The International Buyer In California - The Chinese Buyers

It’s no secret – Chinese investors in California are at the top of everyone’s “must-get” client list. We’ve heard ad nauseam how their economy is booming, their high net worth population is burgeoning, and they are investing millions of dollars in the United States economy, including real estate. I won’t bore you the statistics (but if you’re interested, check out NAR’s Profile of International Home Buying Activity – good stuff). Herb Jahnke, Director and Principal of China Real Estate Group, didn’t bore us with statistics in his session at the REALTORS® Conference & Expo. Instead, he got right down to business – how do U.S. agents find Chinese investors, and what should they expect once business is underway? Herb has been doing business in China for over 25 years, and his company has offices in 5 Chinese cities. He is intimately familiar with their culture, business practices, and real estate protocol. His knowledge and expertise served the audience well, as he provided many actionable tips on how to find and work with Chinese buyers. Forgive the choppiness of the post – I was furiously taking notes and this is the result…but all great information nonetheless! Some of the learning points: - One common mistake made by agents seeking the affluent Chinese buyers: focusing solely on first tier cities such as Beijing, Shanghai, and Tianjin. Many second and third tier cities often have as many millionaires as the first tier cities, and they are not as saturated with agents vying for their attention. - The Chinese love luxury brands – BMW, Porsche, and Audi have all created their own luxury brands just for China. It is very important to the Chinese to be able to show that they have the power and ability to purchase luxury. If you want to stand out in China, position your membership in NAR and CIPS as the luxury brands in real estate. - Economists that measure consumption estimate that Chinese buying power is three times that of Americans. Their outbound investment was $87 billion – that’s a 17% increase of money going out. Within 5 years, they will have invested $500 billion in overseas investment. - One of the hottest industries in China is film/movies. They invested $5 billion to create a film studio that is much larger than anything in Hollywood, with the goal of creating 200 movies per year. - By and large, the Chinese believe the United States is the best country in the world in which to invest. They see the value of home ownership. As one Chinese millionaire, Su, has stated, “”In China, nothing belongs to you. Like buying a house. You buy it, but it will belong to the country 70 years later.” - The Chinese love to negotiate. Don’t be surprised if they make a lowball offer on one of your listings. Unfortunately sometimes during the haggling it will go on so long you can lose the deal…it’s their style and it’s a process! - Before heading to China to do business, check their holiday calendar! Their biggest holiday of the year is the Spring Festival (Lunar New Year), and it lasts about a week at the end of January/early February. China National Day is October 1, and again lasts for a week. The first three days of the week are national holidays. Don’t expect to get any business done during these times! How do Chinese buyers find properties overseas? The answer is a toss up between friends and family that they know in the United States, and immigration companies in China. If they already have friends or family abroad, they are likely to go with their recommendations and move to the same area. If they don’t, immigration companies are a logical resources since Chinese emigrants must go there first for their immigration papers. At this point, they are likely still looking for a place to live. Cultivating a strong working relationship with immigration companies can be a great referral resource. Searching online works a little differently in China than it does in the U.S. and other parts of the world. Listing through Juwai is just a part of the process. Chinese buyers are intent upon finding the best agents, getting a good deal, and knowing you can complete the transaction. They aren’t as familiar with our search engines, so they will find a reputable (again – think luxury brand!) real estate company to contact. The older generation of Chinese (which many of the millionaires are) will still look for listings in newspapers and magazines. The younger generation will look on the internet. Also – agents don’t have the level of prestige in China that they do in the United States. Buyers don’t see the value of using an agent as much, even when searching in the U.S., because they don’t understand the value. In China, they don’t negotiate on behalf of their client…the buyer and seller work directly together on the negotiations. Exclusive listings don’t exist in China, and neither does buyer representation. Mostly because of the leasing structure that has restricted ownership in the past, but it will change as these laws change. It is important to understand that real estate law is still not completely developed in China. Hong Kong has a sophisticated and intelligent real estate and legal system, but China does not yet. How to reach Chinese buyers Advertising is the way to go to reach Chinese buyers. Their social media structure is far different than in the