, where concerns over mutual economic prosperity supplanted the horrors of mutually assured destruction. The 1989 fall of the Berlin Wall triggered the breakup of the Soviet Union and its state-run economy. Pent-up entrepreneurial and capitalistic spirit swept throughout the re-emerging Soviet republics and satellite states. Starting with reforms launched in 1978, capitalism Chinese-style transformed the economy of the People s Republic of China from a tightly controlled communist system into a worldwide economic powerhouse. The expansion of capitalism in former communist countries has coincided 2 Scott Baldau, Is This the Rhythm of a World in Step? Christian Science Monitor, October 5, 2005, 12

19 with an expansion of private property rights. After decades of collectivism, these countries, particularly China, face the challenges of transitioning real property ownership from the state to private citizens. How do these developments affect real estate markets? Capitalism opens the way for the growth of wealth personal, corporate, and national. New wealth often looks for opportunities and safety in real estate. It is a preferred investment not only because of safety and durability, but also because of potential for value appreciation and a hedge against inflation and currency fluctuations. When it comes to real property investments, the United States rank consistently ahead of other countries for stability, security, and opportunity. Alliances 1. How the Global Economy Shapes Your Market Countries providing best opportunity for capital appreciation. 1. United States 2. Brazil 3. Spain 4. Ireland 5. United Kingdom 6. Netherlands 7. China 8. India Closely interconnected alliances eliminate barriers to the flow of trade, capital, and people across the borders of member countries. While it is logical to question the macroeconomic results of such a broad and impactful alliance as the European Union, there is little doubt that in the global economy countries must partner with one another to achieve their aims. Countries providing the most stable and secure real estate investments. 1. United States 2. Germany 3. United Kingdom 4. Canada 5. Australia 6. Netherlands Ranking of Global Cities for Real Estate Investment. 1. New York 2. London 3. Los Aneles 4. Berlin 5. San Francisco 6. Paris 7. Tokyo 8. Washington D.C. Source: Annual Foreign Investment Survey, 2016, Association of Foreign Investors in Real Estate (AFIRE), Washington D.C., Countries in the Asia/Pacific region are allied primarily on the basis of trade. Growth triangles, a uniquely Asian phenomenon, proliferate throughout the Asia/Pacific region and bring countries together on the basis of economic interdependence instead of political alliances. For example, the Indonesia-Malaysian-Singapore (IMS-GT) growth triangle links those countries to optimize economic strengths. Even loose alliances 13

20 Global Real Estate: Local Markets founded primarily for trade purposes provide a neutral forum in which members can discuss regional matters, such as environmental issues. Throughout the world, trade relationships, formalized through alliances, transcend politics and create an expectation of cooperation. As you can see from the following illustration, alliances of trading partners sometimes include ideological opponents. How do trade-based alliances impact real estate markets? The alliances engender the stability and security that real estate buyers seek. Capital flows where business goes and so do entrepreneurs and workers. Companies need commercial space for manufacturing and operations and workers need housing. Businesses, particularly high-tech companies, seek locations with a pool of qualified workers. As economies grow, money is available to develop more resources, which creates demand for new skills, provides new jobs, increases incomes, and attracts workers. When trade barriers drop, so do capital flow barriers and, to some extent, the cross-border movements of people. This is good news for investors who wish to look outside of their national borders for opportunities. 14

21 1. How the Global Economy Shapes Your Market North American Free Trade Area (NAFTA) Canada Mexico United States Austria Belgium Bulgaria Croatia Cyprus Czech Rep. Denmark European Union (EU) Estonia France Finland Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Sweden Slovakia Slovenia Spain U.K. Algeria Bahrain Egypt Iraq Kuwait Lebanon Greater Arab Free Trade Area (GAFTA) Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunis U.A.E. Yemen Asia-Pacific Economic Cooperation (APEC) Australia Brunei China/Hong Kong Indonesia Japan Korea (ROK) Malaysia New Zealand Papua New Guinea Philippines Russia Singapore Taiwan Thailand Vietnam Asia-Pacific Economic Cooperation (APEC) Canada Chile Mexico Peru United States Mercosur Argentina Bolivia Brazil Paraguay Uruguay Venezuela Burundi Comoros Rep. of Congo Djibouti Egypt Eritrea Common Market for Eastern and Southern Africa (COMESA) Ethiopia Kenya Libya Madagascar Malawi Mauritius Rwanda Seychelles Sudan Swaziland Uganda Zambia Zimbabwe Association of Southeast Asian Nations (ASEAN) Brunei Myanmar Cambodia Philippines Indonesia Singapore Laos Thailand Malaysia Vietnam 15

22 Global Real Estate for Local Markets Connectivity Perhaps the most potent of world-shrinking forces are the Internet and social networking. From every corner of the globe, all variety of events, from economic milestones to political revolutions, are shared on social media sites such as Twitter and YouTube. People engage one another in ideas and opinions; they share cross-cultural knowledge and opportunity. Countries such as China, Singapore, the Philippines, and Vietnam aggressively pursue outsource development through broadband infrastructure and tax incentives. India dominates in offshoring also referred to as e-work or worldsourcing because of its large Englishspeaking population and universities that graduate well-prepared engineers and technical workers. Tata, Infosys, Wipro, and HCL are leaders in India s outsourcing of IT and business processes. Large real estate firms and banks often outsource technology and accounting functions, document imaging, mortgage processing, and even legal services. North America 9.3% 213 Percentage of World Internet Users Latin America/ Caribbean 10.2% 295 Facebook Users (millions) Europe 18% 309 Africa 9.8% 124 Middle East 3.7% Asia 48.2% Oceania/ Australia.8% 18 Source: Internet World Stats, The real estate market relies on the Internet to communicate about transactions and market listings and attract buyers and renters. Reliable Internet access facilitates communication between real estate professionals and their clients and customers. Moreover, clients and customers are increasingly knowledgeable about the markets in which they are interested and have the ability to communicate their interest in 16

23 1. How the Global Economy Shapes Your Market investment opportunities through innovative ways, facilitated through smart phones and other constantly evolving technologies. An outgrowth of our Internetconnected world is round-theclock financial markets. Investors have instantaneous access to market signals from major stock exchanges such as London, New York, Paris, Frankfurt, Hong Kong, and Tokyo. While this access to the market can allow investors to seize opportunities, it can also create volatility and uncertainty. Major Stock Exchanges Around the World London FTSE 100 Paris CAC Interdependence and Specialization Some countries specialize in the production and export of certain products and services to gain a competitive advantage. Although specialization creates economic efficiencies and benefits, it fosters dependence on other countries for commodities not produced at home. Despite its world-leader economy, Japan lacks completely the minerals needed for modern industrial production. China depends to a large degree on imports of minerals from Australia New York Dow, S&P500, NASDAQ Frankfurt DAX Hong Kong Hang Seng Tokyo Nikkei and Latin America. Economies rise and fall according to demand for commodities. Export markets for countries such as Taiwan, China, and Mexico are closely tied to consumer behavior in the United States. Middle Eastern countries export oil, but they must import most manufactured and many consumer products. Interdependence also affects workers. For example, as the world financial crises spread, Japan asked immigrant laborers from Indonesia, Malaysia, and the Philippines to return to their home countries; this put greater pressure on the employment markets in those lesser-developed economies. More recently, Asian countries such as 17

24 Global Real Estate for Local Markets Singapore and Japan are being forced to consider loosening immigration regulations to replace an aging workforce. Another interdependency between countries is workers remittances money that immigrant workers send home to their families. Remittances flowing to developing countries total over US $400 billion, more than three times the amount of official government foreign aid. That figure only includes remittances sent through official channels, such as banks and postal orders; an unknown quantity moves through informal channels such as private couriers or hand carry. 3 How do workers remittances intersect with real estate? In many countries and cultures, real estate purchases are cash transactions, often with pooled money that includes remittances. In the United States, major banks, particularly in the southwest, compete for the Mexican workers remittance market by offering low transfer fees and accepting the consulate-issued Matrícula card as identification. Top Remittance Sending Countries US$ billions Top Remittance Receiving Countries 1. United States India Saudi Arabia China Russian Federation Philippines Switzerland Mexico Germany France UAE Nigeria Kuwait Egypt France Pakistan Luxembourg Germany United Kingdom Bangladesh Source: Migration and Remittances Factbook 2016, Third Edition, The World Bank Group, US$ billions 3 Migration and Remittances Factbook 2016, Third Edition, The World Bank Group, 18

25 1. How the Global Economy Shapes Your Market Affordable Travel Affordable airfares and availability of flights makes travel possible for a larger group of travelers. Air travel is generally low-cost and convenient from major European cities to U.S. hub cities and resort areas. Europe is also experiencing a wave of baby boomer retirees who, like their U.S. counterparts, want an active lifestyle in their retirement years. In resort areas, vacationers and retirees from other countries represent a large pool of potential buyers and sellers. In the United States, the largest numbers of vacation homes owned by foreign nationals are in Florida, California, Texas, Colorado, and New York, and in major gateway cities, such as Washington, D.C., San Francisco, Chicago, and New York. Affordable travel has changed expectations for many immigrants. Many maintain ties with their homelands and travel back and forth. Even though firmly planted in the United States, they maintain ethnic traditions and ties. This means the real estate professional must be adept at cross-cultural business relationships. Warm climates, low cost of living, and sometimes homeland ties increasingly lure U.S. retirees to foreign countries. Your next client may be looking to list or buy a second home in one of the countries that welcomes retirees with reliable pension incomes. Recipients of U.S. Social Security benefits may receive their monthly checks regardless of where they live. U.S. Medicare, however, does not reimburse expenses incurred outside of the United States. 21st Century Workforce Related to the concepts covered above is the mobility of the global workforce. The world is moving away from the days when employees spend their entire lives going to work each day in a headquarters office or factory. Many companies need workers spread across the world to take advantage of new markets, participate in new ventures, and work with outsourced suppliers or service providers. Connectivity and affordable air travel facilitate this mobility. Employees are also working remotely. In global real estate, the nature of the twenty-first century workforce means that opportunities arise when workers and new businesses enter local markets. They may need office, residential, retail, or industrial space. Remote workers may choose to live and work in a specific area, 19

26 Global Real Estate for Local Markets regardless of where their company s offices are. Entrepreneurs may start businesses from anywhere in the world, no matter their target market. Capital What Flows Capital flow includes currency, assets, capital goods, debt, and credit. Although obviously immovable, real estate ranks as a capital good because it can produce income, appreciate in value, and serve as collateral. We tend to think of capital only as money, but information, technology, and innovation are valuable capital, too. Capital flow occurs in every global transaction, such as the acquisition and sales of real property, receipt of income, payments of fees, and expenditures on improvements and operating expenses. As mentioned previously, workers remittances are also a major source of capital; after living expenses, real estate is a major target for remittance money. Some communities in Mexico pool remittance money to fund infrastructure construction like water system improvements. Capital Flees: Falling returns and value decline Ownership restrictions Capital Seeks: Movement restrictions Acceptable risk/return Tight, expensive credit Favorable returns on investment Quality properties Affordable and available credit Orderly, transparent markets Flight capital seeks safety. It is foreign investment money placed in markets for conservation and safety of investment or to avoid losses and uncertainty. Politically stable countries such as the United States, Canada, and Western European countries offer a safe haven for capital at risk. 20

27 1. How the Global Economy Shapes Your Market Capital Flow Trends Through 2007, a worldwide oversupply of capital pursued investments around the globe, particularly real estate because of its stable return and appreciation potential. A major factor in the global movement of capital has been sovereign wealth funds, which are investment funds created by countries that have excess foreign exchange. Since 2007, the global economy has wavered between recovery and setback. During this time, investors have been alternating between aggressively pursuing riskier investments in developing countries, especially those with economies less affected by financial crises, and seeking safer investments in historically stable economies. Bargain Rate Theory Capital flows to the point of relative weakness, where prices are at bargain rates and other currencies have more buying power. Capital Flow Theories Loss Avoidance Theory When values decline foreign investors avoid buying assets that may lose value and negate any advantage gained from exchange rates. Market Linkage Theory A single global system interlinks the world s economies, which rise and fall together. Influences on Capital Flow Regardless of the theory, most economists agree that the following factors influence where and why capital flows. Balance of payments: investors use these statistics to follow economic trends, and improving economies attract investment Gross domestic product (GDP) and gross national product (GNP): rising rates indicate a growing economy and investment opportunities Political events: stability and ability of a government shapes the business climate and influences foreign investment Inflation rates: high inflation erodes the value of financial assets and increases the cost of living 21

28 Global Real Estate for Local Markets Currency value: changes in value attract or repel foreign investment Interest rates: rates indicate the cost of borrowing money and return on financial assets Domestic consumption and savings: high savings rates increase the amount of money available for lending Business cycles: the peaks and troughs attract or repel capital investment Trade: export and import volume, balance of trade, tariffs, and other trade barriers encourage or discourage capital flow Investment choices: a wide variety of choices creates more opportunities Uniform manufacturing and professional standards: modern production methods and quality control ensure universal marketability and the flow of goods across borders. Monitoring Trends and Indicators With so much news and financial data available from multiple sources and viewpoints, how can you catch the meaningful signals but filter out distractions? You can start by selecting key indicators and monitoring them over time. Comparing indicators over time and between countries shows the likely flow of capital and investment between countries and the rest of the world. In most cases, comparing the economic performance, interest rates, and exchange rates of one country or region to those of another provides a sense of how trade and investment flows will evolve. Although there are consulting and forecasting services that provide detailed assessments of countries and regions, publications such as The Economist, Financial Times, and The Wall Street Journal provide data and forecasts. The governments of the world s major economies also publish statistical reports (like the ones described below) with the latest data and forecasts. NAR Research provides a snapshot of the latest U.S. economic indicators and the relevance for real estate. NAR s Economists Outlook is available online at U.S. Economic Indicators U.S. GDP, Bureau of Economic Analysis, 22

29 1. How the Global Economy Shapes Your Market The primary measure of economic growth in any country is GDP. The U.S. GDP report tracks the growth of the economy and major sectors including consumption, investment, international trade, and government. U.S. Employment, Total and by Industry U.S. Unemployment Rate, Bureau of Labor Statistics, One of the key factors affecting income growth and consumer spending is employment. Monthly reports show the number of workers employed and increase or decrease in the number of employed, nationally, by state and metro area, and by industry. High unemployment suggests weakness in the economy while low unemployment often indicates a strong economic environment and rising incomes. Inflation Consumer Price Index, Bureau of Labor Statistics, Changes in the cost of living for consumers are important indicators for the credit market. High or rising inflation will most often lead to higher interest rates and increased costs of borrowing for businesses and consumers. Labor Productivity, Bureau of Labor Statistics, Labor productivity estimates workers output per hour. High or rising productivity indicates opportunities for profits by businesses and higher wages for workers without the risk of inflation. Retail Sales, Census Bureau, Monthly retail sales indicate the health of the consumer segment of the economy and also reflect consumers confidence about their own financial situation today and in the future. Exchange Rates, Federal Reserve, A strong dollar indicates that U.S. residents can purchase more goods and services from abroad since a dollar buys more foreign currency. A weak dollar means that foreign buyers can purchase U.S. products and services at relatively lower cost in their home currency while U.S. residents will find prices of foreign goods and services relatively expensive. Interest Rates, Federal Reserve, Short- and long-term interest rates reflect the cost of borrowing. Large differences between the rates foreshadow a period of economic growth. Small differences between rates or even periods 23

30 Global Real Estate for Local Markets when short-term rates exceed long-term rates (known as an inverted yield curve) signal weak growth or an impending recession. Assets, Liabilities and Financial Flows Flow of Funds Federal Reserve, The Flow of Funds data, updated quarterly, is the definitive source of information about financial flows throughout the U.S. economy. It includes data on the assets and liabilities of households and businesses and the financial flows between sectors of the economy. Mortgage Rates Numerous sources publish information on current mortgage rates, including the Wall Street Journal, Freddie Mac, Fannie Mae, and many websites. Global Indicators U.S. Imports, Exports and Trade Balance, Bureau of Economic Analysis, Trade in goods and services reflects the relative health of the U.S. economy. Strong import growth often indicates a growing economy for the United States and other countries. Rising U.S. exports signal demand for goods and services produced in the United States and imply robust health for sectors of the economy and local communities tied to export industries. U.S. Direct Investment Abroad, Bureau of Economic Analysis, Although this data is updated with a significant time lag, it shows where U.S. companies are investing abroad both geographically and by industry. Foreign Direct Investment in the United States, Bureau of Economic Analysis, The FDI report shows the countries that are investing in U.S. assets including detail by industry. 24

31 1. How the Global Economy Shapes Your Market Leading Economic Indicators Financial news reports often include references to leading indicators. But what exactly are the indicators and why are they significant? Economists have observed that over time these trends are reliable predictors of future direction. The reports and indexes include many of the economic factors covered in this chapter, such as consumer behavior, equity and bond capital markets, currency movement, employment, and productivity. You can monitor individual components of the group, but a richer picture of U.S. economic direction emerges when the indicators are considered collectively. Indicator Data Source Report Average work week U.S. Dept. of Labor Employment Situation Initial jobless claims U.S. Dept. of Labor Employment Situation Factory orders for consumer goods Manufacturers orders for durable goods Vendor performance (Purchasing Managers) Building permits and housing starts Census Bureau Census Bureau Institute for Supply Management Census Bureau Report on Manufacturers Shipment, Inventories, and Orders Report on Manufacturers Shipment, Inventories, and Orders ISM Index Housing Starts and Building Permits Consumer sentiment University of Michigan Consumer Confidence Index Money supply (M2) S & P year Treasury Note interest rate spread, Fed Funds Rate Federal Reserve NYSE Federal Reserve 25

32 Global Real Estate for Local Markets Excerpt from NAR Local Market Assessment Case Studies 26

33 1. How the Global Economy Shapes Your Market 27

34 Global Real Estate for Local Markets For more state-level case studies, go to 28

35 1. How the Global Economy Shapes Your Market Key Point Review The real estate professional can design a plan for information gathering and select trends and indicators to monitor. By monitoring key indicators over time, the real estate professional can catch significant signals and filter out distractions. The spread of capitalism and private property rights have created new personal and sovereign wealth, which seek investment opportunities in real estate around the world. The United States consistently ranks ahead of other countries for investment stability, security, and opportunity. Trade alliances create an expectation of cooperation that transcends politics. The alliances reduce barriers to capital flow and encourage a stable, secure investment environment. Although specialization creates economic efficiencies and benefits, it fosters dependency on other countries for commodities not produced at home. Capital includes currency, assets, capital goods, real estate, debt, credit, information, technology, and innovation. Capital seeks acceptable risk/return, favorable return on investment, quality properties, affordable and available credit, and orderly markets. Capital flees falling returns, value decline, ownership restrictions, movement restrictions, and tight expensive credit. Influences on capital flow include balance of payments, GDP, political events, inflation, currency value, interest rates, savings, business cycles, trade, investment choice, uniform manufacturing, and professional standards. Strong import growth often indicates a growing economy. Rising exports signal growing demand for a country s goods and services. 29

36 Global Real Estate for Local Markets The Next Chapter So far, we have focused on the global and national economic indicators and real estate markets. Opportunities in your hometown market, however, matter the most. Prospecting for global business at homeprospecting glocally is the focus of the next chapter. We will look at finding opportunities and adapting your core real estate skills to serve your hometown glocal market. 30

37 2. Your Hometown Global Market 31

38 Global Real Estate: Local Markets In This Chapter Gateway cities and beyond Prospecting glocally Lawful target marketing Working with your REALTOR association How to use the information in this chapter Identify local market opportunities and make connections Prospect for global business in your local market Take advantage of association resources Do I Have to Leave Home? Do you have to leave home to be part of the global real estate market? It s true that some international real estate professionals focus on clients and customers in far-flung places. But many real estate professionals will attest that abundant global business happens in their hometowns with foreign and immigrant buyers and sellers. Developing a global specialty enriches real estate professionals business and personal lives as they form new relationships and learn about other cultures. Local opportunities create new business at home and sometimes lead practitioners abroad. Building an international specialty provides a competitive market distinction and, when combined with a reputation for knowledge and professionalism, demonstrates to clients that you re a participant in a worldwide real estate market. This chapter focuses on identifying opportunities and tapping into the global market in your hometown and taking advantage of association resources to build your business. Let s get started. 32

