Foreign Buyers Pay More for Real Estate Than Local Buyers.

An interesting article in the Winter 2023 issue of “The Appraisal Journal” written by Drs. Allen, Goodwin and O’Sullivan concluded that foreign buyers pay more for real estate.  The authors studied the condo market in Miami.  Their conclusion validated the generally accepted belief within the real estate industry that local buyers have an advantage from first hand knowledge of real estate people in the community, the neighborhood dynamics and pricing trends.

Most people have a handle on what a house is worth.  They know what a house for sale is listed at.  But the real estate market is much more sophisticated today.  A sale’s price is a matter of public record.  There are many professional services that collect and collate the data.  It is the function of the appraiser to adjust a sale to indicate an accurate value of the subject property.

So, the study conducted of the Miami condos was derived from the Miami, Florida multiple listing service.  As one would expect, a large portion of the buyers came from South America.

Just as real estate has been considered a tangible, stable investment for people inside the United States, during times of political and economic uncertainty, US real estate serves the same purpose for foreign buyers, looking to move their money outside of their home countries.

Foreign buyers disappeared during the pandemic, but are now back.  In 2022, international buyers snapped up 98,600 properties, totally $59 billion.

The increase from foreign buyer prices partly reflects the increase in US home prices.  All-cash sales accounted for 44% of international buyer transactions, nearly twice the rate (24%) of all existing home buyers.

I believe that another element is that foreign buyers are much more interested in a quick purchase.  They will not be negotiating price and terms as a local buyer.  They want to move their money quickly into a safe investment.  Foreign buyers do not have the time to dither on price.  Generally, they have a time limit to shop around or negotiate.  They may also be unsure of local customs in the purchase of real estate and laws that they must comply with to do so.

Posted in Foreign Buyers, Local Buyers, Real Estate Customs
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