U.S. (no Facebook!), so you’ll want to think in terms of more traditional advertising channels. Internet, print, and TV advertising are still the best avenues to reach Chinese buyers. Go Reach China is a group (located in China) that offer support services to help get you in front of the Chinese. An idea of the potential audience you will reach in each advertising channel: Luxury magazines – 30,000 high net worth buyers Television: 2.2 million viewers. Internet/web coverage: 1.9 million Expo booth: 5,000 Keep in mind, expos are very expensive. Television advertising is not nearly as expensive. You will have a smaller total potential audience reach at an expo, but the one-on-one connection can be very rewarding. You will have better luck reaching people in a second tier city at an expo — they are saturated in the first-tier cities like Shanghai and Beijing. It is a good idea to attend an expo before taking out booth space. Get a feel for the expo – it’s not expensive, and many will let you in free. If you like it and it seems good for your business, talk to Go Reach China — they will help group together multiple real estate companies in one booth and help save you money. Things You Should Know: 1. Know your property, inside and out, and how it looks on paper. Chinese are looking for ROI in commercial properties – make sure you have these numbers. If they want to buy residential, 50% of them are buying because they want to be near a university and prefer to own instead of rent. 2. When it comes to the country of China, don’t bite off more than you can chew. It’s huge, it’s confusing, can be a maze! Narrow your geographic target area to one place, get a foothold in that market, then build from there. 3. Don’t take uneducated risks or throw money away unless it’s part of a plan. Make sure your plan is multi-pronged, sustainable, continuous, and affordable. The one-shot approach won’t work – working in China requires a continuous presence. Go Reach China and China United can help you build plan. 4. How do you separate the lookers from the buyers? For example, buyers will ask for property tax rates, ask about property management, etc. If they aren’t asking specific questions beyond the number of bedrooms and price, they are likely just looking. 5. Make sure your materials or method you are using is presented in Chinese style. It must be in the format and substance that is attractive to Chinese culture or it will be of no use. They like a lot of information – so sometimes it’s not as clean or image-heavy as it is in Western culture. It should be bilingual. The example used in class was miamilp88.com. 6. Make sure you use all media available. China is huge – 1.4 billion people. They all find things in different ways, so going back to #3 – have a plan, and make it multi-pronged. 7. Truly high net worth buyers will never let you know who they are and what they are doing. They won’t call and say “I found a mansion, I want to buy it.” They will use a friend or referral contact, or they will spend time getting to know you and feeling out your business style. They will often buy anonymously. 8. Be available to field questions when leads come in intelligently. A call center won’t work – have a professional who is skilled and has extensive knowledge to answer the frequently asked questions of Chinese buyers. 9. Work only with experienced and licensed professionals because Chinese prefer licensed and certified people. In China an agent doesn’t have the same level of training as in the United States. Don’t be afraid to explain designations and your specialties/expertise, how long you’ve been in business, and how many international transactions. 10. When a lead comes in, entice the Chinese buyer to come here. It is important to get them to come here and close the property. They won’t buy it sight unseen. 11. Have complete knowledge of the colleges, universities, high schools, elementary schools in your area. Again, about half of the Chinese buyers are purchasing a home for their children while they are in school. Also know the job opportunities in the area if they are relocating the whole family. 12. Because of U.S. visa laws, most of them can’t stay here for a long period of time. Only those with EB-5 visas can stay here permanently, and it’s very popular in China. You’ll want to have an expert in visa/immigration law available, but you should be knowledgeable enough to answer their basic questions. 13. Be ready to educate and explain the differences between U.S. and Chinese real estate transactions – for example, exclusive listings, title insurance. 14. Beware of buyers who are asking you to help them transfer funds out of China! There is a law that an individual can only transfer $50,000 out of China, and they will (or ask you to) get creative on finding ways around it. Make sure you decline, and say this is NOT your area of expertise. But when it comes time to complete the transaction, be clear that the source of the funds are good funds — If you are involved in a transfer that is in violation of the exchange controls of a foreign country, you can be implicated in these violations. 15. Again – don’t count solely on web listings. Many older-generation, high net worth Chinese are not searching listing sites for properties. Take a multi-media and multi-pronged approach – this can all be done for less than a plane ticket!