39 China Canada Mexico India U.K. Germany France Venezuela Florida California Texas Arizona New Jersey New York Illinois Washington D.C. Michigan Hawaii 2. Your Hometown Global Market Gateway Cities and Beyond Where do foreign real estate buyers purchase properties? The largest group of foreign buyers looks for urban and suburban areas, which reflects the distribution of U.S. population. Eight out of ten U.S. residents live in a metropolitan area. About half of international sales occur in four states: Florida, California, Texas, and Arizona, but significant numbers of transactions occur in other states too. State's Share of International Sales 21% 16% 50% of sales occur in these 4 states Type of Area Suburban: 46% Central City/Urban: 33% Small/Town Rural: 9% Resort Area: 9% 8% 5% 3% 3% 3% 3% 2% 2% Major Countries of Origin: International Clients Purchasing Property 16% 14% 9% 8% 4% 3% 3% 2% Source: 2015 Profile of Home Buying Activity of International Clients, National Association of REALTORS, 33

40 Global Real Estate: Local Markets The Top 4 States International Buyers Region of Origin Latin America 35% Canada 28% Europe 27% Asia/Oceania 7% Mid East/Africa 1% International Buyers Region of Origin Asia/Oceania 57% Europe 18% Latin America 14% Canada 6% Mid East/Africa 3% International Buyers Region of Origin Canada 46% Asia/Oceania 19% Latin America 19% Europe 15% Mid East/Africa 2% International Buyers Region of Origin Latin America 41% Asia/Oceania 31% Europe 15% Mid East/Africa 8% Canada 4% The Top 5 Countries of Origin Clients from five countries of origin, as shown in the preceding chart, represent more than half (54 percent) of the $104 billion in sales to international clients. What are their preferred locations, how much do they spend, and how do they finance the purchase? 4 China: 16 percent of sales, $28.6 billion $831,800 average home purchase, 69 percent cash transactions Chinese buyers focus strongly on the west coast, which provides geographical proximity, educational opportunities, and business and trade opportunities. Favored cities include Los Angeles, San Francisco, Seattle, as well as New York and Houston. Many of the purchases are for business, educational, and investment purposes, although there is also interest in vacation homes. Canada: 14 percent of sales, $11.2 billion $380,300 average home purchase, 73 percent cash transactions Canadians, seeking warm-weather winter climates, tend to buy in Arizona, Nevada and Florida. Favored cities include Fort Lauderdale, Orlando, Las Vegas, Los Angeles, Miami, and Naples Profile of Home Buying Activity of International Clients, National Association of REALTORS, 34

41 2. Your Hometown Global Market India: 8 percent of sales, $7.9 billion $450,200 average home purchase, 16 percent cash transactions Much less concentrated in purchases than other nationalities, Indians purchase throughout the country New York, Los Angeles, San Jose, Dallas, and Chicago. Many purchases by Indian buyers are business oriented. Mexico: 9 percent of sales, $4.9 billion $274,800 average home purchase, 46 percent cash transactions Mexicans are particularly interested in Texas, California, and Florida. Favored cities include San Antonio, Houston, and El Paso, as well as San Diego and Miami. Investment, proximity, and lifestyle motivate purchases, as well as a desire for vacation homes. United Kingdom: 4 percent of sales, $3.8 billion $455,600 average home purchase, 58 percent cash transactions U.K. citizens focus on both vacation and work oriented areas, such as Los Angeles, New York, Orlando, Kissimmee, Houston, and San Francisco. Metro and Micropolitan Markets What if your market is not in one of the Big Four states? Although gateway cities and major resort areas attract many foreign buyers, other areas and suburbs are home to significant populations of foreign-born residents. The U.S. Census Bureau s American Community Survey documents 36 metropolitan and micropolitan areas with more than 100,000 foreign-born residents. Ten U.S. cities are home to more than one million foreign residents. 35

42 Global Real Estate: Local Markets Metropolitan and Micropolitan Areas with 100,000+ Foreign-Born Residents and Largest Groups Atlanta-Sandy Springs-Roswell, GA Mexico, India Austin-Round Rock, TX Mexico, India Baltimore-Columbia-Towson, MD India, Korea Boston-Cambridge-Newtown, MA-NH Brazil, Dominican Republic, China Charlotte- Concord-Gastonia, NC-SC Mexico, India Chicago-Naperville-Elgin, IL-IN-WI Mexico, Poland, India Cincinnati, OH-KY-IN Mexico, India Cleveland-Elyria, OH Italy, India Columbus, OH Mexico, India Dallas-Fort Worth-Arlington, TX Mexico, El Salvador, India Denver-Aurora-Lakewood, CO Mexico, Vietnam Detroit-Warren-Dearborn, MI Mexico, India, Iraq Hartford-East and West Hartford, CT Jamaica, Poland Houston-The Woodlands-Sugar Land, TX Mexico, El Salvador, Vietnam Jacksonville, FL Philippines, Cuba Las Vegas-Henderson-Paradise, NV Mexico, Philippines Los Angeles-Long Beach-Anaheim, CA Mexico, Philippines Miami-Fort Lauderdale-West Palm Beach, FL Cuba, Haiti Milwaukee-Waukesha-West Allis, WI Mexico, India Minneapolis-St. Paul-Bloomington, MN-WI Mexico, Laos New York-Newark-Jersey City, NY-NJ-PA Dominican Republic, China Orlando-Kissimmee-Sanford, FL Mexico, Haiti Philadelphia-Camden-Wilmington, PA-DE-MD India, Mexico Phoenix-Mesa-Scottsdale, AZ Mexico, Canada Portland-Vancouver-Hillsboro, OR-WA Mexico, Vietnam Providence-Warwick, RI-MA Portugal, Dominican Republic Riverside-San Bernardino-Ontario, CA Mexico, Philippines Sacramento- Roseville-Arden-Arcade, CA Mexico, Philippines San Diego-Carlsbad, CA Mexico, Philippines San Francisco-Oakland-Hayward, CA Mexico, Philippines, China San Jose-Sunnyvale-Santa Clara, CA Mexico, Vietnam Seattle-Tacoma-Bellevue, WA Mexico, Philippines St. Louis, MO-IL Mexico, Bosnia Herzegovina Tampa-St. Petersburg-Clearwater, FL Mexico, Cuba Virginia Beach-Norfolk-Newport News, VA Philippines, Germany Washington-Arlington-Alexandria, DC-VA-MD El Salvador, India Source: American Community Survey, U.S. Census Bureau, 36

43 2. Your Hometown Global Market Discussion Question? Who are the most prevalent international buyers in your market area? What types of property do they buy? Working with Foreign Buyers Based on many transactions and years of experience, CIPS Designees have observed some commonalities among foreign buyers. Of course, every combination of buyer, seller, and property has its unique aspects. But, over time, you will likely encounter some of the following characteristics and preferences when working with foreign buyers in your local market. Long-term perspective By its nature, real estate is not a liquid asset that can be easily bought and sold in a short-term time frame. Furthermore, capital gains tax discourages short-term investment by imposing a higher rate. Aside from these financial and tax aspects, finding a property and closing a transaction require a good deal of effort, which encourages a long-term time frame. 37

44 Global Real Estate: Local Markets All cash or high-equity transactions According to NAR research, 55 percent of all foreign buyers paid cash for their U.S. properties. For many, qualifying for a mortgage presents an insurmountable obstacle because they cannot demonstrate creditworthiness. The credit ratings and information that potential borrowers can supply may not correspond to U.S. lenders requirements. Foreign investors seeking low-risk placement of capital want to avoid the magnifying effects of leverage, unpredictable interest rates, and exchange rate fluctuations. Acceptable, predictable returns Foreign investors are not necessarily looking for bargains, but, like any investor, they do expect reasonable rates of return and assurance that future income streams will remain steady or increase. Quality properties Foreign investors, seeking reasonable and predictable returns over the long term, usually prefer high-quality properties. However, experienced investors with established portfolios may consider higher-risk ventures, such as rehabilitation or conversion projects. Foreign buyers who purchase residences for both personal and investment goals are usually not interested in fixer-upper properties. When foreign buyers are limited in the amount of time they may spend in the United States (by immigration law or personal vacation time available), they do not want to spend time on remodeling and major repairs. Foreign investors interested in commercial real estate may prefer different classes of properties depending on their investment goals, which usually reflect a desire for safe investments with predictable returns. No matter the quality of the property, commercial investors will need options on how to meet those investment goals. Sophisticated financial analysis is required in order to present these options to the client. The CIPS course Global Real Estate: Transaction Tools provides an introduction to the type of financial analysis required, and further study is available through the CCIM Institute. Desirable locations and familiar markets In the past, foreign buyers tended to concentrate in and around the major gateway cities such as New York, Washington, D.C., Miami, Chicago, Los Angeles, Boston, San Francisco, Dallas, Houston, and 38

45 2. Your Hometown Global Market Atlanta. As shown on the chart on page 36, significant numbers of foreign-born residents and homeowners live in metropolitan, micropolitan, and suburban locations throughout the United States. But it is also true that foreign investors, vacation-home buyers, and immigrants all tend to seek out markets where there are established communities of compatriots. As first- and secondgeneration children of immigrants move out of traditional neighborhoods and establish new communities, buyers are drawn to other areas including suburbs. Resort areas with convenient air connections to global hub cities draw vacation-home buyers, many of whom regard their second homes as both a family vacation spot and an investment. The same qualities that attract buyers variety of properties, recreational activities, entertainment, climate attract renters. Detailed research Whether investors or vacation-home buyers, all buyers want detailed information about the properties they plan to purchase. Because of the distance and unfamiliarity with the market, foreign buyers are often at an information disadvantage. They do not know where to go for information and lack the local market savvy for judging the validity of information. Foreign buyers look to the real estate professional as a trusted advisor to fill in this knowledge gap. This means the real estate professional must be prepared to present detailed information in writing. Specialized advisors Buying real estate, particularly investment property, in a foreign country may require the involvement of global specialists in law, taxes, immigration, property management, and other areas. The real estate professional can help by putting together a team of professionals and being prepared to work with the buyer s advisors. It is not uncommon for investors to send out preliminary advisors to assess markets, make contacts, and conduct initial property searches. The real estate professional should realize that these advisors are not just information conduits but integral to the decision-making process. 39

46 Global Real Estate: Local Markets Prospecting Glocally How can you find the global business opportunities in your market and make the contacts that result in transactions? Prospecting globally and locally glocally means: Awareness of the opportunity in your marketplace Knowledge of the market dynamics Outreach to potential clients, customers, and other real estate professionals Raising Awareness of Opportunities The first step in developing your hometown global business is awareness of the opportunities. Globalization shrinks and interconnects the worldwide marketplace and, despite temporary setbacks, there is no indication that this trend will reverse. Foreign business, such as exports, imports, investment, and tourism, generates real estate transactions, whether for a manufacturing plant, office space, or homes for employees. You could start with the macro-level assessment of the global business potential in your local markets. The following resources provide information on global business in local markets: NAR publishes State-by-State International Business Reports (see page 43) with detailed analysis of population demographics, languages spoken in households, foreign visitors, foreign direct investment, exports, and trading partner countries. The U.S. International Trade Administration compiles statistics on trade, including global patterns of each state s exports. They also publish state-by-state reports on exports, jobs, and foreign investment ( State economic development agencies are excellent sources of information on global business. The federal government maintains a portal site, through which you can access the development agency for your own or other states. These state agencies offer data on foreign business, inbound and outbound, programs to encourage business development, and information about future developments. Another approach is to look at what other local businesses are doing and to whom they target marketing efforts. Contact with your local Chamber of Commerce may yield information on foreign companies future 40

47 2. Your Hometown Global Market development plans. The local convention and visitors bureau can likely provide information on foreign tourism, which is particularly relevant for resort areas. Finally, listen to your own business intuition and make your own observations they are valid too. Getting in on the ground floor when a company develops a new location can lead to tremendous opportunities. Who Is the Market? Today? Tomorrow? Once you have assessed market opportunities on a macro level, how do you get down to finding out the details who are the foreign buyers and sellers in your market? Where are they from? What language do they speak at home? What are the cultural considerations involved in a business transaction? Are they inbound or outbound? What do they buy? And, most importantly, what are the trends today and tomorrow? The clues to your local global market are all around. You could start by driving around neighborhoods and commercial districts. Observe the businesses and the clientele they serve. Look at signs in shop windows; what language are they written in? Make note of the houses of worship as this indicates the presence of a supporting community. Your observations could include something as simple as a trip to the supermarket. Grocery stores are closely attuned to customer demographics and depend on volume. What foreign food items are on the shelves and in the produce aisle? If it s on the shelf, a significant number of customers buy it. If your market includes a college or university, seek out demographic information on foreign students and faculty. Large universities attract graduate students, faculty, and researchers from around the world. Plus, many parents find it more economical to purchase a residence, such as a condo, for their student children than to pay for room and board on campus. Real estate practitioners who work in resort areas know that vacationers and snowbirds who return to the same destination every year eventually become buyers and ultimately sellers. Place your advertising flyers in resort newsletters and bulletin boards, present a seminar for vacationhome buyers, or participate in events as a sponsor. Market Outreach Some real estate professionals approach global business by saying that they want to be the real estate agent for the world. But the reality is that this is too broad an approach. After you have done the research and 41

48 Global Real Estate: Local Markets figured out who is in the market and what they buy, it s time to pick your niche. You could select your niche based on a language you speak, your ethnic affinity, travels to a particular country, or a personal interest in a particular country or culture. Whatever market niche you select, invest the time in really learning the country, the culture, and the language. In subsequent CIPS courses you will learn an assessment model for researching all aspects of a foreign country in depth. Of course, firsthand experience is best, but even if you cannot afford to travel, you can learn a lot through online sources, media, and personal contacts. Whatever market niche you select, your interest and participation must be authentic and altruistic. The big question is how will you reach the buyers and sellers in your market niche? If you are selling single-family homes, your contacts will focus on individual clients and customers. On the other hand is large commercial or industrial development, where you will have to make contacts with a number of interrelated people and organizations that could include companies human resource departments, manufacturing division, strategic planning division, suppliers, and logistics support. The approach and tactics you would use to reach individuals, like vacationhome buyers, are quite different from those you would use to communicate with corporations. A common theme expressed by real estate professionals who have built global businesses is that you just need to go and get out there. Participate in community events that involve your market niche, or build your profile by sponsoring events. Join social clubs for expats from foreign countries. Consider offering to present homebuyer seminars for community groups. Homebuyer seminars provide valuable information and give potential clients and customers a chance to ask questions in a non-sales environment. Access to information is a frequently cited obstacle for first-time homebuyers. Imagine how much more daunting that obstacle becomes when the buyer speaks a language other than English. You can provide a valuable service, demonstrate your professionalism, and show your understanding of the difficulties buyers must overcome. While you are presenting the seminar, your audience can check you out before getting involved in a one-on-one relationship. 42

49 2. Your Hometown Global Market NAR State-by-State International Business Reports provide detailed analysis of population demographics, languages spoken in households, foreign visitors, foreign direct investment, exports, trading partner countries, and more. Go to 43

50 Global Real Estate: Local Markets Strive to become the global go-to person in your market and be willing to share that expertise. It will take time, knowledge, networking, and experience to build up your reputation as the source of the source. But when you have a reputation as a reliable and supportive information source, the business follows. Blogging is an excellent method for demonstrating your knowledge and driving traffic to your website to view listings. Not an expert? You could start by inviting guest bloggers who are specialists in other areas, such as immigration and taxes, and providing links from your blog to expert sources. Social media is another way to raise your profile as the global go-to professional. Keep your social media pages fresh and relevant (but remember to avoid a sales-y tone). Share information, both from your own experiences and from your research. Tap Into Association Resources Your own state or local real estate association may have a global council or committee. Getting involved with this group will put you in touch with real estate professionals who share your interests and are already involved in global real estate. Your association s international group can be an information source for other global real estate connections such as seminars, courses, trade missions, and real estate expos. If a large group of inbound buyers are from a particular country, investigate if there is a real estate association and if you can join as an international member. NAR has cooperating agreements more than 80 national real estate associations in nearly 60 countries; for contact information go to Resources and Tools for REALTORS Every REALTOR has an expert global business partner NAR s Commercial and Global Services offering resources and tools to assist you with international business development. All of the global programs, products, and services that NAR provides to members are available online at 44

51 2. Your Hometown Global Market Three-Step Brainstorm: Market Outreach For the next six minutes, brainstorm ideas for finding and making contacts with foreign buyers and sellers in your local real estate market. Write your group s ideas on flip chart pages. Take a walk around the classroom to see the other groups ideas. Make a note of the ideas that appeal to you. Now, highlight the ideas that you will try first. 45

52 Global Real Estate: Local Markets Target Marketing Legal Affairs National Association of REALTORS Lawful Targeting It s a well-established marketing principle that narrowing the segment of prospective customers you want to attract lets you create a more effective targeted message and ultimately yields you a better bottom line. But the Fair Housing Act says it s unlawful to discriminate against members of certain protected classes in providing real estate services, even if these groups don t fit in with your targeting strategy. More specifically, you can t make, print, or publish, or cause to be made, printed, or published, any notice, statement, or advertisement with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination. With these limitations looming over you, how can you create an effective marketing plan that focuses on one or more parts of the population without running afoul of the Fair Housing Act? That s a difficult question a question for which we don t yet have all the answers. To date, neither the courts nor the U.S. Department of Housing and Urban Development have provided specific guidance on some of the grittier, real-life questions related to this issue: Is it okay to describe myself as African American on my website so prospective clients who prefer an African American salesperson can easily find me? Unfortunately, until more guidance is available, the only safe course of action is to focus your target marketing activities on what s clearly permissible under the Fair Housing Act and scrupulously avoid what isn t even if it occasionally seems to put a crimp in your marketing strategy. What to Avoid Perhaps the most critical mistake you can make is to base your marketing decisions on prospective clients membership or nonmembership in any of the classes protected by the federal Fair Housing Act or by your state s fair housing laws. This means you can t focus your business plan or advertising tactics only on Hispanics or Arab Americans and exclude African Americans, Asians, or Caucasians, for example. Likewise, you can t market your services only in Christian-oriented publications or on television, even if you d prefer to target only those who want a Christian salesperson. (Note that advertising restrictions under the Fair Housing Act apply to all forms of print and electronic media.) Practitioners who want to specialize in senior housing and issues such as retirement and reverse mortgages face a similar challenge. Even though you may legally make customers aware you have special expertise that can benefit seniors, you must make this knowledge available to anyone who has an interest in your skills, regardless of age or familial status. And unless a community is qualified as senior housing under HUD regulations, you must never refuse or forget to show families with children properties just because many seniors live there. The rule not to market on the basis of membership in a protected class applies even if the protected class is one that you belong to. Also note that the Fair Housing Act makes it illegal for anyone in a brokerage office to be designated as the associate who automatically services all clients who are of the same ethnic or racial background as the associate. Focus on Your Skills, Property Does that mean, then, that you can t let buyers know that you re fluent in the language they 46

