What do international buyers and sellers have to know about Manhattan real estate? We interviewed two award-winning Certified TopAgents who specialize in international clients to find out.
Astrid Pillay, Halstead Property: Astrid was the highest grossing agent in the Halstead Eastside Office in 2004, 2006 and 2008. She has worked with many international clients and has lived all over the world, including Israel, Sudan, Hong Kong, Italy, China, Norway, Cambodia and Thailand.
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Gabriel Bedoya, The Corcoran Group: Gabriel was named Corcoran’s “Rookie of the Year” in 2003. Since then, Gabriel has been one of the firm’s Top 25 agents for three years running. He works with many international clients and is fluent in Portuguese, Spanish, French and Italian.
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What are some of the challenges that international clients face when buying or selling NYC homes?
Gabriel Bedoya: In New York, you’re always represented by an attorney for the transaction. The other aspect that is much different, is that there is no money transacted at the beginning of the sale. Sometimes foreign buyers come with their checkbook, thinking that it’s required to write a check right away, but that doesn’t happen here. There first has to be a meeting of the minds and then the attorney will go through their due diligence, looking into the financials of the building, the Board of Directors, the budget, etc. This can take up to a week. Only after everything is agreed upon does the buyer write a check for the down payment.
Astrid Pillay: When selling, there are certain tax related procedures that are specific to foreign sellers. The IRS requires foreign sellers to have their lawyer hold 10% of the capital gains for a period of one year in order to ensure that taxes are paid. That’s one thing that we explain before they go on the market – they won’t get all the proceeds of the sale immediately.
For international buyers, it’s important to know that banks are no longer as generous as they used to be. They require much larger down payments from foreigner buyers than residents often double. Recently my foreign buyers have had to put down at least 40% of the purchase price, have had to establish accounts with the lending banks, and have had to have 12-18 months of expenses put in a savings account in the bank—to ensure there are enough funds available to service the loan. That adds up to quite a bit of money. Many non-cash international buyers are increasingly discouraged and reluctant to buy in the city.
What advice would you give to an international client who is looking to buy in Manhattan?
Astrid Pillay: I explain to them the concept of a co-op. A lot of buyers want to use the place as a pied-a-terre or to let their family use it or to rent it out and nearly all co-ops don’t agree to this concept. In most cases coops look for individuals who will be using the apartment as a primary residence. The overwhelming majority of the time, this is not something that is suitable for foreign buyers.
Gabriel Bedoya: It’s a very good time to buy for foreigners, which is why I think the demand has increased so much over the past few months. Tax abatements in new construction is an interesting factor that they understand and like Second, the currency exchange–the dollar is at its lowest point in Europe, so that makes investments very attractive. Another reason is the supply–there’s a lot to choose from, whether it’s a resale or new development. Lastly, it’s a buyer’s market, and although the prices have been adjusted by most sellers to reflect the market, there’s still a little room to negotiate.
I usually tell international buyers that they need to have a good attorney, a good broker, and if they are financing, to be working with a good bank. Those three things are very important for a successful transaction, no matter where in the world you are. It will make the most efficient transaction from beginning to end.
Is a particular property type better suited for international clients?
Astrid Pillay: It is much easier for foreign buyers to buy in a condo. Coop requirements are often too complicated for foreign buyers. Coops also require foreign buyers to disclose all their asests–which most foreign buyers find offensive.
Gabriel Bedoya: My international clients only purchase condominiums. They know that even if they like a co-op in a beautiful building and great location, it won’t be a good fit because most co-ops won’t accept foreign buyers.
What is the benefit of working with an agent who has experience working with international clients?
Gabriel Bedoya: The most important thing is to realize that our transactions—either purchasing or selling in NYC–are so very different. It requires a good amount of education for someone who’s not from here. It’s also a process in which you must inspire a lot of trust and impart an understanding of the chronology–what will happen during the first two weeks, then from 2-4, 4-5, 5-6, etc. There is also the fact that they’ll need to provide so much financial information. For the real estate broker, I find it very important to be like a teacher with the buyer. You have to be very patient and transparent with everything, because there are certain situations that could scare many people away. For example, bidding wars that we seeing in NY are a completely foreign concept to many international buyers. I recently had an experience with an Italian-Swiss couple and French buyer bidding for the same property with a third party, a New Yorker, and at the end, the Europeans withdrew their bids because they became uncomfortable.
Astrid Pillay: Working with a broker in NYC is extremely important since there are so many steps to the transaction and a broker need to work in a team with the lawyers and banks to complete the transaction. Having intimate knowledge of the buildings that allow international buyers and rules for renting the apartment is very important. Buyers will be confident that they have someone who can take care of their property. Speaking a language or sharing a cultural understanding helps a lot as well. A lot of international buyers today are sophisticated and speak English, but if you can speak their language, that makes them very comfortable.
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on Feb 9th, 2010
@ 2:47 pm:
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