October 2013 - Creepy or ..... Not Creepy?!?

As we come to a close for the month of October, we are all reminded of the holiday season fast approaching. You see the Christmas decorations being set up in places like Costco. Speaking of Costco, good luck finding a parking spot and being able to shop at locations like the Morena Blvd Costco (aka first Price Club). Real Estate in San Diego County and Santa Clara County The "experts" have called for a slower October 2013. I agree (to a point). Being on the front lines as both listing and buyer agents, I see both sides of the real estate fence. From the listing side, I'm still getting leads in both San Diego and Bay Area Counties to list their properties. Homeowners are taking advantage of the appreciation growth. And for those homeowners and business landlords interviewing me to be their agent, my approach is Shin-to-Win Baby!! "Mr. and Mrs. Seller, at what price do you see me selling your home?" On the buyer side, I've been generally seeing an average transaction have 8 offers. Now it's down to 4 offers. That's a 50% drop but my clients are still competing with 3 other interested parties. Is that a slow down? Your San Diego Realtor in Blue Jeans Watch for the You Tube videos as I, your Realtor in Blue Jeans, go over real estate oriented topics like choosing that ideal realtor or where are some great areas to live. My daughter (aka The Daughter of The Realtor in Blue Jeans) joins me as my side kick. Check us out. Fall Sports Good to see the Chargers playing good football, SF 49ers continuing to win, and the Raiders simply improving. Baseball is in World Series mode between the St. Louis Cardinals and Boston Redsox. Hockey in in the swing of things - Go Sharks. And basketball is just around the corner. Trick or Treat. Be safe and don't forget to wear your Halloween costume at Krispy Kreme on 10/31 for your donut. Thanksgiving is just around the corner - Gobble Gobble.

Miss USA and Global Real Estate

Nina Davuluri, Miss New York, took home the crown during the 2013 Miss America competition last month. This is the first time in the history of the pageant that an Indian-American has been declared the winner. To quote Ms. Davuluri, “Miss America is evolving. And she’s not going to look the same anymore.” Truthfully, I am not much of a pageant person. But something about the newly crowned Miss America’s remarks struck a chord. Last summer we devoted an entire edition of Global Perspectives to “exploring India.” In researching the topic, my eyes were opened − the data is extraordinary. Did you know that there are more than 25 million people of Indian heritage living outside of India, making this the second largest expatriate group in the world after the Chinese? Data from the 2010 U.S. census indicates that the number of Indians in the U.S. increased 69% since the 2000 census. In fact, Indians are the youngest, fastest growing, most highly educated and highly paid ethnic group living in the United States today. So while the Miss America competition is a quintessential American event, Ms. Davuluri’s success should not come as a surprise. Quick Facts: ■67% of adult Indians living in the U.S. have their Bachelor’s degree. ■Indians are the youngest ethnic group in the U.S. with a median age of 31.7 years. ■Data from the 2010 U.S. census noted that Indians had the highest average household income at $90,711 versus $50,046 for the total population. ■Indian Americans own over 40% of the hotels and motels in America. This accounts for nearly two million rooms and property values in excess of $100 billion. ■According to NAR’s 2013 Profile of International Home Buying Activity, the median price paid by Indian homebuyers purchasing U.S. properties was $300,000. This is over $121,000 more than the median purchase price paid by domestic buyers. So what does this mean for your business? As a global agent, you should be cognizant that there is a tremendous amount of opportunity working with Indian and Indian-American clients. Indians are purchasing commercial and residential properties throughout the United States. In fact, India (tied with the U.K.) ranks fourth in the top ten countries of origin for foreign home buyers in the U.S. (Canada is number one, followed by China and Mexico.) In comparison with properties in India and many other major global markets, the U.S. is more affordable. For example, the ultra-wealthy are eyeing the U.S. for luxurious second homes. The average price per square meter of a home in Mumbai’s Cuff Parade area is about 40% higher than a comparable property in New York City. Additionally, Indians view U.S. real estate as a safe investment with strong potential for return. Social Customs and Business Practices If you are interested in working with Indian investors, it is important to remember that there is a world of difference between Indian and American social customs and business practices. To be successful, you should recognize dissimilarities and be prepared to adapt to your client’s needs. Below are a few tips to bear in mind when working with Indian clients: ■Stay professional. Hierarchical social relationships are observed in meetings. Status is determined by age, university degrees, caste and profession. High status individuals speak first and those of lower status show deference and listen. Titles are highly valued. Always use professional titles such as “Doctor” or “Professor”. You should not address someone by his or her first name unless requested. ■Be accepting when your clients are late. While Indians appreciate punctuality, it is not uncommon for participants to be late to scheduled meetings. You, however, should always be on time, and never show irritation when your clients are delayed. Also, don’t be surprised if impromptu meetings are requested at late hours. ■Family and friends takes precedence. Social and family obligations supersede business commitments. If a client cancels an appointment because of a family commitment, gracefully express your understanding of the situation. ■Take note of religious holidays. Religion plays a major role in Indian culture− both Buddhism and Hinduism originated in India. Be sure to check the calendar before proposing a meeting date as business is never conducted during religious holidays ■Don’t talk business too soon. Trust and comfort must be established before “getting down to business”. Build relationships by finding common ground socially. Conversation regarding sports, movies, and families is a great way to break the ice. Protocol: Indian Real Estate vs. U.S. Real Estate If you are working with Indian investors who have never purchased property in the U.S. before, it is important you educate them. There is a vast difference between how real estate is practiced in India and how it is practiced in the United States. The more your clients know about what to expect, the better you can manage the process. For example, listings are not exclusive in India. Indians are accustomed to working with many agents when searching properties. Instead of telling them how exclusive listings work, demonstrate it. Show them the MLS, let them narrow down properties of interest, and accompany them to showings of other agents’ listings. This is just one example of the many differences between U.S. real estate practices and Indian real estate practices. The more you know about Indian policies and protocols, the better prepared you’ll be to serve your clients. NAR’s CIPS designation offers a course, Asia/Pacific & International Real Estate, which provides in-depth information regarding working with buyers from Asia, including an entire chapter dedicated to Indian customs, business practices, and information on the Indian real estate market. If you want to learn more about working with Indian clients, this course will help you.