53 2. Your Hometown Global Market speak? Not at all. Under the Fair Housing Act, there s nothing wrong with marketing yourself as having certain language skills. So long as you pitch your services to the population at large, not just to those ethnic groups who speak your language, it s fine to indicate in your promotions that you speak Arabic, Spanish, or whatever. HUD or the courts, play it safe and abide by clear-cut rules. The NATIONAL ASSOCIATION OF REALTORS Legal Affairs department will keep you posted on new information as it becomes available. First published in REALTOR Magazine Then prospects can decide to choose you because you share a similar language, religion, or background, and you re not choosing them based on some similarity they have with you. There are other strategies you legally can use under the Fair Housing Act. First, you re usually on safe ground if you focus on a propertyrelated niche instead of a client-related one. A niche marketing plan that s based on any of the following property types is perfectly lawful and can be quite effective: Fixer-uppers Condominiums Single-family homes Resort housing Properties in foreclosure Environment-friendly buildings Golf course communities Homes on the historic register Second, you can focus on individuals specific needs that are not covered by fair housing: relocation, interest in living near particular hobby or sports offerings, and level of understanding about the buying and selling process. It s perfectly lawful, for example, to market to first-time buyers so long as you don t make assumptions about the likelihood of any group such as recent Hispanic or Asian immigrants being first-timers. So, you see, it s possible to follow the advice of the marketing gurus and target a niche without violating the Fair Housing Act. But be inclusive in your marketing, allowing prospective clients to choose whether they want you to represent them. As for the questions not yet answered by 47

54 Global Real Estate for Local Markets Key Point Review Among global clients of REALTORS, the more frequently purchased property type is the single-family detached home. Commercial/ investment real estate is the smallest market segment in terms of numbers of transactions, but the dollar volume of transactions is generally higher than residential sales, and the commercial market in general is a great area of opportunity. Many consider their vacation homes as both a personal residence and an investment. In general, foreign buyers preferences, as observed by practitioners, include: long-term perspective, cash or high-equity purchases, predictable returns, quality properties, desirable and convenient locations, familiar markets, detailed research, and specialized advisors. Prospecting glocally involves awareness of opportunities, knowledge of market dynamics, and outreach to potential clients, customers, and other real estate professionals. A critical mistake to avoid in target marketing is to base your marketing decisions on prospects membership or nonmembership in any of the classes protected by federal Fair Housing Law. This rule applies even if the protected class is to which you belong. The Next Chapter Glocal markets are made up of people from diverse cultures and backgrounds. When you come in contact with diverse clients and customers, in your hometown or abroad, how can you apply your real estate skills in culturally aware ways? In the next chapter we will focus on enhancing your cultural literacy. 48

55 3. Cultural Literacy for Business 49

56 Global Real Estate: Local Markets In This Chapter Cross cultural business skills Generalizations and stereotypes High context/low context cultures How to use the information in this chapter Distinguish between expectations, generalizations, and stereotypes Demonstrate professionalism by serving clients and customers in culturally appropriate ways Global business means interacting with people from a variety of cultures. The way people make decisions, place trust in others, disclose information, or make eye contact is often rooted in cultural mores, and shape behavior and expectations in both business and social settings. Interactions with foreign clients and customers proceed best and lead to successful transactions when you are sensitive to their expectations of business and social behavior. We can summarize our experiences by saying most, many, or some of the individuals in a particular group tend to share certain characteristics. Generalization helps us sort through and cope with the confusing details of life. In this regard, generalizations are useful as guidelines. Generalizations allow us to revise our opinions and responses as we observe how an individual s behavior and reactions match or differ from these expectations. We will look at generalizations, but be careful not to stereotype. The less we know about the individuals who belong to the group, the more the stereotype turns into a cultural myth that ultimately describes no one. Generalizations become harmful stereotypes when we allow them to interfere with treating people as individuals. Cultural learning can work both ways. Foreign clients and customers are curious and sometimes as confused about the cultural, social, and business expectations of U.S. businesspeople. The real estate 50

57 3. Cultural Literacy for Business professional can serve as a cultural interpreter for foreign clients and customers. Real estate professionals understand the importance of building relationships with clients to promote business opportunities. For some cultures, relationships are the key to successful transactions. Simply put where there is no relationship, there is no business. The bottom line is you don t have to change who you are or your culture, you just need to adapt your outlook and behavior. High Context and Low Context Cultures No one wants to be the subject of a statement like, he s a typical But, the concept of high- and low-context cultures helps us generalize about the traits of individuals within a group. This concept helps us adapt our business behavior and avoid value judgments. Even first-generation and second-generation offspring of immigrants may be still immersed in their parents culture. They may expect and appreciate real estate professionals sensitivity to cultural preferences. High Context A high-context culture values formality, face-saving communication, relationships, and the slower pace needed to develop relationships. Conduct business through development of relationships. Nonverbal communication is important. Contracts are the basis of relationships. Time is fluid and schedules tend to be flexible. Prevalent in: Asia, Russia, Middle East, Central and South America, Southern European countries, African countries, Pacific nations High Context or Low Context? 5 Low Context A low-context culture values informality, direct communication, results, fast pace, and punctuality. Relationships interfere with business. Precise verbal agreements are important. Contracts are binding and exist apart from personal relationships. Time is treated as a commodity and schedules are carefully observed. Prevalent in: United States, Canada, Northern European countries, Australia, New Zealand, South Africa 5 Herbig, Paul, Handbook of Cross-Cultural Marketing, The International Business Press, Birmingham, New York,

58 Global Real Estate for Local Markets High Context-Low Context Continuum Cultures can be placed generally on a continuum according to whether they are high context or low context. It is important to remember that this information is only useful as a generalization and a starting point; it is especially helpful when you are first developing relationships with individuals and to navigate points in a transaction. Swiss Scandinavian Australian German American Other Northern European South American African Southern European Arab Asian Lower Context Higher Context 52

59 3. Cultural Literacy for Business Cross-Cultural Business Skills Emily Post, the American expert on manners, defined etiquette as a code of behavior based on respect, kindness, and consideration for the purpose of helping people get along and avoid conflict. That definition is a good way to think about cross-cultural business and social skills. Beyond the everyday good manners you already use in the course of business, how can you be sure that your behavior is appropriate? Following are some basic cross-cultural do s and don ts that will help you project a positive attitude toward cultural diversity, as well as adjust to the other person s need for high- or low-context interactions. Saving face Allowing others to save face is a valuable cross-cultural skill and good manners. Never do anything to embarrass another person, either in that person s eyes, in the eyes of others, or in your own eyes. You should not sacrifice your own face in front of others. Talk less, listen more Master the art of knowing when to talk and when to keep quiet. Respect the role of silence during the conversation and don t rush to fill it with talk. Pause to allow time to think. Communicate informatively rather than persuasively. And minimize comparisons to the United States. Relationships first Do not try to create an instant friendship. Wait to be invited before using first names or any other indications of familiarity. In cultures that place high value on relationships, such as Japan, first meetings are for getting acquainted; decisions seldom occur at first meetings. Carefully time your approach to discussing business issues. Be aware that the pace of decision-making varies from culture to culture. Greater formality and a slower pace Avoid jokes, slang, and hand gestures because they have a high probability of being misunderstood. Dress conservatively and appropriately. Offer and accept refreshments graciously. Punctuality Always make an appointment and be punctual even if the prospect is not. Some cultures regard lateness as a character flaw, and if they do not, they know that an American would be offended if another American were late. 53

60 Global Real Estate: Local Markets Keep attorneys in the background Be prepared to proceed at first without lawyers and accountants; for some cultures the involvement of an attorney signals trouble with the deal. Contract end or beginning? High-context cultures may view a contract as a basis for further negotiations, not a binding agreement. The expectation is that a contract can be renegotiated if its provisions prove unsatisfactory at a later date. Respect for hierarchy In some cultures, such as the United States, social structures are fluid, but in others, social structure is quite rigid. Status may be based on family connections, age, gender, wealth, seniority, birthright, or religion. Show deference to those the prospect does, such as children, extended family, the poor, and, in particular, the elderly. Stand when elders enter, and wait for them to speak or extend their hands in greeting. In meetings, allow the highestranking person in the group to lead the conversation. Business card etiquette Respect the use of business cards; in some countries, it is an essential ritual. Present and receive business cards respectfully treat them as an extension of the person. Make your professional position clear and state it on your business card. Cultures that are very sensitive to hierarchy will try to fit you into an appropriate status; if later they find that they have placed you at a lower status than your position deserves, an embarrassing loss of face may ensue. Family matters are private Do not ask about family unless you are personally acquainted with individual family members, they are present, or the other person mentions them. Get names right Be sure you obtain the correct names and do not shorten long or difficult names. Be aware that in some Asian cultures names are given with the family name first; for example Kim Yu-Na should be addressed as Ms. Kim, although Asians who live or do business abroad may adopt the western naming convention Ms. Yu-Na Kim. 54

61 3. Cultural Literacy for Business Practice with interpreters Many real estate firms employ multilingual professionals who can assist with translation and interpretation. Practice with your interpreter before business meetings and be sure the interpreter understands the technical terms of real estate. Consider giving foreign people a glossary of real estate terms and jargon in their own language. These can be obtained from the Federal National Mortgage Association, Fannie Mae. Double check online translations You may use translation websites, but be aware of their limitations. Ask a fluent speaker to edit documents. Online- or softwaregenerated translations cannot capture the nuances of another language. Observe nonverbal signals Be sensitive to nonverbal behavior that may indicate the other person does not understand, such as nodding, smiling, or the absence of questions. Be aware that yes does not always mean, I agree. Avoid intense, prolonged, or assertive eye contact. Common sense Use common sense and credit the other person for also having it. Acknowledge mistakes and apologize when appropriate. Accept responsibility for language difficulties. Nonverbal Red Flags Re-adjusting distance Averting eye contact Scowling, frowning Laughing at the wrong time or inappropriate laughing Covering the face Remaining silent, not asking questions Displaying impatience Behaviors to Avoid Standing with hands in pockets or on hips Making intense, prolonged eye contact Crossing legs, showing the soles of your feet, pointing with or touching another with the foot Fleeing or invading the other s personal space Initiating any physical contact Showing impatience Pointing or beckoning with the fingers, making hand gestures 55

62 Global Real Estate: Local Markets Negotiations and Decision Making Negotiation practices among global buyers and sellers vary as much as decision-making styles. Some groups seek favorable win-win results for everyone involved, while others see negotiations as a zero-sum win-lose process. When negotiating abroad do not state your departure date. Some groups may use your departure date to pressure you into last-minute concessions, knowing you would prefer to complete the transaction and avoid returning home empty-handed. Global real estate decision-making tends to take place either by consensus, by committee, or through levels of hierarchy. For example, in Japanese business, decisions result from consensus development. Even for a transaction taking place in another country, the decisions are likely to be made in Japan at the home office. In many cultures, decisions for residential purchases are subject to the hierarchy in the home. Whatever the process, global clients are going to follow their own practices, so be prepared to accept and adapt to the client s practices. To be sure that all decisions are understood by the parties involved, follow up every verbal exchange with a written confirmation or summary. may be acceptable, but a card or letter is better. Ask the prospects about their preferences. Gender Issues Perhaps the most sensitive cultural issue is that of the roles of men and women in business. Men and women from cultures that practice strict separation of the sexes may have difficulty adjusting to expectations in the United States. Always be deferential to women even if their own culture is less so. Many foreigners know that American women are treated equally in professional settings and deferentially in social ones; they will expect the same behavior. Treat members of the opposite sex with respect and err on the side of formality. And be patient and forgiving if a member of the opposite gender has trouble determining how to treat you. As a general rule, wait for a woman to extend her hand first for a handshake, and do not make any physical contact, such as a pat on the arm or a hug. 56

63 3. Cultural Literacy for Business For women in business, inviting a male client or colleague from some cultures out for a business lunch or dinner can be misunderstood. An awkward situation can be avoided by including the spouse or other colleagues in the invitation. In order to avoid an embarrassing struggle over paying the check, make advance arrangements to settle the bill, such as signing it to a room account or stepping away from the table to settle the bill directly with the maître d or server. Religious Traditions in Business Religion is one of the most important cultural differences due to its fundamental role in creating cultural identity and behavioral norms. You do not have to read the Confucian texts, Koran, Vedas, or other sacred works to work with their believers, but you should know that religious tradition shapes certain behaviors among individuals. If you work frequently with customers and clients of a particular religious background, educate yourself about its theology and traditions. You do not have to change your own beliefs, and you will benefit by learning about others. Active Listening Active listening can smooth the process of cross-cultural communication. Interactive and active listening allows you to learn and adjust while building the other person s confidence and comfort level with the communication process. For example, paraphrase what the other person says, and encourage the other person to paraphrase you. Paraphrasing is simply the art of putting what the other person has said into your own words and asking if the other still recognizes the idea. Ask open-ended questions that seek information instead of agreement or a value judgment. Open-ended questions begin with: who, what, where, when, how, why, or an invitation to tell me about Open-ended questions invite listeners to explain their understanding of the process; for example, What would you like to know about making an offer? Pay attention to the person as well as the message. As 1960s media guru Marshall McLuhan famously stated, The medium is the message. For many cultures conversation is the message. Several weeks of visits and drinking tea together precede even mentioning what it was that brought the customer into a merchant s shop or business. Foreigners who want to buy U.S. real estate likely realize that business proceeds quickly, but the 57

64 Global Real Estate: Local Markets real estate professional should be prepared to adjust the pace to the client s comfort without losing out on opportunities. Active Listening Skills Pay attention Share information Withhold judgment Active listening Summarize or paraphrase Reflect Ask questions to clarify Cultural Snapshots For brief descriptions of business customs in selected countries, refer to the Resources section of this manual. Cultural Snapshots: Asia Pacific, page 125 Cultural Snapshots: Europe, page 132 Cultural Snapshots: South America, page 139 Cultural Snapshots: North America and Caribbean. Page

65 3. Cultural Literacy for Business? Discussion Question What cultural differences have you observed among foreign clients and customers? How do these differences impact the real estate transaction? How do you adapt your behavior and response? 59

66 Global Real Estate: Local Markets Hablas Hispanic Consumers? Inclusion of extended family members and a culture of loyalty characterize Hispanic consumers who emigrate to the United States. Learn more about this group and how to work with them. Imagine buying a house in a place without multiple listing services, franchises, or real estate licensure. Down payments are extremely high, around the 50 percent mark. The amount you can borrow is based on your age of all things, and after all that, it s really easy for a renter to claim rights to your house while you re away, leaving you with nothing. That s the environment your average Mexican client is coming from, and many of those same difficulties exist across Latin America. Clearly, language isn t the only barrier to the real estate transaction for this group. In fact, Maria Valentin, vice president of strategic markets at First American Title, would argue that learning Spanish should be closer to last on your list of things to do to make your Hispanic customers feel at home. It s not English that s the issue, she said during an educational session at the 2012 REALTORS Conference & Expo in Orlando. Real estate is very different across countries...we don t grow up with real estate Spanish. We don t grow up with escrow entitlement Spanish. Even if you are fluent in Spanish, breaking out your language expertise right away could turn off some buyers, even if you re speaking their dominant language. Jennifer Castejon, strategic markets director at First American Title, said that many of their Spanish-speaking customers prefer to do business in English. Ask them, What s your preference? Castejon told attendees. You have to allow them to selfidentify. Of course, some portions of the transaction can be confusing to laymen regardless of their language preferences. Whether you re explaining the home buying process in English or Spanish, Valentin urged attendees to steer clear of jargon. We many times make the mistake of using acronyms, she said. Customer confidence in the transaction can become degraded, when people don t really know what we re talking about. When showing homes to Hispanic buyers, it s important to keep in mind the influence of family in financial decisions. Within the dominant American culture, parents and other family members only have a significant say in the home buying process if they re contributing financially to the purchase or if they will be living in the home in question. This is not necessarily the case in Hispanic families. Castejon explained that people tend to make their individual decisions based on the needs of the smallest cultural unit. In individualistic societies such as the United States, that smallest unit is one person. But in more collectivist cultures, the family is the smallest unit of consideration. It doesn t matter if you re putting one dime into the transaction, Castejon said. She suggested real estate professionals invite the extended family to home showings in order to avoid showing the house many times over. You need to take all of them at once... do not exclude them, because it s going to be harder on you. Whether you re in an area with a large Hispanic presence or not, this is a group that forwardthinking real estate professionals should target for the future of their businesses. Castejon said their proprietary research finds that while 20 million Hispanics are currently within their 60

67 3. Cultural Literacy for Business target homebuying age, many more are growing into this age group. Castejon also said that the fact that this population is quite young when compared with other demographic groups in the U.S. means that their wealth accumulation and educational achievement is bound to increase a great deal in the coming years. Valentin added that a strong culture of loyalty is another reason to welcome Hispanic clients and treat them well. If you do a very good job for one Hispanic family, they will tell everyone about you, she said. By Meg White Source: First published in REALTOR Magazine: 61

68 Global Real Estate: Local Markets Where in the World Is? Knowledge of geography is a foundation for cultural literacy. Test your geographic IQ with the following exercise. Match the following countries with the corresponding numbers on the map. Write the number in the box. Argentina Germany Peru Australia Haiti Philippines Brazil India Poland Canada Indonesia Portugal China Iraq Republic of Korea Cuba Ireland Russia Dominican Republic Japan Spain France Malaysia Sweden Egypt Mexico Taiwan England Morocco Turkey Ethiopia New Zealand Vietnam Bonus Questions Which of these countries occupies an entire continent? Which of these countries are island nations? (Hint: there are 9) Which of these countries share islands? (Hint: there are 4) What are the names of the two islands? & & 62

69 3. Cultural Literacy for Business 63

70 Global Real Estate: Local Markets Key Point Review Generalizations provide guidelines but allow us to revise our opinions and responses to circumstances and others specific behavior. First- and second-generation offspring of immigrant parents may be quite influenced by the parents culture. They will appreciate sensitivity to cultural differences. For many cultures, relationships are the key to successful transactions. Where there is no relationship, there is no business. A high-context culture values formality, face-saving communication, relationships, and the slower pace needed to develop relationships. A low-context culture values informality, direct communication, results, fast pace, and punctuality. Expect foreign clients and customers to follow familiar decision and negotiation processes and be prepared to adapt to their practices. Interactive and active listening allows you to learn and adjust while building the other person s confidence and comfort level with the communication process. The Next Chapter We ve looked at acquiring economic and cultural literacy. Now, let s look at adapting your core real estate skills throughout the phases of the transaction to build your confidence and effectiveness in serving the global real estate market. 64

71 4. Serving the Global Market 65

72 Global Real Estate: Local Markets In This Chapter Adapting your core real estate skills Presenting your value proposition Using Internet tools to build relationships and prospect Qualifying and serving foreign clients and customers How to use the information in this chapter Adapt your core real estate skills and knowledge base to serve the global market Gain confidence to serve an international clientele Develop a standardized process for qualifying clients and customers How do other real estate professionals become part of the global real estate market? How do they gain the connections and the confidence to serve an international clientele? What skills and knowledge do I need to succeed? Do others get involved in global real estate and then work at becoming more expert? Global real estate can be an exciting, adventuresome experience that creates opportunities for meeting people from around the world and often opportunities for travel to other countries. Many real estate professionals find the global specialty personally rewarding as they make friendships and grow in new areas. Being part of an international network means worldwide exposure for your listings and your services. In this chapter we will look at how to build on your foundation of core skills to serve the global market, differentiate yourself, and enrich your value proposition. Although you may need to add to some skills to your knowledge toolbox, such as currency and area conversions (covered in Global Real Estate: Transaction Tools), your core real estate skills can be adapted to serve foreign clients and customers. 66

73 4. Serving the Global Market 67

74 Global Real Estate: Local Markets Adapting Your Core Real Estate Skills Real estate professionals who serve the global market use the same real estate skills as you. By adapting the real estate skills you already have and deepening your economic and cultural literacy, you can participate in global real estate business too. Regulatory Knowledge Clients from other countries typically expect the practitioner to be a primary source of objective information on federal, state, and local laws and regulations. The ability to discuss and explain laws and regulations reinforces the value you bring to the transaction and your reputation as a reliable information source. Market and Product Knowledge The global specialist s market and product knowledge must encompass a full range of property types and values as well as all aspects of the market and surrounding area. You need to know about the range of property types available for sale and rent in the market and be able to help the client evaluate investment values. This requires comprehensive knowledge of the market, community, demographics, and local cultures. And sophisticated buyers and sellers expect the specialist s level of real estate knowledge to be equal to or surpass their own. Financing Access to mortgage financing is a significant obstacle for foreign buyers. Proving creditworthiness is problematic because the way that other countries collect and report credit history and financial data may not match up with U.S. lenders underwriting requirements. The real estate professional should be sensitive to this problem. You could offer information on lenders who are willing to make loans and offer examples of how other buyers have handled financing. 68

75 4. Serving the Global Market Networking The real estate professional s network is essential to making and receiving referrals, and this is also true for the global specialist. In addition, however, to the traditional referral base, your network needs to encompass experts and service providers such as immigration attorneys, foreign exchange brokers, property managers, commercial real estate professionals, travel agents, housekeepers, landscapers, and so forth. Strategies for network building will be discussed in detail in the next chapter. Presentation Skills Sales presentations need to include the merits of the property and destination as well as the investment value of the property compared to other areas. You should strive to communicate informatively rather than persuasively. Communication and Listening For the global specialist, communication must overcome the challenge of distance, culture, and sometimes language. Communication approaches must be adaptable for a range of clients, from the retiree purchasing a property for a family gathering place to the investor or group of investors purchasing multiple properties. As covered in the previous chapter, crosscultural skills are essential whether you are speaking or listening. Although foreign language proficiency is an advantage, you don t have to be a fluent speaker to participate in the global real estate market. But do make an effort to learn a few key words and phrases. Investment Knowledge If asked to compare real estate to other investments, a real estate professional must be careful not to offer investment advice in violation of SEC regulations. As we learned in Chapter 2, even though the singlefamily home is the most frequently purchased type of property, many buyers consider it both a personal residence and an investment. Therefore, the real estate professional must be able to gather relevant information and compute basic financial ratios so that clients can make informed decisions. Financial analysis is more complex for commercial 69

76 Global Real Estate: Local Markets real estate, and commercial investors will expect to see detailed financial projections. Patience Experienced real estate professionals attest that it takes time to develop a global clientele and initial transactions may be small. Once established, however, foreign clients will turn repeatedly to the same practitioner for their real estate needs and refer others. Additional, and larger, transactions will likely follow, just as with loyal domestic clients. Fiduciary Duties Of course, your state s guidelines for fiduciary duties to clients also apply to foreign clients. The global specialist, however, cannot assume that a foreign prospect realizes the significance of agency representation or understands whose interests the real estate professional must uphold. Global specialists must be prepared to explain agency relationships and also know how much they are willing to do without a signed agency agreement. Customer Service Serving the global market means providing a wide range of customer services and handling aspects of the transaction, such as paperwork, that U.S. buyers or sellers would ordinarily handle on their own. In fact, customer service often is the key to creating the global specialist s market distinction, demonstrating and winning client loyalty, and gaining valuable future referral business. Customer service must be flexible to work with clients and customers from diverse cultures and nations. Spontaneity and flexibility are essential. Client Loyalty It is important to demonstrate your loyalty to the client, keeping in mind your agency obligations. 70

77 4. Serving the Global Market Marketing Marketing efforts for the global specialist are complicated by the elements of distance and culture. Distance, in particular, impacts the global specialist s marketing efforts. Knowing where and how to focus marketing efforts and which approaches to employ for maximum impact may involve some trial and error. Technology Use Internet access, social media presence, and robust phone technology are musts. Savvy clients and customers expect the practitioner to be as up to date as they are in the use of social media, , texting, and websites. A social media presence, such as Facebook, provides a chance for prospects to get acquainted and check you out before moving forward with a relationship or making inquiries about properties. Other real estate professionals are part of your social media sphere too. For example, you can use social media to find out more about other members of the CIPS network or to screen potential members of your team, such as attorneys and accountants. You can take advantage of technology tools to make your website userfriendly in other languages. For example, Google Translator offers free online translation tools for 71 languages. Instant translators can be downloaded and added to your website. Tax Issues Global specialists must know about the taxation of real estate owned by foreigners, particularly properties purchased as investment and rental properties. Important areas of federal taxation are discussed in the CIPS course Global Real Estate: Transaction Tools. Foreign clients and customers will look to the specialist for guidance and to alert them when consultation with a tax expert is needed. Value Proposition Your value proposition consists of the characteristics services, experience, specialty that differentiate you from your competitors, expressed as customer service. Present your value proposition in an informative way, not with a sales approach and never as a hard sell. 71

78 Global Real Estate: Local Markets REALTORS should emphasize the Code of Ethics they commit to. Provide references and testimonials and examples of other global transactions. Highlight the team of professionals who assist you and international offices and affiliations. Provide written materials, translated if possible. Negotiation and Decision Making Americans usually approach negotiations as a win-win proposition but not all cultures do. The practitioner must be attuned to negotiation styles of various cultures and find ways to reconcile differing approaches. In the case of foreign investors, contact and communication with the buyer may be through intermediaries who are not the decision makers. The specialist must work effectively with these transaction gatekeepers and help them fulfill their roles in order to bring the transaction to a satisfactory conclusion. Property Presentations Provide detailed market information on local, state, and regional levels and substantiate what you say in printed form. Provide maps of the market, county, and state, and photographs of the city, neighborhood, and property (aerial photos if available), and take the extra time to clarify terms and procedures. Address every characteristic the client has indicated to be important. Qualifying Foreign Prospects Global practitioners attest that the success of qualifying a client depends on how the relationship has been established and how well it has been defined. Knowledge of how business relationships are established in the client s home culture as well as the traits that are valued will help you form a productive relationship with a prospect. As with any real estate transaction, the practitioner must use questioning skills to determine a prospect s objectives, and also determine if the opportunity is worth pursuing. Articulating and focusing a client s objectives is often an ongoing process. Following is a checklist of information for qualifying a foreign prospect. What questions would you ask to obtain the information? 72

79 4. Serving the Global Market Qualifying Unsolicited Parties Just as in domestic practice, there are window shoppers in the global market; they want free information and have no intention of engaging your services. How can you handle this situation? In domestic practice, experienced practitioners would advise you to move quickly from small talk to fact finding by asking a series of probing questions. In global real estate, although you can use your core real estate skills for making an initial assessment of a prospect s intentions, it is important to maintain sensitivity to establishing a relationship. Prospects from lowcontext cultures may be comfortable answering the fact-finding questions that practitioners ask to qualify prospects. When a highcontext culture is involved, probing questions may be viewed as too intrusive and assertive. If the prospect is not in a hurry or needs to think about it or gives any similar responses so familiar to real estate practitioners, try to distinguish between no hurry excuses and real concerns. Foreign prospects have all of the same misgivings as domestic clients plus the uncertainty of buying property in a foreign country. Look at the questions contained in the following checklist. How could you rephrase some these questions for high- or low-context cultures? Notes: 73

80 Global Real Estate: Local Markets Checklist for Qualifying an International Client What role and responsibilities does the prospect envision for the real estate professional? How long will the relationship last? Notes and Comments Why does the prospect want to purchase real estate in a foreign country? What is the extent of the prospect s experience with foreign real estate? Prospect s knowledge of the local area? Investment objectives and requirements? Investment magnitude and structuring? Financial performance criteria? Property type and characteristics, location? Is the prospect considering other locations? Transaction timeline? Starting date for search? Closing deadline? Project completion/move-in date? Who else is involved in making decisions and how are the decisions made? What are the channels of communication, reporting, and feedback? Communication method preferences ( , social media, phone, text, etc.)? Has anyone else in your business network worked with the prospect? Cash deal or financing? Financing and structure of previous investments? Where is the money and in what currency? How will the transaction funds be transmitted? How will the broker be paid? 74

81 4. Serving the Global Market Real Estate Practices Around the World Real estate practices vary widely around the world. When you are working with foreign buyers and sellers in your hometown market, knowledge of different practices will help you be sensitive to your client s expectations and concerns. If you make a referral to a practitioner in another country, this awareness will help you prepare your client and monitor the transaction. Property Marketing Although franchises and real estate associations may offer property listing websites, the multiple listing service and agent cooperation common in the United States, Canada, and some European countries do not exist, or are in development stages, in other countries. For example, Vietnam s Ministry of Finance, striving for greater market transparency, created property trading floors and regulations requiring all property transactions to take place through these public access trading floors. However, showing how hard it is to change long-standing business norms, only a small percentage of transactions actually occur through the trading floors, many of which have closed down during declines in the market. 6 Cooperation between real estate professionals also runs the gamut from the U.S. MLS blanket offer of cooperation to none at all sometimes referred to as pocket listings. Co-brokerage is sometimes expected; under this arrangement the practitioner co-broker owns the client s business and expects a share of remuneration for any transaction. Don t confuse co-brokerage with referral fees or cooperation. An indispensable resource for marketing your property at the global level is Realtor.com/international. Clients and customers can search for properties in over 45 countries in 11 languages. 6 Hanoi s Real Estate Trading Floors Have Tough Year, Hanoi Times, 75

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83 4. Serving the Global Market Attorneys Attorneys play a larger role in U.S. real estate transactions than perhaps anywhere else in the world. International clients, however, are accustomed to working with real estate professionals, often to the exclusion of attorneys. Therefore, suggestions to consult legal counsel must be stated quite tactfully because involvement of an attorney may signal problems with the transaction or a breach in the trust relationship. It may be necessary to explain that consultation with an attorney is standard procedure for U.S. real estate transactions and in the client s best interests. Foreign clients may be surprised by the volume of documentation lawyers impose and the degree to which they are involved in and influence the selling and negotiating process. Notary In the United States the role of the notary is generally to authenticate signatures on official documents, and qualifying as a notary is uncomplicated. It is quite common for the secretary in a legal firm or a bank employee to serve as notary, and the service is offered for a minimal fee or free as a customer convenience. In other countries, the notary plays an integral part of the transaction process. The notary may be responsible for conducting title search, holdings funds in escrow, registering property titles, maintaining title records, handling transaction settlement procedures, and disbursing transaction monies. For example, in Mexico the notario must hold a law degree and be appointed by the state governor. The notario is responsible for registering property titles, assuring taxes are paid, discovering property liens, and conducting title searches. In Germany a notar draws up the contract between buyer and seller, handles disbursement of transaction funds, and initiates the application for the land title register the Grunchbuch. As might be expected, in countries where the notary plays a significant role in the transaction, fees for their services can add significant cost to a transaction. Mexican notario fees range from percent of the purchase price depending on the size of the transaction. German notar fees typically range from percent of the purchase price. 77

84 Global Real Estate: Local Markets Notary Characteristics and Responsibilities Common Law (United States, United Kingdom) Characteristics Civil Law (Other Countries) Little formal training or education requirements Often bank employees, legal secretaries Minimal or no fee Highly-trained and licensed legal professional, usually an attorney May be an appointed public official Fee can add a significant cost to a transaction Responsibilities* Verifies that the signer understands the contents and purpose of the document Verifies that the signature is that of the signer Verifies that the document was signed willingly Draws up contract between buyer and seller Conducts title search Discovers property liens Holds funds in escrow Ensures taxes are paid Handles transaction settlement procedures Disburses transaction monies Registers property titles Maintains title records Assists in the formation and registration of companies Assists in estate planning * In countries where the notary plays a significant role in the transaction, specific duties will vary. Those listed in this table are examples. Real Estate Licensing Licensing standards for real estate professionals vary widely around the world. Some countries, such as Mexico, Spain, and Thailand, do not require a license. Others set very high qualification standards, such as Sweden, which requires two years of university-level training. Countries 78

85 4. Serving the Global Market with licensing requirements may allow practice within the bounds of province or state, similar to the United States, or nationwide, such as the Netherlands or Poland, which allow the licensee to practice anywhere in the country. Some practitioners think that if a country lacks licensing any real estate professional can go there and conduct real estate business. Even in nonlicensing countries, regulations may require legal residence, a work permit, formation of a corporation, and other conditions. For example, Costa Rica does not have licensing for real estate professionals, but requires legal residency in order to conduct business. Real estate professionals who want to transact business in another country should plan to work with a local partner on a referral basis. Commissions Negotiable commissions and fees are fairly common worldwide. As in the United States, the European Union countries are sensitive to antitrust and price-fixing violations. There are, however, a few exceptions amongst the world s real estate markets. For example, in Brazil state statute determines real estate commissions. The Republic of Korea sets maximum amounts based on the value and type of property general houses, luxury houses, and commercial properties. Some countries impose a service or value-added tax (VAT) on real estate commissions. When a commission is paid and by whom also differs around the world; in some countries the practitioner receives some or all of the commission when at sales contract signing. Generally, U.S. remuneration levels tend to be higher than in other countries. Find out how much a client knows about commission practices by offering to explain how real estate professionals are compensated. Foreign buyers may be pleasantly surprised to learn that U.S. sellers typically pay the real estate professional s commission. Property Records As author Hernando DeSoto so eloquently illustrated in the Mystery of Capital, reliable property titles transform real property into capital. Developed countries enjoy reliable, accessible, and increasingly computerized property records. But even among developed real estate markets, the location of records may be municipal, state or provincial, or federal. Registering the change of ownership could be the responsibility of the owner, a notary, the real estate professional, or other officials. In 79

86 Global Real Estate: Local Markets some cases the official record keeper records the transaction but not an actual exchange of titles. You can help your foreign clients understand the process and procedures in your market. You can also make sure clients you refer abroad have a clear understanding of how and by whom their ownership will be recorded. Title Insurance The issue of title insurance relates closely to the issue of reliable property ownership records. U.S. lenders typically require title insurance as a condition for mortgage approval, but that is not the case in all parts of the world s real estate markets. Title insurance, which has been around in the U.S. market since the 1940s, is rapidly expanding as a result of the globalization of economies and real estate markets. As real estate markets open up in countries where spotty record keeping makes establishment of irrefutable titles difficult, title insurance provides a safety net for the owner s possession and use of the property and to the lender s security interest. Two leading international title insurance companies are First American Title Insurance and Stewart Title. Title insurance is even more needed in countries where title defects arise from lack of records and unclear chains of ownership and inheritance, among other problems. A dramatic illustration of its benefit occurred during the 1990s in Punta Banda on Mexico s Baja coast. The location of the luxury coastal development had two major problems: The land was in a restricted zone in which foreigners could not own property and the site was ejido (farm collective) land tied up in a dispute among members of the cooperative. After protracted and unsuccessful litigation, the Mexican government evicted the homeowners without compensation. Foreign clients may feel that title insurance is an unnecessary expense given the reliability of U.S. land registration records. Foreign attorneys may advise clients that title insurance is not needed. For your U.S. clients seeking to purchase property in other countries, it safeguards their ownership interests. In both cases, the real estate professional can help by explaining the function and importance of this coverage and helping clients find reliable insurers. Document Authenticity How do you know that documents presented by foreign clients and customers are authentic? How can your clients prove the same to foreign authorities? Foreign consulates around the world can provide a certificate of authenticity known as an apostille, which serves this 80

87 4. Serving the Global Market purpose. All 1961 Hague Convention signatory countries ( accept the apostille as proof of authenticity. In the United States, the federal State Department provides this service through the Office of Authentications ( and processing can be accomplished through the mail. Documents that might require authentication include company bylaws, powers of attorney, trademarks, diplomas, transcripts, distributorship agreements, articles of incorporation, good standing certificates, home studies, letters of reference, and similar. The apostille, however, only attests to the authenticity of the document; it does not assure the accuracy of the content. Members and Non-members of the Apostille of The Hague Blue: Member, Light Blue: Non-member, Red: Convention not in force Source: Wikipedia; public domain Apostille Issued by Norway 81

88 Global Real Estate: Local Markets Does It Have to Be in Writing? Agency Agreements Reluctance to sign an agency agreement is common around the world. In addition to a dislike for signing contracts, foreign prospects may avoid signing exclusive agreements because they believe that such agreements limit access to the entire market. It may be necessary to explain the operation of a multiple listing service and demonstrate how it provides access to all listings and reaches a wide audience of buyers. A comparison of client- and customer-level services can demonstrate the advantages of agency representation. Finally, you must establish boundaries for how much you will do without the protection of a signed listing or representation agreement. Some real estate professionals solve this dilemma by offering buyers a trial-basis client-for-a-day agreement. Contracts End or Beginning? U.S. real estate professionals know that a signed contract for purchase of a property is the end of negotiations. The contract terms provide the roadmap for the transaction and specify a limited number of contingencies that allow modification or cancellation of the contract. Other cultures view a contract not as the end, but the beginning of forming a business relationship and negotiating the transaction s details. High-context cultures often have a more elastic view of contracts. Foreign clients and customers may view the commonly used fill-in-the-blank boilerplate contract as cursory and consequently unbinding. Although there is no intention to be disingenuous, they do not necessarily expect to abide by a boilerplate contract. Some will sign a contract because they are asked to do so or because they do not want to offend anybody or lose face. When a conflict arises or circumstances change, they will default or expect to renegotiate. In some cultures, it is assumed that any agreement may be changed due to conflicting demand, particularly if that demand comes from a superior or a relative. Consider that in England an accepted sales offer does not necessarily mean the seller is committed to a buyer. Before closing, a buyer who offers a higher price may purchase the property by a practice known as gazumping. A relationship built on trust and mutual respect combined with full, candid pre-contract communication avoids misunderstandings and costly problems. For example, in the United States enforceable contracts must be rendered in English, but that does not preclude providing translated versions of contracts and agreements for client reference. 82

89 4. Serving the Global Market Are We Speaking the Same Language? Difference in terminology can complicate communication, even among people who share a common language. Following are some real estate terms commonly used in English-speaking countries United States, Canada, U.K., India, and Australia. Match the term in the left column with its counterpart in the right column by writing the corresponding number in the blank space. Example 1 Savings and Loan (U.S.) Building Society (U.K.) 1 2 Valuation Report (U.K.) Earnest Money (U.S.) 3 Flat (U.K.) Conditions of Sale (Australia) 4 Exclusive Authority (India) Leverage (U.S.) 5 To Let (U.K.) Trust Account (Australia) 6 Full Status Mortgage (U.K.) Lounge (U.K.) 7 Insulation (U.S.) Model Home (U.S.) 8 Holding Deposit (India) Apartment (U.S.) 9 Benefit Period (U.K.) Seller (U.S.) 10 Bailiff (U.K.) Mortgage Sale (U.K.) 11 Serviced Apartment (India) Exclusive Agency (U.S.) 12 Sheriff s Sale (U.S.) Real Estate Agent (U.S.) 13 Homebuyer s Report (U.K.) Inspection Report (U.S.) 14 Living Room (U.S.) Sheriff (U.S.) 15 Vendor (Australia) Appraisal (U.S.) 16 Estate Agent (U.K.) Rock Wool (U.K.) 17 Gearing (India) Amortization Schedule (U.S.) 18 Contingency (U.S.) Conforming Mortgage (U.S.) 19 Display Home (Australia) Furnished Apartment (U.S.) 20 Escrow (U.S.) For Rent (U.S.) 83

90 Global Real Estate: Local Markets Key Point Review By adapting the real estate skills you already have and deepening your economic and cultural literacy, you can participate in global real estate business. Clients from other countries typically expect the practitioner to be a primary source of objective information on federal, state, and local laws and regulations. Access to mortgage financing is a significant obstacle for foreign buyers. Proving creditworthiness is problematic because the way that other countries collect and report credit history and financial data may not match up with U.S. lenders underwriting requirements. Your state s guidelines for fiduciary duties to clients also apply to foreign clients. Your value proposition consists of the characteristics services, experience, specialty that differentiate you from your competitors, expressed as customer service. Present your value proposition in an informative way, not with a sales approach and never as a hard sell. In presentations, you should strive to communicate informatively rather than persuasively. The success of qualifying a client depends on how the relationship has been established and how well it has been defined. Suggestions to consult legal counsel must be stated quite tactfully because involvement of an attorney may be perceived as problems with the transaction or a breach in the trust relationship. Title insurance is essential in countries were title defects arise from lack of records and unclear chains of ownership and inheritance, among other problems. High-context cultures that value relationships and face-saving behavior frequently have a more elastic view of contracts. The Next Chapter We have looked at adapting behavior and core skills to serve a global real estate market. But how do we reach out and make contacts with prospects and other real estate professionals? The next chapter looks at networking the key ingredient for global real estate business success. 84