Challenging Low Appraisals

In the volatile real-estate market of the past several years, prospective homebuyers and refinancers have encountered the same frustrating obstacle: a low appraisal.


Appraisal complaints have risen in recent years, particularly since home values began plummeting in 2007 and the Home Valuation Code of Conduct took effect in May 2009. But the experts say this isn't the first real-estate cycle in which contract prices don't often match an appraised value.
"Everyone needs to understand that real-estate appraisers report the market; we don't make the market," says Sara Stephens, president of The Appraisal Institute and principal of Richard A. Stephens and Associates in Little Rock, Ark. "We gather information, analyze it and make a report."

Why appraisals can come in low

A low appraisal is not necessarily wrong, but it does create a situation in which a lender may not approve the loan. Simply stated, appraisers compare the value of a home with the comparable properties, or "comps," in the surrounding area.
Buyers and refinancers often run into trouble when lenders use an appraisal management company to hire an appraiser who doesn't know the local nuances that could affect home values. In markets plagued by foreclosures or short sales, the surrounding comps can weigh down the price of a home in good standing. Or, if there have been few home sales in a given neighborhood, appraisers may be forced to look for comps in surrounding areas where market conditions and the homes may be different.

"Appraisals are a moving target and are based on closed sales, which can be a problem when there are few closed sales to use for comparable properties," says Carole Short, a sales associate with Coldwell Banker Residential Brokerage in Dunwoody, Ga.

While homebuyers and homeowners cannot control a property appraisal, they can influence and challenge it if need be.
Educate the appraiser

"I recommend that [real-estate agents] and homeowners prepare written materials for an appraiser that include information about home improvements and anything else they know about the property that can improve its value. This can improve the chances for a higher appraisal," says Amy Tierce, regional vice president for Fairway Independent Mortgage in Boston.

Stephens recommends that sellers be present at an appraisal. While lenders are held at arm's length and cannot directly communicate with an appraiser, real-estate agents, buyers and sellers are allowed to talk to the appraiser. Agents can present the appraiser with information on comparable sales and how they came up with their sale price.
How to challenge a low appraisal

An appraisal dictates how much money lenders are willing to lend to a borrower. If a home's value is determined to be less than the preapproved loan amount, the lender cannot approve the loan. Buyers have the following five options when challenging a low appraisal:
1. Cancel the contract. Short says that almost all sale contracts today are written with an appraisal contingency that allows buyers and sellers to cancel the contract if the appraisal comes in too low.
2. Negotiate a new deal. "Buyers are allowed to challenge a low appraisal, but usually they prefer to renegotiate the contract," Short says. "A lot of buyers are actually excited if an appraisal comes in for $20,000 less than they offered because they assume they can negotiate to buy the house they want for less money." But that's only if sellers are willing to accept the lower price, which many times they're not.
3. Pay extra. "Every negotiation is specific to the individual circumstances of the contract, how much the buyers want the house and whether the sellers are willing to drop the price or assist with the financing," Short says.
Not all sellers are willing to negotiate, however. So sometimes after an appraisal comes in low, buyers must pay additional cash in order to meet the agreed-upon sale price. Tierce says negotiations should be as creative as possible, including seller financing or other concessions.
4. Challenge the paperwork. Stephens says the individual who pays for the appraisal typically the buyer, can request a copy of the appraisal and review it. Short says real-estate agents and buyers would need to provide additional facts about comps or point out mistakes regarding such items as the number of square feet or the number of bedrooms.
"You should check the comps to be sure they have geographic relevance and the same interior and exterior features," Stephens says. "You can also hire another appraiser to do a review of the appraisal for an additional cost."
5. Request a second appraisal. "If a challenge or a review doesn't change the appraisal, then a buyer can ask their lender to hire another appraiser," Stephens says. "Be sure to request someone with geographical knowledge and someone competent and explain why you are asking for a second appraisal."
Short says either the buyer or the seller can challenge an appraisal or even request a second appraisal. "A challenge should be based on specific errors rather than opinions."