91 5. Networking Power 85

92 Global Real Estate: Local Markets In This Chapter Networking as a business strategy Starting a business roundtable and building your team Integrating social media Facebook, blogging, websites, Internet tools and apps Referral best practices Will local business lead you abroad? Purposeful travel How to use the information in this chapter Derive maximum professional benefit from business and personal foreign travels Build up a network of contacts that can lead to referral business Is Global Networking Different? As a real estate professional, you network every day. How is global real estate networking different? You may think, If I don t speak another language or have the money to travel, how can I be part of the global real estate market? In this chapter we ll look at how you can begin at home in your local market by parlaying your own interests and affinities. When you focus your attention, possibilities appear. If you can afford to travel, to attend events or independently, an even wider world of contacts can quickly open up. Networking as a Business Strategy Successful networkers know that good networking is built on the premise that the more you give, the more you will receive. Give something to people without expecting anything in return. Be a willing resource. See other [real estate professionals] as colleagues, not as competitors. 7 7 Adapted from Network and Referral Systems, Women s Council of REALTORS. 86

93 5. Networking Power An Effective Networking Strategy You can start by making a plan for networking. A strategic plan for networking makes it a measurable activity, focuses your attention, and provides a rationale for resource allocation. Time You must make the time and commit to a time frame. Effort In actual networking and also in tracking progress and evaluating results. Money You must invest some funds up front and have faith in the future benefits, but be clear about why and how you are spending the money. Focus Who will be the target of your efforts? What segment of the market do you plan to capture? Plan Set goals, outline action steps and time frames, and identify measures of success. In Chapter 2, we looked at statistical profiles for foreign and immigrant buyers in the United States. Planned networking transforms this data into market knowledge, actions steps, contacts, and transactions. 87

94 Global Real Estate: Local Markets Finding and Making Contacts Building a global referral network starts with a look at trends in your local market. Are buyers from a particular country moving into or investing in your market area? Are buyers and investors in your market particularly interested in an area in another country? If the answer to either question is yes, consider making contacts in that country a focal point for your networking planning. The type of investments will also determine what contacts you need to make. For instance, a commercial real estate market with a high level of foreign investment might require you to make connections with government trade authorities and business groups. Also, assess your own interests. Do you have a special interest in another country, perhaps through your personal travel or family connections? Make a plan to develop personal contacts in countries that have good market potential and are of particular interest to you. Start a Business Roundtable and Build Your Team The most effective way to build your own network is to become part of someone else s network and you don t have to travel to do it. Include local business owners in your networking plans. Business owners want to know about market trends that impact their businesses too, particularly in resort locations dependent on seasonal traffic. Plus, business owners who serve the same niche market are a source of referrals. For example, if your interest is a particular culture or country, stay in touch with the local businesses that share the same clientele. Provide links on your website to local businesses that serve your niche. Pay a personal visit to the business owner and offer to provide a monthly or quarterly market update. An effective method for business networking and team building at the same time is forming your own business roundtable. You could start by inviting a few key business owners (attorneys, contractors, recreation services, lenders, developers, and builders) to a breakfast or lunch. Be upfront about your aim to exchange client leads and build each other s businesses they want to reach the same clients and customers that you do. Your business roundtable can be the first source for advice when a transaction requires special expertise. Tap into their knowledge and expertise by inviting them to be guest bloggers for your website or columnists for your newsletter. 88

95 5. Networking Power? Discussion Question Based on the Country Assessment Model, are indicators positive or negative for your market area? 89

96 Global Real Estate: Local Markets A Networking Information System A system for organizing information is part of an effective network. A typical system might include: Market Information: surveys, market summary sheets, notes on contacts made, maps. A useful tool for condensing information on a market is to create a one-page hot sheet summary of key information. Prospects and clients: A record of contacts with phone numbers, addresses, addresses, copies of correspondence and conversation summaries. Reminders: dates for follow-up, call-back times, future convention and meeting information. Maps: local, regional, national maps, atlases, aerials, plats, and surveys. Spheres of influence: information on organizations and connections, such as societies, clubs, embassies, business groups, companies, and banks. News: updates on real estate markets and issues. Note if the issues discussed in the article are favorable for global real estate transactions. Also, note interesting practices or events to monitor. References: websites, magazines, trade journals, books, and newspaper clippings, filed by title, subject, or topic. Read websites, newspapers, and magazines from other countries to keep up to date on the current political, business, and economic climate. Trends: organized by date or headings for local and global trends, changes in tax, property ownership, currency, and immigration laws. Whatever system of organization you use, you should: Keep it easily accessible so that you will use it. Keep it current by discarding outdated material and consider if you made good use of it. 90

97 5. Networking Power Social Media Connecting to Your Sphere s Spheres Social media sites such as Facebook, LinkedIn, and Twitter, among others, facilitate connections and provide a platform for the mutual exchange of information. These sites not only facilitate relationships within your spheres of influence but also reach multiple spheres of spheres. They enable prospects to learn about you before making contact, something that is very important for high-context cultures. How can social media help you network? 8 Provide a dynamic online presence and the ability for others to find you Facebook, LinkedIn, and Twitter profiles appear at the top of Google results Follow up on initial contacts made at conferences, events, and business trips to continue building a relationship Make your personal or professional connections visible to others Discover connections that might not otherwise be known Connect with others any time 24/7/365 Establish and participate in shared-interest communities Demonstrate your knowledge, professionalism, and value proposition by sharing information Connect with prospects from diverse backgrounds and demographic groups Consider the following tips as you use social media to network: Although it is important for your contacts to know that you are in real estate, avoid blatant attempts to sell yourself and promote your business. Limit connection requests to those you know, or be clear on why you want to get connected. Complete your profile to show people you are a real user and are invested in the social network authenticity is key! Include links to your blog and website within profiles so contacts can subscribe and share with others. 8 Adapted from Real Estate Marketing Reboot: Innovate>Relate>Differentiate, Real Estate Buyer s Agent Council (REBAC) of the National Association of REALTORS. 91

98 Global Real Estate: Local Markets? Discussion Question How do you use social media in your business? 92

99 5. Networking Power Largest online social network 1.11 billion users worldwide Both business and personal Share photos, links, videos, blog posts Network is called friends Professional social network Find, meet, and connect with qualified professionals Receive recommendations Invite others to be part of your network 140 character limit on tweets Network consists of followers Hashtags (e.g., #realestate) allow users to find tweets on similar topics outside their network Share photos and videos educational, entertainment, and marketing Link to your blog or website Publish to the world or restrict access Google+ United States Instagram United States LiveMocha United States LinkExpats Worldwide Collaborative photo management and sharing site Upload and tag photos and link to your blog or website Photo repository for bloggers MiGente Latin America Myspace United States Qzone China Renren China Users pin images on pinboard to reveal interests, events, and hobbies Images are often grouped by theme Other users can re-pin and like images and follow users Sina Weibo China Vine United States VK Russia WeChat China Source: Partially adapted from Real Estate Marketing Reboot: Innovate>Relate>Differentiate, Real Estate Buyer s Agent Council (REBAC) of the National Association of REALTORS,

100 Global Real Estate: Local Markets Global Perspectives, Build a Better Website 94

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104 Global Real Estate: Local Markets Referral Networks Global real estate practitioners attest that the big payoff from networking lies in the give and take of referrals. A successful referral reinforces the referring agent s value as a trusted real estate advisor and earns commission income for the receiving agent without the expense of prospecting. Plus there is the possibility of future business for both practitioners from clients future transactions and recommendations to family, friends, and colleagues. Even if your firm participates in a referral network, developing a network of personal contacts within that framework will facilitate the referral process. NAR Global Network of Cooperating Associations NAR s Global Network of Cooperating Associations includes more than 80 national real estate associations in more than 60 countries. Every year NAR hosts more than 2,000 global real estate professionals at national meetings as well as delegations and individuals. Argentina Australia Austria Bahamas Belgium Belize Brazil Bulgaria Canada Chile China China-Hong Kong Colombia Costa Rica Czech Republic Denmark Dominican Republic Ecuador El Salvador Finland France Germany Greece Guatemala Honduras Hungary India Indonesia Ireland Israel Italy Jamaica Japan Korea Latvia Lebanon Malaysia Mexico Netherlands New Zealand Nicaragua Norway Panama Paraguay Peru Philippines Poland Portugal Romania Russia Singapore Slovak Republic South Africa Spain Sweden Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom Uruguay Venezuela Vietnam 98

105 5. Networking Power CIPS Network The Certified International Property Specialists (CIPS) Network supported by the National Association of REALTORS provides a readymade network for making referral contacts. The network includes over 2,000 real estate professionals around the world. Network members belong to one of the cooperating associations in the countries with which NAR maintains formal ties. CIPS Network members share your awareness of global business opportunities and want to expand their business networks too. The CIPS Network directory at is a good first step when searching for a referral partner. Best Practices for Making a Referral Determine the area that best meets client needs, price ranges, and types of property. Research market dynamics is it a buyers or sellers market? Check your office policies is your firm part of a referral or franchise network? Research major firms in the market through the CIPS Network. Select 3 5 real estate firms that represent the type of property your client wants and can offer the level of service you. Prepare for agent interviews by organizing information about your client and writing down the questions you want to ask. Make contact with the firm s manager (be sure to check time zones) and ask to speak to the firm s manager. Inquire about local market conditions and state that you have a potential referral. Ask if the firm would be able to pay a referral fee. Provide a few details about the client and ask which agent in the office would be best suited for the client and the type of transaction. Make an initial contact with the individual agent to schedule a convenient time for a productive, in-depth discussion. If the firm seems like a potentially good match, the next step is an in-depth agent-to-agent conversation about the transaction and the client. The purpose of this conversation is to get a feel for the agent s style in handling the transaction and to set expectations. 99

106 Global Real Estate: Local Markets During the interview, ask yourself: Does the agent s approach to the transaction seem consistent with my own way of doing business? Can I build rapport with the agent? Will the agent have time available to spend with the client? Does it seem likely that the agent will communicate at important points in the transaction? Will the agent fulfill my expectations and those of my client? Finalize your selection by reviewing your selection criteria and choose the agent who best matches your standards of service and competency. Discuss compensation issues. Ask, how much would this transaction be worth to you? Share specific client information with the receiving agent. This is the point at which you firmly establish your partnership with the receiving agent. Brief your partner completely about the client s needs and wants so that your clients will not feel like they have to repeatedly explain themselves. Exchange information about real estate transaction procedures. Set expectations for how and when you will communicate. Document the specifics (including the fee and how it will be paid) of your relationship. Prepare the client by describing your contact with the receiving agent and the agent s firm, background, and experience. Describe the steps you have taken to facilitate the referral. Brief your client on market conditions as well as financial and real estate ownership procedures and requirements. Hand off client to receiving agent. Introduce your new partner to your client by phone conference. Monitor the transaction. Follow up with your partner and client if you do not receive expected communications. At minimum, follow up at least every 90 days. A good time to follow up with the client is when you receive a communiqué from the receiving agent. Ask if the transaction is progressing as expected. When the transaction is complete, be sure that the client knows you are available for and interested in handling future business. 100

107 5. Networking Power Questions to Ask When Making a Referral Is it a buyers or a sellers market? Does your firm accept referrals and pay referral fees? Do you represent buyers and sellers? Sellers only? Buyers only? Is this referral interesting to you? Does the firm handle the type of real estate involved? How much would this business be worth? Are there any restrictions on foreign ownership of real estate? Are there any special procedures or documents required of foreign real estate buyers? Are there taxes or service charges on commissions and real estate transactions? Are there any recent developments in regulations? Will other real estate professionals be involved in the transaction? Will a notary or attorney be involved in the transaction? In what capacity? Do you have an address? A website? Facebook page? What is the best time to call you? How and when will contact be made with the client? Do you speak the client s language? Will an interpreter be needed? Have you worked with clients from (country) before? Questions to Ask When Receiving a Referral What citizenship and residency does the client hold? Is the client a buyer or seller and will he or she be present? What type of property and price range is involved? What is the client s time frame and reason for buying/selling? Will local financing be applied for? When and how should contact with the client be established? Do you have an address? A website? Facebook page? Have you referred a client to this country or market before? What is the client s extent of knowledge regarding real estate transactions in general? In this market in particular? Will the client expect exclusive representation or expect to work with other agents in the market? Will it be an open or exclusive listing? What language does the client speak? Will an interpreter be needed? (After the transaction) Would you be interested in working together on future referrals? 101

108 Global Real Estate: Local Markets Best Practices for Receiving a Referral When contacted by the referring agent, discuss the client situation and gather information about the client s requirements as well as the referring agent s expectations. Discuss market dynamics and provide information about your firm s services. Ask questions that can help you determine how to best meet the client s needs. Accept the referral if you feel you can meet or exceed the client s expectations and have formed a good working relationship with the referring agent. Agree on a referral schedule of events and fee. Obtain detailed client information from the referring agent regarding the client s needs. By asking questions and making suggestions, you can collaboratively brainstorm a successful strategy for the client. Exchange information on real estate transaction procedures and regulations. Contact the referred client. Demonstrate your understanding of the client s needs and wants by summarizing your knowledge and asking specific questions regarding the transaction. Communicate with the referring agent at agreed times and as the transaction progresses. Immediately communicate the closing date when it is confirmed. Pay the agreed referral fee as soon as possible after the transaction closes. Treat your referral partner as you would your best client. If the experience of working with the referral partner was rewarding and worthwhile, remember to invite future referrals and reciprocate, if possible. The complaint most frequently voiced by referring agents is I tried to contact the other agent but no one replied to my s or returned my phone calls. If you do not know the other agent, check them out through the CIPS Network. If you do not want to accept a referral, inform the contacting agent. A referral of a buyer or seller is found business, an unreturned phone call or is lost business. 102

109 5. Networking Power Will Local Business Lead You Abroad? U.S. Expatriates Warm climates, low cost of living, and sometimes homeland ties increasingly lure U.S. retirees to foreign countries. Your next client may be looking to list or buy a second home in one of the following countries that welcome retirees with reliable pension incomes. Recipients of U.S. Social Security benefits may receive their monthly checks regardless of where they live. U.S. Medicare, however, does not reimburse expenses incurred outside of the United States. Panama Pensionado and Specific Countries Visa Program Panama s Pensionado Visa Program grants permanent resident status for retirees of any age. The program requires a retirement income or pension of US $1,000 per month plus US $250 for each dependent. Retirees must pass a medical exam in Panama. The program offers percent discounts on airfares, hotels, entertainment, restaurant meals, medications, hospital care, and doctor visits. Retirees may not work in a job that takes employment away from a citizen of Panama, but may own a business for which they do not perform work other than what would be expected of an owner (e.g., training employees). Another program allows immediate permanent residency for foreigners who move to Panama to invest in real estate or start a business or for a job. Still very new, the Specific Countries program expedites the process to obtain a permanent residency visa for expatriates from a list of 47 countries. Applicants must have a Panamanian bank account with at least a $5,000 deposit plus $2,000 for each dependent. Mexico Although Mexico does not offer special residency status for retirees, large communities of U.S. expatriates and retirees make Mexico their home. The FM3 visa status (Long-Term Non-Immigrant) permits long-term residency and requires only proof of financial self-sufficiency. The majority of foreign real estate buyers in Mexico are from the United States; Canada, Latin American, and European Union countries, particularly Spain, also have significant numbers of citizens who are residents of Mexico. People of Mexican ancestry are a large group of 103

110 Global Real Estate: Local Markets potential buyers, particularly those with family ties, who may want to return to their roots for their retirement years. Foreigners may not own real estate within 100 kilometers (60 miles) of a national border or within 50 kilometers (30 miles) of a coastline. In these restricted areas, ownership is through the fideicomiso, a Mexican bank trust. The bank serves as the owner of record and holds the deed in trust for the foreign owner beneficiary. The fideicomiso s term of 50 years can be renewed for additional 50-year terms. When terminated, the property is sold and the sale proceeds go to the trust beneficiary. The foreign owner of the property enjoys all ownership rights; the property can be sold, rented, pledged as collateral for a mortgage, and bequeathed to heirs who can receive the trust property by assignment and avoid a Mexican probate process. Belize Retire in Belize Program The Central American country of Belize offers warm climate and low cost of living in an English-speaking environment. Eligibility for the Retire in Belize program begins at age 45. The program requires a monthly income of US $2,000 and completion of a medical exam. There are no restrictions on foreign ownership of real estate. A resident who has been designated Qualified Retired Person may import personal effects and a vehicle free of taxes and duties. All income and receipts from sources outside Belize, whether related to a business, investments, or work performed, is exempt from taxes and duties. For information, go to India Non Resident Indian Incentives The Indian government views Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs), particularly those residing in the United States, United Kingdom, Hong Kong, and the Gulf region, as prime sources of foreign exchange and investment in real estate. The government increasingly encourages and offers incentives to NRIs and PIOs to strengthen their cultural and ancestral ties with India and invest in longterm ventures. Regulatory conditions are adapting to lower the barriers for purchasing real estate and making other investments. Foreign citizens of Indian origin may purchase residential real estate for personal use and commercial property, other than agricultural land. In order to attract high-income Indians back from their homes abroad, 104

111 5. Networking Power developers offer full-amenity communities known as NRI colonies. These developments from high-rise luxury condos to gated communities offer Western-style amenities, security, and services, and also provide an insulating layer between residents and harsher aspects of daily life. The Ministry of Overseas India Affairs publishes annual downloadable, detailed guides on investing in India; go to Malaysia Malaysia My Second Home The lush tropical beaches and cosmopolitan capital city, combined with a low cost of living, lure retirees and second-home buyers to Malaysia from Australia, Japan, Korea, Hong Kong, the United Kingdom, France, Canada, and other countries. Capitalizing on this trend, the national government offers the Malaysia My Second Home Initiative (MM2H) specifically for foreign retirees. Foreigners may own any number of residences valued at a minimum of MYR 500,000 (about US $124,000) for most states. If over age 50, the retiree must show proof of liquid assets of MYR 350,000 and an offshore monthly income of MYR 10,000 (limits higher for under 50). Once approved, the over-50 retiree must secure a deposit of MYR 150,000 or show proof of government-approved pension funds of MYR 10,000. From the second year onward, the retiree must maintain a deposit of MYR 100,000. Medical insurance is also required. The retiree may own a business or work part time under certain conditions. Visit Philippines Special Resident Retiree s Visa (SRRV) Program The Philippines SRRV program provides incentives and services to ease the transition for retirees. The program offers long-term residency status, exemption from income tax on pension and annuity income, merchant discounts, assistance with financial matters, and a 24-hour assistance hotline. Eligibility begins at age 35 with a sliding scale of deposit and income requirements based on age and citizenship. Age 50 retirees with a pension must maintain a US $10,000 deposit. Those without a pension must maintain a US $20,000 deposit. Individuals require a US $800 monthly income; couples require a US $1,000 monthly income. The deposit requirement is only US $1,500 for former Filipino citizens and former foreign diplomatic staff who served in the Philippines. Foreigners may own condominiums provided no more than 40 percent of the units are occupied by foreigners. Foreigners may buy a home, but not the land; 105

112 Global Real Estate: Local Markets the land is usually leased for 50 years with a renewal option for another 25 years. For information go to the Philippine Retirement Authority website at Purposeful Travel One of the best ways to meet other agents is participation in global real estate events, such as meetings, trade shows, and trade missions. Whether you combine business with pleasure travel is a personal and family choice. As one veteran global practitioner put it, Look at your strategy. You can book your vacation first and then work in your business or your business first and work in your vacation. Decide what is most important to you and take it seriously. Invest in your business. Getting the connections is what you want to accomplish. 9 Network builders include: Real estate association meetings Conventions Trade missions Sister city programs and events Seminars and education courses Your personal and business travels Trade Shows and Expositions As global real estate is increasingly practiced over the Internet and social media, the trade show may be the one time when business contacts have an opportunity to meet face-to-face. Trade shows offer networking, comparison-shopping, cost-effective sales contact, education, an opportunity for keeping an eye on the competition, and exposure to new ideas, products, and trends. For exhibitors, it is an opportunity to concentrate the sales staff in one location and market to decision makers as well as maintain market visibility and position. When selecting where to invest trade show attendance resources, the first question is: What is your business focus? Strategize how you will accomplish your specific objectives based on the show s advance information. 9 Timothy McFadden, The Adventure Continues, International Real Estate Best Practices: From the Classroom to Your Real Estate Business, National Association of REALTORS, 106

113 5. Networking Power Prepare a brief (one-minute) personal script that quickly communicates your goals to an exhibitor. Your personal script should answer the questions: What do you (your company) do? Why are you at the show/convention? What are you looking for? When you arrive at the show, check the on-site booth map against your preshow plan and verify booth locations. Visit must-see exhibits first. Exhibitors, who invest a lot of time and money, have their own objectives and will try to control your time and attention. Just remember that your own objectives take priority. When you approach a booth, look for everything that provides insight about the company from the professionalism and condition of the display to the attitudes of the booth attendants. You can also gain interesting information and insight by asking exhibitors, Why is your company exhibiting? How you present yourself says a lot about you and your company and not always the message you would like to convey. For example, when exchanging business cards, you will make a positive impression if you take time to chat for a minute and find out if you have anything in common with the other person. Your behavior demonstrates to observers what type of behavior is acceptable in your business; professional behavior and demeanor are best. Observe how other attendees and exhibitors are dressed; if they are dressed in business attire you should be too, if you want to present the right image. If you are attending the show with others from your company or association, plan to meet daily to maximize show coverage, avoid duplication, and learn about new products that you may have overlooked in preshow planning. If you really want to build your network quickly and receive priority treatment from vendors, initiate the follow-up yourself by sending a thank you note or , making a phone call, or connecting through social media. Exhibitors seldom hear from show attendees, so if you follow-up it will make a big impression. 107

114 Global Real Estate: Local Markets Major Global Trade Shows and Events AMPI Conference Mexico, CCIM Institute Spring and Fall Meetings USA, CIMI and ENBRACI Conference Brazil, Cityscape Global Colegio de Martilleros y Corredores Públicos del Departamento Judicial de San Isidro Argentina, Expo Immobiliaria ACOBIR, Panama, Expo Real Germany, FIABCI World Congress FNAIM s International Convention and European Forum Paris, Institute of Real Estate Management (IREM) Fall Leadership Conference USA, International Council of Shopping Centers (ICSC) National Conference USA, MIPIM Europe Cannes, MIPIM Asia Hong Kong, RECon Global Retail Real Estate Convention, Real Estate Investment World China (REIW) Shanghai, REALTOR QUEST Toronto, REALTORS Annual Conference and Expo USA, São Paulo Real Estate Week ww.convencaosecovi.com.br SECOVI Convention Brazil, Urban Land Institute (ULI) Events and Meetings Global, 108

115 5. Networking Power Trade Missions Real estate trade missions develop relationships, build networks, educate participants about other markets, and showcase development opportunities. By contrast, many industries and government organizations, including the U.S. Department of Commerce, understand the concept of a trade mission as an event during which business deals are transacted between companies. A real estate trade mission might more accurately be termed a study tour because it is a market- or country-specific trip focused on development of relationships and members business opportunities. Trade mission itineraries are a combination of business, social, and educational activities. Business development opportunities, however, must be the guiding force for planning trade mission activities. If the host association is assisting in planning, provide a general outline of the preferred schedule and be prepared to defer to the hosts on some matters. U.S. groups are more likely to be interested in building referral networks, while non-u.s. groups are more interested in facilitating foreign investment. However, common ground, such as identification of local partners, can be found, if both the visiting and host groups understand each other s objectives from the start. The most successful missions are those that give equal focus to both the traveling and host group s objectives. If you have an opportunity to participate in an inbound trade mission in your market area, you can make contacts without leaving home. In order for the trade mission to attract interest, it may need to include visits to other competing markets. The reactions of visiting participants will help you gauge the competitiveness of your market area in comparison to others. You will also have an opportunity to make contacts with real estate professionals in these markets. In addition to an understanding of global transactions, participants should have comprehensive market knowledge and the ability to discuss a range of property types. 109

116 Global Real Estate: Local Markets Reaching Across the Globe Interested in taking your business global without getting on a plane? Many United States based practitioners have forged close and lucrative ties with international clients in a steadily growing segment of the real estate business. The foreign buyers Connie Antoniou works with generally move to the United States for professional reasons. Whether she s establishing a connection with a corporate executive from Japan or helping a Russian hockey player recruited by the Chicago Blackhawks, her responsibility goes well beyond the mechanics of a transaction. You become their conduit, says Antoniou, CIPS, CRS, brokerowner of Hunter s Fairway Sotheby s International Realty in North Barrington, Ill. They don t know our ways, so they have to be able to trust you. That House Needs to Rock and Roll International buyers fall evenly into two main categories: those who will live in the home they buy and investors who will continue to live abroad. Antoniou s foreign clients who plan to live in the United States want newer, lowmaintenance, high-end homes, she says. That s partly because they don t know whom to turn to and don t feel they ll have time for renovations and repairs. They re moving to a place where they don t know many people, if anyone. And like any buyer, they re looking for qualities like good schools and close proximity to people they have something in common with. It s important to put yourself in their shoes from the outset, she says. CIPS instructor David Lauster puts it this way: Imagine being led blindfolded through an obstacle course by a stranger. That s how most first-time foreign buyers feel. Lauster is an international real estate expert who now helps the U.S. State Department with overseas property purchases. You, as their real estate guide, can make that obstacle course far less daunting by preparing them for the buying process, he says. For example, make sure you explain the role of attorneys in U.S. transactions and in your state. In many Asian countries, attorneys are associated with being in trouble, Lauster says. Since most foreign buyers are buying in the United States for the first time, their only frame of reference for doing business is whatever they have experienced in their own country, he says. To meet the unique circumstances clients face as they move from another country, Antoniou s brokerage offers a concierge service, finding everything from childcare to contractors for clients. She once found a justice of the peace for an impromptu wedding. International buyers almost always shop online first, and they ll sometimes buy without seeing the house first, say Antoniou. Her Sotheby s website is translated into 20 languages and allows buyers to search by lifestyle. Online, that house needs to rock and roll, she says. If they don t like the pictures and they re thousands of miles away, they re not going to come see it. Photos are so important that Antoniou has a staff videographer and photographer. The World s Most Transparent Process Without a doubt, we are the safest environment to purchase a property and ensure you own it. It s recorded at the courthouse and your ownership is protected, says Tony Macaluso of Palm Beach Gardens, Fla., who has been a CIPS instructor for 15 years. Macaluso and his wife Nancy, broker-owners of Portside Properties Inc., estimate that 30 percent of their business in the fourth quarter of 2012 was from international clients. Favorable exchange rates against the dollar have enabled bargain-hungry foreign buyers to 110

117 5. Networking Power get a lot more home for the money. Compared to Europe where the average apartment is 700 square feet, our properties are twice the size, and often for half the price, Macaluso says. Miami had 23,000 vacant condos at its peak inventory in Since then, most have sold, largely due to the eager lineup of international investors from Central and South America. And while Florida may be a mecca for Europeans and South Americans, Macaluso s not discounting the people of China. Today, there are at least a million millionaires in China, with an average age of 39, he says. They re young and rich and looking for alternative places to live and invest. China (including Hong Kong), Canada, Mexico, India, and the United Kingdom account for majority of international transactions in the United States. These countries dominate the market for a reason. For the first time in 2008, Canada s dollar hit par with the U.S. dollar. China has seen a proliferation of new trade agreements that favor Chinese investors, and the country s slower growth rate is still a robust 9.5 percent, remaining quite high compared to the 1.5 percent rate in the United States. Mexico has US $26 billion flowing into its economy from abroad, much of which comes from the remittances of migrant workers, many of whom are in the United States. Investing in real estate is great for individuals and for sovereign nations, says CIPS instructor David Wyant of Wyant Realty and Across Borders School of Real Estate in Ormond Beach, Fla. Real estate has its ups and downs, but it s never worth nothing. It s tangible, it holds its value, and it s around for a long time. States, banks won t even consider lending to such buyers. Five years ago, foreign buyers could provide U.S. lenders with letters from banks in their home country to verify creditworthiness and get financing, Macaluso says. It s not that simple today. In addition, some countries have laws that impose punitive fees and taxes on citizens who take assets out of their own country and invest them abroad. Thus, buyers from such countries may not want a bank or mortgage company back home making inquiries into their financial matters, Lauster says. The Chinese government, for instance, makes it very hard for its citizens to wire money out of the country. Some end up bringing bundles of cash with them, says Helen Tam, abr, CIPS, a Hong Kong native and a broker at Prudential York Simpson Underwood Realty in Raleigh, N.C. The best advice you can give international clients who want to obtain mortgage financing is to get their funds into a U.S. institution and season them for at least six months, Lauster says. Or they can open an account with one of the large international banks, such as HSBC, UBS, Standard Chartered, RBS, or Citi. It makes the verification of accounts simple, he says, particularly if the client goes to that same bank for a mortgage. By Erica Christoffer Adapted from Reaching Across the Globe, REALTOR Magazine Surmounting Financing Hurdles As hard as it is for many Americans to qualify for mortgages these days, the obstacles facing foreign buyers are even steeper. Since U.S. credit reporting bureaus do not accumulate credit histories on people outside the United 111

118 Global Real Estate: Local Markets Key Point Review An effective networking strategy requires commitments of time, effort, money, and focus. An effective method for business networking and team building at the same time is forming your own business roundtable. A networking information system includes: market information, prospects and clients, reminders, maps, spheres of influence, news, references, and trends. Social media sites offer opportunities to connect with people you would not otherwise meet and reconnect with people you ve lost touch with. NAR s global Network of Cooperating Associations more than 80 national real estate associations in nearly 60 countries. Every year NAR hosts more than 2,000 global real estate professionals at national meetings as well as delegations and individuals. Follow best practices for making and receiving a referral. Warm climates, low cost of living, and sometimes homeland ties increasingly lure U.S. retirees to foreign countries. Your next client may be looking to list or buy a second home in one of several countries that welcome retirees with reliable pension incomes. Trade shows offer networking, comparison shopping, cost-effective sales contact, education, an opportunity for keeping an eye on the competition, and exposure to new ideas, products, and trends. A real estate trade mission might more accurately be termed a study tour because it is a market- or country-specific trip focused on development of relationships and members business opportunities. The Next Chapter Ready, fire, aim! It s okay to do a transaction before you ve developed a full business plan for global business. Some practitioners get involved in global real estate as a result of their first experiences with foreign clients. But let s look at what might go into a business plan for global real estate business. 112

119 6. Planning > Action > Results 113

120 Global Real Estate: Local Markets In This Chapter Building global business confidence through planning Adapting core business planning skills Tapping REALTOR association resources and tools Quick-start planning and action Measuring results How to use the information in this chapter Formulate a plan and set goals in achievable increments Allocate resources Implement an action plan for integrating global business into your real estate practice As a real estate professional, you know the importance of developing and working a business and marketing plan and measuring the results. But what goes into a business plan for global real estate business? What should you do differently from your domestic real estate practice? You can start by adapting your core business planning skills and tapping into the resources available through the national, state, and local REALTOR associations. Planning Builds Business Confidence The process of planning can help a sales team coalesce around shared goals and buy into the allocation of resources. Even if you are on your own, developing a business plan sharpens your focus and decisionmaking skills. Although no hard and fast rules exist, a comprehensive business plan usually includes at least the following components: Description of the business and the market clients, customers, and properties An analysis of the competition who are they, what is their market share? 114

121 6. Planning > Action > Results Goals what do you want to accomplish? Financial projections sales volume, average sales price, gross commissions needed to meet goals Rationale for resource allocations time, money, sales staff Business development activities how will you accomplish your goals? Progress measurements what will you look at to measure results? What does success look like? Other plan components might include: Mission or vision statement Statement of core values and principles Your value proposition Service philosophy Business model Identify Your Market Niche The most authentic niche marketing flows from interests you share with clients and customers. Make a list of your interests and affinities. Your niche may be a current interest or one you want to develop. If you pick an interest your involvement does not have to be expert, but is must be sincere and real; you can t fake it. Be flexible you may have a market niche in mind, but be prepared to go where the market is taking you. Setting Goals Determining goals sets the direction for activities and resources. Setting some short-term goals will help you build on the enthusiasm and momentum created by course participation. Short-term goals could be to: Research foreign and immigrant buyers and sellers in your market area Assess association resources that can help you Increase your social media and website presence. 115

122 Global Real Estate: Local Markets Long-term strategic goals might be, for example, to: Reallocate resources to increase global business Add or expand services for foreign clients and customers Establish network contacts in the local or global market Develop relationships with foreign real estate professionals for the purpose of referrals. Remember, building a global practice takes patience. But experiencing the success of accomplishing short-term goals will motivate you to set longer-term and more complex ones. If your goals seem a bit vague at first, don t be discouraged. As your involvement in global real estate deepens, your personal vision of business success will gain sharper focus. Finally, you don t need a full business plan with detailed goals, objectives, actions steps, and time lines in order to get started. Try starting out with a few no-cost/low-cost steps like establishing a presence on Twitter, authoring a blog, contacting business roundtable partners, or participating in the state or local association global council and events. Observing what other international practitioners in real estate and other businesses do may help you set and articulate your own goals and action steps. As you develop your plan and goals, confer with your broker. Goals need to be in synch with your firm s direction, priorities, and value proposition. REALTOR Association Resources and Tools References to REALTOR association resources appear throughout this manual. To recap, some of the tools and resources available from the National Association of REALTORS are listed below: State-by-State International Business Reports Economists Outlook NAR Profile of International Home Buying Activity 116

123 6. Planning > Action > Results Local Market Assessment Case Studies Global Perspectives in Real Estate Newsletter REALTORS Annual Conference and Expo Global Alliances, Cooperation Associations Global Business Councils The Global View Blog Certified International Property Specialists (CIPS) Network For a comprehensive listing of business resources and services, visit Ask your state and local REALTOR associations what resources are available for developing global real estate business. Promoting a Property Globally At times, you may want to apply your business planning skills to marketing a particular property. There are some distinct differences between promoting a property particularly a large commercial or investment property locally or in the country and globally. The business plan for marketing a property globally usually includes the following components. Market profile A market profile also demonstrates that the real estate professional understands how the property fits into the big picture. County and local market data and state, regional, and national economic summaries (Your state, region, city, chamber of 117

124 Global Real Estate: Local Markets commerce, or convention and visitors bureau may be able to supply information.) If a property is in a secondary market, comparisons to and advantages over primary markets The ability for global clients to buy and sell in a market access is a major consideration Consider potential clients experiences in your market. What language do they speak? Have they visited before? Is this likely a first investment in your country or market? Property profile Provide detailed information, because it is difficult to foresee the buying criteria of an offshore buyer. Also, the property listing may be competing with alternative opportunities in other markets. A detailed profile allows the client to compare properties. The property s competitive standing with properties located outside the immediate market, region, state, or even outside the country Physical dimensions in measurements familiar to the client, such as square meters Promotion plan Advertising should promote your company not just a property. Global buyers are sometimes surprised at the degree to which some real estate professionals, particularly those from the United States, promote themselves rather than their firms. Advertising in the financial papers of targeted cities can be effective if it is done consistently and frequently. Global marketing efforts should be directed at developing long-term relationships rather than obtaining expected commissions. Smaller real estate companies should focus on institutional advertising that promotes the company and their local market expertise. This can create competitive advantage over larger companies with brand-name recognition. Someone familiar with the culture you are targeting should review brochures or print materials. Color, theme, text, and 118

125 6. Planning > Action > Results graphics often have different meanings in other cultures and countries. Resources Selling property globally may involve some travel and entertainment expenses. Foreign clients prefer meeting the real estate professional personally, but they often expect you to visit them, not vice versa. Showing properties to offshore clients may entail paying travel expenses for the prospective buyer. Business Planning Quick Start A quick-start method for formulating goals and taking action can be adapted from an approach used by firefighters. The acronym for this method is STRAP. 10 S T R Size up the situation What is the opportunity? Tactics What are your options for taking action? Resources What resources are required and where can you acquire them? A Actions Implement actions. P Progress reports Evaluate the success of actions. Size up the situation again. 10 Incident Command Model, Flash Over Seminars. 119

126 Global Real Estate: Local Markets Measuring Results How can you know if you are making progress? As you develop goals and identify action steps, outline how you are going to measure your results. For each action step Identify anticipated start and stop dates for specific actions Include the name of the person or group responsible for completing a specific action Describe what successful completion of the action looks like Detail the resources needed Establish a regular schedule for monitoring progress monthly, quarterly, or a time interval that suits your needs. 120

127 6. Planning > Action > Results Exercise: What Will You Do Next? Build on the momentum of this course by drafting immediate goals. What will you do? Tomorrow? In the next 7 days? In the next 30 days? In the next 60 days? One year from now, what will your global real estate practice look like? How will you measure success? 121

128 Global Real Estate: Local Markets Key Point Review The process of planning can help a sales team coalesce around shared goals and buy into the allocation of resources. A comprehensive business plan usually includes: description of the business and the market, analysis of the competition, goals, financial projections, rationale for resource allocations, activities, and progress measurements. The most authentic niche marketing flows from interests you share with clients and customers. Be prepared to go where the market takes you. Setting some short-term goals will help you build on the enthusiasm and momentum created by course participation. Experiencing the success of accomplishing short-term goals will motivate you to set longer-term and more complex ones. Use the national, state, and local REALTOR association resources to support your global business development. The business plan for marketing a property globally usually includes: market profile, property profile, promotion plan, and resources. Use the STRAP quick-start method for formulating goals and taking action. 122

129 Resources Resources Websites Cultural Snapshots: Asia Pacific Cultural Snapshots: Europe Cultural Snapshots: South America Cultural Snapshots: North America and Caribbean

130 Global Real Estate: Local Markets Websites National Association of REALTORS Global NAR Research Division NAR Economic Outlook NAR and REBAC course schedules Association for Foreign Investors in Real Estate Economic Development Administration Economist Forecasts FIABCI International Real Estate Federation U.S. Bureau of Economic Analysis U.S. Bureau of Labor Statistics U.S. Census Bureau U.S. Federal Reserve U.S. Chamber of Commerce Traderoots Google Translate (click on more) Investment Guide for NRI Hague Convention signatory countries Internet World Stats International Real Property Foundation Malaysia My Second Home Program Online Conversion Panama Pensionado Visa Program Philippine Retirement Authority Retire in Belize Program World Lingo Translation World Clock XE (exchange rates) 124

131 Resources Cultural Snapshots: Asia Pacific Japan A chain of islands in the North Pacific forms the country of Japan. As an island nation, Japan shares no land borders with any other country. The closest neighbors are Korea and Russia. Japan is virtually devoid of natural mineral or energy resources. It depends almost entirely on foreign sources for petroleum and the minerals needed for modern industrial production. Japanese relationships rest on a foundation of order and propriety. An intricate system of social indebtedness defines who, what, and how much is required, and friendship creates extensive obligations. Therefore, both the short- and long-term effects of an action may be evaluated before implemented. A personal relationship, which cannot be rushed, must be developed before business is entrusted and conducted. Anyone whose behavior threatens group harmony may be viewed as an unreliable business partner. When making decisions, not every point is defined. This ambiguity opens the possibility for further discussion and allows for consensus, which preserves group harmony. A verbal commitment carries binding weight with the Japanese; you will be held accountable for unfulfilled promises. Japanese contracts often have an escape clause stating that both parties agree to sit down and renegotiate if either has a problem interpreting the written contract or if circumstances change. Do not be surprised by long periods of silence. This does not indicate disinterest or disagreement. They are evaluating what you have said. Age equals rank and Japanese companies are structured on a seniority system. Always identify the oldest members and show respect, but do assume that the oldest or most senior person is the one in charge. Business cards, called meish, are a personal extension and must be treated with respect. Present your card with both hands, bowing slightly. Present the card with the written (Japanese) side up and facing the receiver. Accept a business card with both hands and read it slowly, acknowledge it with a slight bow, and comment favorably. Place the card on the table in front of you and store it carefully away in a card case. Never write on another s card, throw it down, or place it in a back pocket. The Japanese rely on business cards to determine an appropriate level of respect and a counterpart within their organization. Your title should accurately communicate your position and level of responsibility. If Japanese clients later discover that you are more important than your card suggests, they may feel embarrassed about having treated you with an improper level of respect. Japanese appreciate creativity in marketing. Pay attention to the packaging of presentation materials. Consult an expert on such details as the use of colors as some colors have connotations; for example, the color white is associated with death, red is the color for celebrations, and yellow signifies courage. 125