In The Wake Of The Week- October 3rd

October Already? - A few more months and we'll see 2009 come to a close. How scary and exciting is that? With the start of football, hockey, and baseball playoffs, yours truly will be camping out in front of the tv more than normal.


Grandma Kraft - It was nice seeing Grandma Kraft for Yom Kippur. She's the only grandmother alive on both sides of the family. At 87, she's looking forward to her great grandchild being born in 2010.


USF Council - It's quite a honor being nominated onto the board for my alma mater. I look forward to attending all the events with Brandy. The last event at Tom Malloy's Race Car Warehouse was quite fun and entertaining for my wife and for my in-laws.

San Jose Sharks - Hockey season's back in session. Go Sharks.

San Francisco Giants - Close but no cigar... Hopefully, they will make adjustments to solidify their positions for next year.

In The Wake Of The Week - Sept 26, 2009

It's nice spending time in the desert with the Mrs... We are truly blessed to have the dual locations. How can you beat the ocean and the desert?

Speaking of the Mrs., because of her hormonal pregnancy situation and separation anxiety, we've decided to remain together (and not separated!) in either San Diego or Palm Springs. Whether the commutes back and forth shortens remains to be seen. Plus, it seems Baby Shin needs its father's hand and touch. Speaking of....

Baby Shin- What a joy. Whoever thought a new life could bring this much joy to yours truly? Baby Shin doesn't realize how much of an impact it's been to Brandy and I, our parents, my brother, and her brother. It's already a trooper with the stress that Brandy endures. Not to mention, it's already developing attitude in the womb. Payback surfaces itself from offspring.

TV Premieres- Didn't really watch any of them, except Two And A Half Men. I still see similarities with my life and the show....

San Francisco Giants - They're still in it. Humm Baby. Continue with the great pitching led by Timmy Lincecum and get the bats rolling and we'll have extended play in October.

Health Incident - It's still an emotional event that occurred almost 1 year ago. The other day, I brought Brandy to the UCSD hospital and she got emotional herself being in the same hospital room. I mean, without yours truly alive, there would be no "pumky" today. To commemorate this event, we've decided to bring donuts for the workers at UCSD and to bring cake at our next Connect event.

Football - Devastating loss for USC. It seems like last week's game happens every year. Washington this year. Oregon State last year. The Bolts are starting off slow again. I mean, the Oakland Raiders have the same record! However, you can't beat the aggressive play of the San Francisco 49ers. Go Niners!

Me Write You Long Time...

It was excellent working and spending time in San Diego all week. The weather is much cooler than the desert (Palm Springs)...

Cardenas: Speaking of the desert, I miss Cardenas. There's really no place in San Diego where you can get fresh watermelon/cantaloupe juice. I mean, 40% of SD is latino and yet you can't get a Cardenas?!?

Family Update: Wife and soon to be born baby are doing well. Brother is doing well. Parents are doing well. In Laws are doing well.

High Blood Pressure: It's really important to keep your high blood pressure in check. Check yourself before you wreck yourself. That means no soda's and eliminating fast food out of your diet.

Ping Pong Playa: The San Diego Asian Film Festival showed "Ping Pong Playa". The movie is about some Chinese, gangster talking, basketball playing wannabe that has to step up to help his family by winning a ping pong tournament.

Rosh Hashanah: L'Shanah Tovah to all my fellow Jews. Yours truly is becoming more Jewish every minute. It was nice celebrating with Brandy and other Jewish brethren at the synagogue (Kehilat Ariel).

Hany Los Lobos: It was nice having lunch with the guy after all this time. You gotta give the guy props for managing his life the way he has. Just remember, La Bamba.....

San Francisco Giants: Humm baby. Continue winning and October / November will be great months.

Coupons: Ever since I've started a baby fund, yours truly has been cutting out more coupons. None of these, "save 25 cents" coupons, but it seems like every restaurant in San Diego has a promotion happening. That includes McDonald's! Not to mention, every grocery store is offering double and even triple coupons.

I think it's absolutely foolish by not taking advantage of these promos. "Such a time is this...."