132 Global Real Estate: Local Markets Japanese regard seriousness as a virtue and are uncomfortable mixing humor with work. The Japanese strive for group harmony in business, family, and social relationships and seldom express a personal opinion in a group. Japanese people try to appear polite, spare others any pain or embarrassment, and maintain harmony. An apology is offered for anything that causes inconvenience, even when it is no one s fault. The Japanese often smile when they don t understand, rather than ask a question, which would be rude. They avoid saying no, because this causes discomfort to others. Rejection may be phrased as We ll think this over. Find an indirect way of raising a problem and suggest the person may want to consider it further in private. India India occupies a peninsula between the Arabian Sea and the Bay of Bengal. In land area, India is about half the size of the United States, about three-quarters the size of the total European Union. It has 7,000 kilometers of coastline, approximately the same as the coastline of Italy or Brazil. Worldwide, India is the largest recipient of workers remittances payments sent by workers abroad to family members in the home country. Workers remittances equaled US $72 billion in 2015 according to the World Bank and dwarfed foreign direct investment. Many economists believe that India s economic growth and population will surpass China s within the next years. Mere statistics do not present a complete picture of the wealth of Indian people. Based on statistics, India s average per capita income of less than US $3,900 makes it a poor country and many live on one dollar a day. At the other end of the spectrum, the top 10 percent of the population owns 28 percent of the nation s wealth. Between these two extremes is a large and growing middle class. Respect for age and position is traditional. The most senior member of the firm or group is introduced first followed by introductions of subordinates according to rank. Greet the most senior member of the group first and introduce your team in order of rank or seniority. In the business setting, subordinates stand when a senior executive enters the room, and you can show respect by rising to greet him or her. In a negotiation session, or any business meeting, the most senior member typically speaks for the group, even if subordinates do not agree. Decisions are made at the highest level of a company. In family-owned companies, the highest authority may be the most senior family member. Although traditionally a male-dominated society, increasing numbers of women achieve high levels in education, professions, business, the IT industry, and politics. Women play significant roles in operating many family businesses. Respectful forms of address include the person s title such as doctor, professor, or Mr. or Mrs. Naming traditions differ by region, religious practice, caste, and even profession. In the south, a man uses his father s name or village name, in place of a family name, which are abbreviated as initials and placed in front of the first name; for example, Dr. A.P.J. Abdul 126

133 Resources Kalam, a former President of India. In the north, people usually have a western-style first name and family name, such as Arun Kapoor. Upon marriage, a woman in the north customarily adopts her husband s family name, or in the south the first name or initial. In the Sikh tradition, all boys are surnamed Singh, and girls surnamed Kaur. Business people commonly shake hands, although some greet each other with the namaste bringing the palms together at chest level and slightly bowing the head. Traditionally, women do not shake hands. In India, social distance tends to be a bit closer than in western countries but hugs and back pats are improper greetings. Offer and accept business cards with the right hand and with the writing facing the recipient. Do not use the left hand for presenting a business card, eating, or offering a gift. Although punctuality is much appreciated and foreign meeting participants should arrive on time, Indians themselves are rather casual about their own punctuality. Meetings often do not start at the scheduled time. Meetings usually begin with some small talk. Refreshments may be offered and should be accepted. Generally, India has a business pace more relaxed than in western countries, but this should not be mistaken for informality. A strict hierarchy determines roles, status, and social position, and actions that disregard it can create embarrassment and tension. Indians tend to think in an inductive manner; the broad context must be understood before proposals can be considered. Therefore, do not be surprised by questions that seem overly broad or unfocused. Seeming digressions are likely attempts to understand the proposal in a broader context. Indians are generally uncomfortable expressing open disagreement or saying no because it seems overly aggressive and hostile. Indirect statements, such as I will think about it or I will have to check with others, may signal disagreement. Indians expect flexibility in negotiations and may dismiss straightforward propositions or requests for an immediate action as too constraining. A proposal with bargaining room is a better approach. Hospitality is a core value for Indians, regardless of religion or state, rural or urban. Foreigners are sometimes surprised at the casual nature of Indian social invitations. Even a casual acquaintance may prompt an invitation. An invitation to drop in is sincere, but calling ahead is advisable. 127

134 Global Real Estate: Local Markets China In land area, the People s Republic of China (PRC) is slightly smaller than the United States or Canada, but about twice the size of the European Union. China shares land borders with fifteen other countries. Despite its size, one time zone spans all of China. Imagine the impact of 20 percent of the world s population, with pent-up demand and growing personal wealth, focused on achieving prosperity. China s rapid economic development unleashed a tremendous amount of entrepreneurial activity and produced a new class of super-rich wealthy. The political status of Taiwan, the Republic of China, remains an ambiguous issue for the PRC. The PRC s One China policy views mainland China and Taiwan as one country, with Taiwan as a province. On the other hand, Taiwan considers itself a separate country. Guanxi is an essential ingredient in Chinese business success. The broad concept includes all sorts of business and family connections for mutual benefit and implies an obligation. Westerners might think of the concept as building a network, but with the ability to call on another for a favor or service that, it is understood, must be reciprocated in the future. Chinese do not like to say no and will go to great lengths to avoid it. The Chinese may remain silent rather than express disagreement, which would cause a loss of face. They may respond with a maybe or we ll see to avoid the uncomfortable situation. If you must ask for confirmation of a point to which the likely answer is negative, pose the question in such a way that the other can save face by answering in the affirmative. Experienced businesspeople report that tough and protracted negotiations are commonplace. The contract provides a foundation for further agreement and can be changed if the terms prove unsuitable. The signed contract signals progress, with further contract details and concessions to be worked out. The Chinese tolerate ambiguity and trust that matters will be resolved when the time is right. Chinese names are given with the family name first followed by the given name. When meeting someone for the first time, a brief handshake with slightly downcast eyes is appropriate and shows respect. Direct eye contact may be perceived as confrontational. Hugs, an arm around the shoulders, or back pats are inappropriately familiar. Posture should remain rather formal and demeanor should be attentive, calm, and composed as these qualities communicate competence and control of the situation. The Chinese may seem a bit dour when introduced because they are taught not to show excessive emotion. A group of business associates are introduced in order based on status and age. Placing chopsticks vertically in a rice bowl is equivalent to wishing death to someone. Chopsticks placed parallel on top of a bowl are a sign of bad luck. Using red ink to write a message or sign a document signifies the end of a relationship. Gifts of clocks and handkerchiefs are associated with death. Gifts of knives, scissors, and umbrellas indicate a wish to sever a relationship. A gift of a green hat signifies marital infidelity. The number four is associated with death and considered very unlucky. 128

135 Resources Philippines The Philippine archipelago is made up of 7,000 islands (4,000 inhabited). Spain colonized the Philippines starting in the sixteenth century. The remnants of Spanish influence linger in place names, devotion to the Roman Catholic Church, and the surname of the people. The United States gained possession of the territory in 1898 as a Spanish/American War treaty concession. Independence came in 1946 following WW II. Many Filipinos have Spanishsounding surnames that hark back to former colonial times. Spanish colonizers required adoption of surnames for identification and tax purposes and these family names continue. The combination of a young population, median age 23, and fast population growth, 2 percent annually, pressures the economy to create new, adequate employment. Consequently, over 10 million Filipinos live and work abroad and send remittance money home. The official language, Filipino, derives from traditional Tagalog, but English is the language of education, government, and business. Initial greetings and introductions are formal in tone. Introductions of a group of business colleagues proceed by rank from the eldest and most senior to most junior. A sincere handshake is an appropriate greeting for both men and women. Women who share a close relationship may embrace. Professional and academic titles, as well as Mr. and Ms., should be used until you are invited to proceed on a first-name basis. Business card protocol is not as formal as in other Asia/Pacific countries, but cards should be presented and received respectfully. Present a business card with both hands, with the writing readable to the recipient. Examine a received card before placing it carefully in a card case. Senior level executives may offer their business cards only to those of similar rank. Filipino business runs on the basis of a network of personal and family relationships. Family connections figure into many preferential hiring practices. Business relationships are personal, with the individual not the company. Face-toface meetings are preferred because they provide an opportunity to form and affirm personal relationships. Remain for a period of social conversation at the end of the meeting. Relationships imply the exchange of favors you may be asked to perform favors and Filipinos will fully expect to do the same. Feelings based on personal relationships guide decision making as much as, or more than, facts. In business, Filipinos generally expect punctuality. Because the decision maker may not attend meetings, and decisions are generally made at the top, it may take several meetings to hear a business prospect s decision. The Filipino concept of saving face involves causing no shame (Hiya) to oneself or family. The individual avoids bringing shame on the family by living up to social expectations.embarrassment and criticism may also cause shame. Therefore, Filipinos avoid confrontation, negative answers, and displays of temper because these cause loss of face. Appearances, including attire, are important and you will be judged on how well you dress. The best choices are conservative, well- 129

136 Global Real Estate: Local Markets tailored business suits for men and suits or stylish dresses for women. Men should not remove their jackets unless others do. The family is the most important social unit. The extended family includes honorary relations such as godparents (children may have several) and close family friends. If invited to a home, bring a gift. Sweets or flowers are good choices but avoid chrysanthemums and white lilies, as these are associated with funerals. Compliment your hosts on their home and their hospitality but do not refer to the host s wife as the hostess as this has other connotations. Republic of Korea South Korea, a trillion-dollar economy, ranks among world leaders in technology, auto manufacturing, and robotics. Korea enjoys moderate inflation, low unemployment, an export surplus, and a fairly equal distribution of income. A rapidly aging population presents a challenge to future economic growth. Korea s over-65 population will reach almost 40 percent by 2050, making it one of the world s oldest countries. Providing support and services for a large elderly population will present an economic challenge. Through the rapid growth decades and continuing today, governmentsponsored conglomerates known as chaebols dominate Korean business. The chaebols are familydominated companies, with relationships often reinforced by marriages. 130 Confucian principles shape much of Korea s business culture. Strict hierarchy, respect for seniority and elders, and group harmony characterize Korean business behavior. Although Koreans share many attitudes and behaviors with other Confucian-based cultures, like Japan and China, they are not the same. In fact, a history of conflict and subjugation make Koreans react quite emotionally to discussions of Korea s relations with Japan. As in other Asian countries, business cards are an extension of the giver and must be handled with respect. Use the right hand or preferably both hands to present and receive business cards; the writing (translated into Korean on the reverse) should face the recipient. After studying the card and commenting favorably, place it carefully in a card case. Experienced business travelers report that Koreans tend to schedule meetings close together; a delayed conclusion to one meeting means a late start for the following one. Arrive punctually, but remain flexible if a meeting s start is delayed. Demeanor during business meetings is formal and attempts at ice-breaking humor communicate a lack of seriousness about the matter at hand. Koreans, like other Asian peoples, value face-saving behavior. But, in Korea, the concept, known as kibun, involves not only saving face but also personal dignity, pride, mood, and feelings. Harming another s kibun can cause irreparable damage to a relationship. Koreans share the Chinese and Japanese reluctance to say no and admiration of calm, professional demeanor. But Koreans are very different from their neighbors. They tend to be

137 Resources assertive, expressive, individualistic, and direct in their communication and appreciate candor in others. Respect for elders is a paramount virtue. You should, for example, allow elders to go first through doorways and go ahead of you in a line. Also, refrain from smoking, remove your sunglasses, and sit with uncrossed legs in the presence of elders. Koreans view contracts as a statement of consensus instead of a conclusion of an agreement. They tend to be assertive in negotiations and appreciate straightforward negotiations with others. Building a business relationship may involve evening socializing with cocktails and dinner. Offer and accept drinks using the right hand, or both hands to show extra respect. When toasts are made, lift your glass with the right hand; extra respect and enthusiasm are shown by supporting the right elbow with the left hand. Australia Australians increasingly view their country as a diverse, multicultural society. The composition of the society has extended beyond the original mix of British, Irish, and Aboriginal peoples to include immigrants from other European countries and Southeast Asia. Australians are rather informal in both business and social life. A brief handshake is appropriate, but other contact, such as back patting or hugging, is too familiar. Greetings are casual and first names are used early on. The relaxed business atmosphere should not be mistaken for lack of seriousness. Punctuality is expected for both business and social occasions. Business proceeds without a lengthy period of relationship development. Fair play, loyalty to friends, candor, modesty, and selfdeprecating humor are admired qualities. Based on a strong sense of fairness, Australians tend to conduct negotiations on a win/win basis. New Zealand New Zealand spans two large islands-in the South Pacific, about 1,300 miles east of Australia. The capital city is Wellington located on the North Island. New Zealanders refer to themselves as Kiwis, after the country s national bird. Maoris refer to New Zealanders of European descent as Pakeha. Although they share membership in the British Commonwealth, don t make the mistake of confusing or comparing New Zealanders with Australians. New Zealanders are quite egalitarian and do not stand on ceremony when introduced. A smile with eye contact, a cordial handshake, and a how do you do are quite sufficient. It is polite to address the person as Mr. or Ms. when initially introduced, but New Zealanders will likely move quickly to a first-name basis. Maoris, the native Polynesian people, may be a 131

138 Global Real Estate: Local Markets bit reserved at first meeting, but place great value on hospitality and assuring a guest s comfort. New Zealanders do not generally conduct protracted negotiations or haggle over details or price. A concise, straightforward approach is best. New Zealanders appreciate brevity and direct communication. Present your proposal straightforwardly along with supporting data. Arrive for meetings on time or a few minutes early. Meetings begin with some small talk and then get down to business. The kiwi business culture is basically European in approach, but definitely relaxed and low key. Dress, including business attire, tends toward casual. Cultural Snapshots: Europe Germany Germany is located in northern central Europe. It shares borders with nine other countries Austria, Belgium, Czech Republic, Denmark, France, Luxembourg, Netherlands, Poland, and Switzerland. Berlin is the capital city. After 46 years of post-war separation, East and West Germany were reunited in Germany now ranks as the largest economy among the European Union countries. Germans are masters of planning. Careful planning provides security in both personal life and business because it assures order, security, structure, and stability. Germans generally want the assurance of knowing what they will be doing at any given point in time. Therefore, rules and regulations are carefully followed because they contribute to an orderly life. Important values are discipline, responsibility, achievement, and education. There is a proper time for everything and business and personal life are kept strictly separate. Working overtime shows a lack of careful planning. Be careful about trying to do business after hours. If you invite a client or a client s subordinate to dinner, it may be perceived as a conflict of interest. In Germany, business proceeds without a personal relationship; following established protocol and deferring to authority maintains the business relationship. Establish your standing through academic credentials and company affiliation. Deference to authority is important for Germans, so be clear on your level of authority. When introduced, a firm handshake is appropriate. It is polite to shake hands with everyone present (including children). Shake hands with each person present as you are introduced. Senior executives will offer their hands first. Stand until the senior host invites you to sit down. Use all appropriate titles and forms of address. Use first names only if specifically invited. Titles are very important; address others as Herr or Frau along with the title and surname: for 132

139 Resources example: Herr Prokurist Jahn. Do not use gestures such as touching or backslapping. Casual greetings and smiles are reserved for close friends and acquaintances. Germans usually do not greet strangers. Maintain a communication distance of 18 inches or more, similar to North Americans. Do not attempt to sit or stand close. Punctuality is essential in both business and social settings. If unforeseen conditions prevent a timely arrival, telephone immediately and explain the reason for the delay. In communications, Germans can be straightforward to the point of bluntness. Exhibiting impatience or confrontational behavior is counterproductive. Maintain direct eye contact while speaking. Expect a great deal of written communication to summarize business discussions and maintain a record of document decisions. Meetings, which begin and end on time, are rather formal and follow a strict agenda. Although business does not rely on personal relationships, first meetings are for getting acquainted. The eldest or highest ranking person enters the room first men enter before women if their status and age are otherwise about the same. Germans sometimes rap their knuckles on the table to express approval. When making a presentation, dress formally and conservatively. In your presentation, stress shared interests and benefits that appeal to Germans efficiency, performance, and quality. Be direct, factual, concrete and precise. Neatness is essential in all correspondence and presentations. Avoid using hand gestures when talking. Observe formality in business meetings; visitors should keep ties and jackets on, and refrain from casual behavior. An erect posture and neat appearance are essential for a good impression. After brief small talk, expect to get down to business. Companies tend to be quite hierarchical with decisions made at the top. Respect the chain of command of the German firm. Once a decision is made, it is seldom changed. It may be rendered into a series of detailed action steps that will be accomplished meticulously. Contracts are very important and are followed to the letter. German families tend to be nuclear and small, with the father as the dominant figure. The Germans take great pride in their homes and orderliness is a virtue. In fact, the home is seen as the one place where a German can relax and show individuality. If you are invited to a home, bring a gift such as chocolates, a good-quality French wine (not German), or flowers. Avoid red roses as they are associated with romance; lilies, chrysanthemums, and carnations are associated with funerals. Send a handwritten thank you note the next day. 133

140 Global Real Estate: Local Markets France France is located in Western Europe with coastlines along both the Atlantic and Mediterranean. It shares borders with Belgium, Germany, Italy, Luxembourg, Monaco, Spain, and Switzerland. The capital city is Paris. The French tend to be rather private people with different codes of conduct for those within the circle of friends and family and those who are not. Although generally polite in business dealings, it is only with the inner circle that they can relax and express individuality. Friendship implies frequent contact and mutual support when needed. Close friends may exchange a light kiss on both cheeks left and then right. Although very familyoriented, families tend to be small and the role of parent is taken very seriously. The extended family can be called on for emotional and sometimes financial support. When introduced, a handshake is appropriate along with the greeting for the time of day. Business cards are exchanged without a formal ritual though cards should always be treated respectfully; French business cards may be a bit larger than the North American standard format. Business conduct stresses courtesy and formality; wait to be told where to sit. Before doing business, the French expect to establish a foundation of mutual respect and trust, which is earned through proper, courteous behavior. Appointments should be made at least two weeks in advance by letter of phone. A secretary may handle appointments for senior executives. Avoid scheduling a meeting during the months of July and August as these are the traditional vacation periods. Punctuality is important; if delayed, phone immediately and provide an explanation. Business meetings are for the purpose of discussing issues, not making decisions, which are usually made at the top of the company hierarchy. During discussion, the French may be quite candid and direct in their communications. When making a presentation, avoid high-pressure tactics low key is a better approach. Maintain direct eye contact and present information in a detailed, logical progression. Do not be surprised if spirited debate ensues. Although business is conducted slowly, once an agreement is reached, it may be documented by a precisely worded, comprehensive written document or contract. Many French businesspeople are quite risk-averse. Appearances matter, so dress conservatively and in well-tailored clothing. The French appreciation for the finer things in life includes stylish apparel and accessories. If invited to a home, arrive on time and phone ahead if you will be delayed more than 10 minutes. It s appropriate to bring a gift of flowers, an uneven number of blossoms but not 13, or wine; be sure the wine is of exceptional quality. Ask the florist for help in selecting the appropriate flowers as certain flowers and colors have symbolic meaning. For example, white lilies and chrysanthemums are associated with funerals, red carnations signify bad will, and white flowers in general are associated with weddings. If invited to a large dinner party, send flowers on the morning of the event so that they can be displayed that evening. 134

141 Resources Italy Italy occupies the boot of southern Europe with miles of Mediterranean coastline. It borders Switzerland, Austria, France, and Slovenia. The capital city is Rome, within which the Vatican, a separate state, is nestled. In Italy the family is the essential social unit that provides stability, security, continuity, and emotional support. In the north, families tend to be small, only the nuclear family, while in the south a large extended family lives together. The family elders are respected and deferred to. Deference is also shown to those who have achieved business success and those who are connected to influential families. Italians prefer to do business with people they trust. An introduction arranged through a mutual contact is beneficial in starting out the relationship on the right note. In fact, cultivating a network of connections is a way to succeed in business. When introduced a handshake with direct eye contact is appropriate. Once the relationship is established greeting may be quite enthusiastic and involve air kisses on both cheeks left cheek first. Business cards are exchanged without formal ritual. Your title and academic credentials should appear on your card, as Italians want to know where you fit in the hierarchy of your firm. Italians strive for the bella figura, (all the factors that define image) in their style, demeanor, and dress. Your style of dress can communicate everything about you from family connections to educational level. First impressions tend to be quite lasting, so dress stylishly with good quality accessories and project confidence and a sense of style in your demeanor. Even an invitation to an informal occasion requires stylishly casual apparel. Appointments are absolutely necessary for business meetings. Make the appointment 2 3 weeks in advance and reconfirm it a few days prior. August is the traditional vacation month and best avoided for business meetings. Arrive on time. Punctuality is expected in the north and appreciated in the south. Initial meetings are for getting acquainted and building rapport, not for making decisions. Meetings provide a venue for exchanging ideas and frequently do not follow the planned agenda. Decision making happens outside of the meeting and at the top of the hierarchy. During discussions, several people may talk at the same time, interrupt, and raise their voices to be heard over others, not to express anger. Communication styles tend to be defined by geography. In the north, businesspeople are direct, candid, and want to get down to business after the briefest period of small talk. In the south, it is common to take more time to exchange small talk and get acquainted. If you are invited to a home, you may arrive up to 15 minutes late as strict punctuality is not expected for social occasions. If invited for a dinner party, send a gift of flowers on the day of the occasion. Avoid chrysanthemums, which are associated with funerals; red flowers signify secrecy, and yellow flowers symbolize jealousy. The colors black and purple are traditional mourning colors. 135

142 Global Real Estate: Local Markets United Kingdom The United Kingdom comprises four distinct component regions England, Wales, Scotland, and Northern Ireland. Through a process of devolution, Scotland and Northern Ireland have achieved a degree of home rule. Each of the four component regions maintains a strong sense of nationalistic identity. Although any citizen of the U.K. may be referred to as British, only people from England are referred to as English. The U.K. is part of the European Union, but the British do not always think of themselves as Europeans. Furthermore, they maintain use of the British pound instead of the euro. The U.K. s multiculturalism reflects the colonial history of the British Empire with threads from India, the Middle East, Caribbean, Asia, and other countries woven into the modern social fabric. Cultural background may greatly influence personal behavior, but, like in the United States, first and second generation children of immigrants tend to bridge the cultures. Both personal and business behavior is quite conservative, reserved, and formal. The British are extremely guarded of their personal privacy and even friends may avoid discussions of personal or family matters. There is a longstanding tradition of keeping a stiff upper lip in the face of adversity or embarrassment. Observance of proper protocol is a core value for the British. Although the old system of social classes is increasingly an anachronism, it is still present and observed in subtle ways. Younger generations may, however, be more relaxed about protocol and informal in demeanor and interpersonal interactions. When introduced, a handshake with eye contact is appropriate. Other touching such as back pats, hugs, and air kisses are inappropriate. The British tend to maintain a wide social distance and direct eye contact is minimal. When making introductions, a younger person is introduced to an elder and a junior colleague is introduced to a more senior; when introducing people of equal age or seniority, introduce the person you know best to the other. Courtesy titles Mr. or Ms. are used along with last names unless invited to proceed on a first-name basis. Business cards are exchanged without ritual. Arrive on time for meetings and appointments; the Scots in particular are sticklers for punctuality. Meetings involving colleagues of equal rank tend to be open discussions; when present, a senior or highranking participant usually leads the discussion. The English in particular tend to be masters of understatement although they can be quite candid and direct. When making a presentation, persuade with objective facts and solid evidence and avoid a hardsell approach. Although not needed to conduct business, the British look to develop long-term relationships with those they do business with. A business appointment may include a visit to the pub for a light meal and a pint. It is common practice to pay for a round of drinks for everyone in the group. Avoid the use of slang expressions and gestures, which will likely be perceived as too familiar. An extremely rude gesture to avoid is the two-finger V for victory sign with the palm facing inward. 136

143 Resources If you are invited to a home, arrive on time and bring a modest gift flowers, chocolates, or wine for the hostess. Russia Russia spans the continents of Asia and Europe and includes nine time zones. Its capital city is Moscow. Russians are quite proud of their rich cultural history and want others to esteem it too. You will win the respect of Russian colleagues if you show sincere admiration for Russian culture. They also pride themselves on flourishing in challenging conditions, such as frigid Siberia. Russians do not need a personal relationship to do business, but a network of personal connections can smooth the way. Connections are known as svyasi, which implies friends in high places essential for cutting through bureaucratic red tape. A network of trustworthy contacts can smooth making connections and doing business. A request to perform a favor is a sure sign that a relationship has been successfully established. When introduced, a firm handshake and direct eye contact are appropriate. Business cards are exchanged without ritual; if someone does not have a card, make a note of the name, title, and contact information. Close female friends and associates may exchange air kisses on both cheeks (left cheek first) and male friends may exchange a hug or pat on the back. Russian names consist of three names: a first name, a patronymic formed by adding ovich for a man, ovna or avna for a woman, and a surname; for example, Anna Ivanova Borodin. In formal address all three names are used, but close friends and associates may use only the first name and patronymic, or first name only. Appointments for meetings are necessary and should be made as far in advance as possible. Expect a 6 8 week wait for an appointment with a government official. Be on time for meetings but be prepared to wait. Russian schedules are constantly changing and meetings can be cancelled on short notice. Initial meetings are for getting acquainted and evaluating if you and your company are worth doing future business with. Expect a long period of socializing and conversation as a way to get acquainted. During a presentation, be prepared with a comprehensive treatment of the subject. Russians are accustomed to detailed presentations that include a project s history and precedents. Do not show disapproval or impatience if the discussion is interrupted by unrelated side conversations. Be prepared for a slow pace of business. Decisions are made outside of meetings and at the upper levels of the hierarchy. Hierarchy is quite important and Russian businesspeople prefer to meet with those of similar rank and authority. Business proceeds slowly and patience is essential. Let your Russian contacts set the pace. At the conclusion of a meeting, you may be asked to sign a protokol, which summarizes the discussion. But nothing is final until an agreement is signed. Even after signing, contracts are viewed as rather elastic and modifiable. Russians are tough negotiators and view 137

144 Global Real Estate: Local Markets negotiations as a win-lose proposition. They may use raised voices, threats to walk out, and displays of temper to coerce an opponent into compromising, which is viewed as a sign of weakness. If invited to a home, arrive on time and dress in business clothes to show respect for the host. Bring a modest gift, which will be refused at first; you can ease acceptance by saying the gift is just a little something. Ireland The country of Ireland occupies about 80 percent of the Irish island to the west of Great Britain; the remaining territory is Northern Ireland, which is part of the United Kingdom. The capital city is Dublin. A quality that characterizes the Irish is humor, which is often self-deprecating and ironic in tone. They admire both wit and eloquence in speech and have a rich tradition of storytelling. Teasing between friends and close associates is common and if you are teased it is a sign of acceptance, so play along and don t take it personally. To the Irish, expressing humor is part of being polite. With the emphasis on humor, it should not be a surprise that business proceeds with a less formal tone than in other European countries. When introduced, a firm handshake with direct eye contact and very important a warm smile are appropriate. Shake hands with everyone present (including older children in social settings) at the beginning and end of meetings. Business cards are exchanged without a ritual; many businesspeople do not have business cards so don t take offense if you are not offered a card in return. Unlike their continental counterparts, the Irish tend to move quickly to first names. When making a presentation, modesty is the best tone, so avoid boasting about your credentials, achievements, or firm. Although communication styles depend on the individual, overall the Irish try always to be very polite and may avoid giving a direct negative response. Silence may signal disagreement. The Irish use humor to smooth over uncomfortable situations and also use it to avoid confrontation and conflict. Meetings usually begin with some small talk, which establishes rapport. Don t be surprised if the meeting is moved to the local pub or a restaurant. With the Irish gift of gab, meetings tend to include a great deal of discussion and exploring a proposal or problem from every angle; everyone is expected to participate in the discussion. If you are invited to a home, bring a gift of flowers or wine. Avoid lilies, which are associated with religious occasions, and white flowers, which are used at funerals. 138

145 Resources Cultural Snapshots: South America Argentina Argentina lies in the southern portion of South America and borders with Brazil, Bolivia, Chile, Paraguay, and Uruguay. The capital city is Buenos Aires. The official language is Spanish. Argentines are primarily of European descent, which distinguishes it from other Latin American countries. Culturally, Argentina is more closely tied to Europe than to South America and many people trace their heritage back to Italy. Unlike other South American countries, there is little mix with the native Indian culture. A strong sense of personal honor underlies much personal, professional, and community life. Communication styles depend on the individual but generally Argentines are candid and direct yet tactful. They are not reserved in expressing passions or sentimentality. Avoid confrontation, as they do not like to admit publicly that they are wrong. Argentines also have a difficult time saying no; disagreement may not surface during meetings. Comfortable personal space is considerably closer than in North America; Argentines may touch each other when speaking and generally stand very close to each other when speaking. When introduced, a handshake and warm smile are appropriate. Eye contact demonstrates interest. In a group, the eldest or most important person is introduced first. At a social gathering, wait for the host to introduce you to other guests. When leaving a meeting or social occasion, say goodbye to each person individually. In business, an introduction through a trusted mutual contact can smooth the way as Argentines prefer to do business with people they know and trust. Relationships are very important and building a network of contacts is essential to doing business. Argentines strive for a network of friends and connections who can be called on for favors and assistance. Nepotism is seen as a good thing because it assures loyalty and trust. Business relationships are with individuals, not their companies. Appearances matter and you will be judged not only on the basis of what you say or do, but also how you dress and present yourself. Appointments should be made 1 2 weeks in advance by phone or . Arrive on time for meetings although you may be kept waiting. In some very traditional companies, the higher up the person you are meeting with, the longer you will be kept waiting. Meetings are for getting acquainted and discussion, not for making decisions. Business cards are exchanged without ritual. Hierarchy is very important and Argentines like to do business with people of similar status. The decisions are made by the upper levels of the hierarchy outside of the meeting. Business tends to be quite bureaucratic and the pace of making decisions and taking action is rather slow because several levels of approval are needed. Meetings begin with some small talk to establish rapport before getting down to business. Do not be surprised if the person you are meeting with accepts phone calls or attends to other matters. If you are invited to a home, bring a small gift. Avoid gifts of scissors or knives as they 139

146 Global Real Estate: Local Markets signify severing a relationship. Dressing well for the occasion shows respect for the host. Punctuality is not expected for social occasions, particularly large dinner parties; arriving minutes later than invited is acceptable. Brazil Brazil is the largest country in South America, occupying almost half of the continent. Its most populous cities are Rio de Janeiro and São Paulo. Its capital city, Brasilia, lies inland. Unlike its neighbors, the official language of Brazil is Portuguese, not Spanish. Brazilian society is an amalgam of European, African, and indigenous peoples. Although Brazilians do not consider themselves racially aware, social distinctions based on skin color are common. There are also class distinctions based on social standing, and the upper classes have only brief interactions with lower classes, who may be employed as household workers. The family provides the foundation for a network of relatives and friends an essential part of Brazilian life. Brazilians like to do business with people they know, so a relationship is essential to getting things done. Loyalty is to the individual, not the company. Nepotism is considered a good thing because it assures loyalty and trustworthiness. When introduced, a handshake is an appropriate greeting between men; a woman should extend her hand first. Close female associates may exchange an air kiss on both cheeks (left cheek first). Business cards are exchanged with everyone in the group. Appearances matter, as Brazilians tend to be quite style conscious and will judge you based on your apparel and accessories. Face-to-face interaction is much preferred over written communication. During meetings, everyone present may express an opinion. It is not considered impolite to interrupt when another is speaking. Saving face is an important value; criticizing another causes a loss of face for both individuals. Meetings begin with small talk to build rapport. Decisions are made outside of meetings at the upper levels of hierarchy. Negotiations are often conducted by people who do not have final authority. Once an agreement is reached, Brazilians expect to document it with a detailed legal contract. Appointments should be made 2 3 weeks in advance, although appointments can be scheduled on short notice if needed. In São Paulo and Brasilia, punctuality is expected, although you may be kept waiting. Brazilians generally feel that time is outside of their control and other events may intervene to change schedules. In Rio de Janeiro, punctuality is appreciated, but not strictly observed. If you are invited to a home, bring a small gift or flowers for the hostess. Avoid purple flowers; purple and black are associated with funerals, as are gifts of handkerchiefs. It is acceptable to arrive up to 30 minutes late for a dinner party and up to an hour late for large parties. Even casual dress for social events should be stylish and more formal than in other countries. 140

147 Resources Cultural Snapshots: North America and Caribbean Mexico If there is one characteristic that distinguishes business and social interaction in Mexico, it is the importance of relationships. The interconnecting circles of friends and professional associates with much trading of favors among them are a constant feature that creates a rich context for both business and social interactions. In business, a handshake is the standard greeting for both men and women when meeting; women extend their hand first. It is considered polite to greet every member of a group individually. Make eye contact when shaking hands; however, after the initial greeting, frequent or intense eye contact may be considered rude. Handshakes and goodbyes are also exchanged with every member of the group when departing. Among family members, friends, or trusted business acquaintances, a pat on the elbow or an embrace may accompany a greeting. Close male acquaintances may greet each other with the abrazo, a combination of a firm handshake, hug, and backslap. Women may greet each other with a kiss or air kiss on the cheek. Do not initiate this contact yourself but, if offered to you, accept it graciously because it is a sure sign of goodwill and conveys that the relationship has been established. Backing away or withdrawing from these affectionate gestures can be perceived as discourteous. When conversing, Mexican professionals tend to stand closer to each other than their U.S. or Canadian counterparts. Mexicans usually have three names; a first name followed by the father s family name and then the mother s family name, e.g. Juan Gomez Ortega. On a business card, formally addressed letter, or legal document, all three names are presented. When addressing someone, the paternal family name is used. Use a person s title and last name, until it is specifically requested that the relationship be put on a first name basis. Professional titles are also very important and their use is expected in formal, polite address as well as in correspondence. For example, Doctor (M.D. or Ph.D.), Ingeniero (engineer), Arquitecto (architect), or Licenciado (holder of a degree equivalent to bachelor s degree). A business card represents the person offering it and therefore is presented and received with respect. In companies, decisions are usually made by the most senior or highest in authority. Traditionally, there is a great respect for authority and hierarchy; people look to those above them in rank for guidance when making a decision. In Mexico, questions are often answered with the intention to please; Mexicans will go to great lengths to avoid responding with a no to a question or delivering bad news. A maybe may in fact be a softened no. This is not an effort to be evasive or conceal the facts; rather, it is a cultural norm to avoid being impolite and thus displeasing the questioner. If specific information must be obtained, phrase questions in specific terms and in a way that the respondent may answer affirmatively. Mexicans generally feel that people are more important than time or schedules. Family comes first and business may be interrupted 141

148 Global Real Estate: Local Markets for family matters. Although punctuality and adherence to deadlines are always appreciated, they are not always a priority in Mexican business culture. It would be considered rude to question why someone was late for an appointment or missed a deadline. Likewise, it would be impolite to cut a conversation short by announcing that you have other obligations. Nonetheless, Mexicans are accustomed to North Americans arriving on time. The family has great importance for Mexicans because it is the individual s source of help and support in times of crisis. Elders are respected and usually cared for at home. The expected roles of men and women within the families follow traditional norms, although with increasing numbers of women employed outside of the home, these roles are changing. Within the family group, the father or oldest son is usually the family leader and decision maker; however, do not underestimate influence of the wife or mother on home and family matters. Do not refer to the United States as America. The United States, Mexico, and Canada all share the North American continent and all of the people are Americans. Canada Canada shares the longest undefended border in the world with the United States. The population of Canada is about 30 million equal to about 10 percent of the United States but it occupies a vast area roughly twice the size. The capital city is Ottawa and major centers of commerce, finance, and industry are clustered around the cities of Montreal, Toronto, and Vancouver. Modern Canada was formed in 1867, known as the Confederation, and gained independence from Britain in 1931, although it remains a member of the Commonwealth. Two distinct cultural strains English and French shape Canada s culture. In addition, immigrants, particularly from China and other Asian countries, enrich Canada s cultural diversity. Although they share some common characteristics, it is important to be aware of subtle cultural differences between French-speaking and English-speaking Canadians, as well as regional differences. Tensions linger between Quebec and the other English-speaking provinces. In general, Canadians are very individually oriented and strive to maintain their personal privacy. Personal and business lives are kept separate. Canadians are quite egalitarian and success is measured by individual achievement; French Canadians, in particular, esteem educational accomplishment. Despite the emphasis of individuality, they value a sense of community and are very aware of interdependence among provinces and other countries. They strive to maintain a spirit of cooperation, civility, equality, modesty, and harmony in business and daily life. Regional differences are subtle, but no less significant. English-speaking Canadians tend to be a bit more reserved than their French-speaking counterparts; they also maintain a wider personal distance when conversing and are less likely to gesture or touch. 142

149 Resources Although equality is a core value, businesspeople in Canada show more deference for rank and title than their U.S. or Western European counterparts. Coworkers of equal rank may be on a first-name basis, but senior and older colleagues are addressed by titles and last names. Although not essential to doing business, Canadians aim to establish relationships with business associates based on equality and mutual respect. Punctuality for meetings and appointments is expected; appointments are essential and should be made in advance. When introduced, a firm handshake and direct eye contact are appropriate; handshakes are repeated when departing. Men may wait for a woman to extend her hand. Business cards are exchanged without formal ritual, but it is wise to have business cards printed in both English and French. For initial introductions, use the appropriate professional title or Mr. or Ms. Often you will Dominican Republic The eastern Caribbean nation of the Dominican Republic occupies two-thirds of the island of Hispaniola. Its capital city is Santo Domingo. be quickly invited to proceed on a first-name basis. Business meetings begin with some small talk and then get down to business. Meetings tend to be open give and take discussion sessions during which all participants may exchange opinions, while maintaining a cooperative and harmonious atmosphere. When making a presentation, it is important to check an organization s language requirements. Some companies and many governmental and civil organizations require documents to be in both English and French. In business, a reserved demeanor and good manners combined with confidence and modesty are admired qualities. It is important to avoid boasting or overemphasizing your firm s abilities or competitive standing. Canadians, however, can be quite direct and succinct in business communications. The official language of the Dominican Republic is Spanish, unlike Frenchspeaking Haiti, which shares the island. Dialects, accents, and expressions, however, produce a unique Dominicanese style of Spanish. An extremely rude gesture to avoid is the two-finger V for victory sign with the palm facing inward. Canadians prefer to keep their business and personal lives quite separate, so inquiries about personal and family matters are inappropriate and invitations to homes are rare. If, however, you are invited to a home, arrive on time and bring a modest gift flowers, wine, or chocolates for the hostess. On the other hand, inviting a business associate out for a meal, theatre performance, or sporting event is appreciated. If you are from the United States, lumping Canadians into the category of Americans shows a lack of respect for Canada s distinct cultural and historic heritage. For Dominicans, the family provides stability and the basis for a network the individual can call on for assistance and therefore loyalty to family comes before any business relationship. Given the 143