Generally these areas share a few similarities. First, nice is often synonymous with new. The most affluent and desirable areas tend to have a lot of new construction. As a result of this engrained belief, many of the people that relocate to the States favor new or newer construction in very good condition. Thus, the grand old dame in Old Palo Alto that would appeal to so many Europeans and New Yorkers may be passed over in favor of a newly constructed home with an in-law suite in Midtown.
Also, the smaller lots in many parts of Palo Alto and the surrounding areas may not deter buyers from areas where land is very limited and housing is quite dense. Therefore, not surprisingly, the convenience of Palo Alto may hold more appeal than the rural charm of places like Woodside and Portola Valley.
Once a foreign buyer has found the perfect house, he or she needs to submit an offer that will be considered competitive in this hot sellers' market. Fortunately, foreign buyers tend to favor all-cash purchases for a combination of cultural and practical reasons. On the cultural side, many countries do not share the American acceptance of debt, especially long-term debt. On the practical side, it is simply harder for buyers to obtain credit when the majority of their income and credit history is outside of the United States.
While some banks, most notably HSBC and Citi, have begun to lend based on international credit history and foreign income, the approval process takes considerably longer. Although all-cash offers may be both more convenient and competitive for the well-heeled foreign buyer, this may not be possible for many foreign buyers. Therefore, sellers evaluating multiple offers should consider the reasons for a longer requested escrow period and weigh the offer's strength in light of the totality of the circumstances.
In addition to the impact on the offer process, the shift in demographics over the past 20 years has reduced housing inventory. Typically the "American Dream" of home ownership has involved a consistent upgrading of homes throughout one's life cycle. Generally, someone graduated from college, saved money for a down payment, bought a condo or small house and lived there until their family size made them desire a larger home. Most often, they would sell the first property and use the proceeds as a down payment on the next property.
Many foreign buyers utilize a buy and retain strategy. When it is time to upgrade, many foreign buyers retain the old property as an investment. Thus, there are fewer and fewer properties coming on the market each year. Naturally, this reduced inventory contributes to the strength of the local real estate prices.
While it is inappropriate, and, in fact illegal, for a seller or real estate agent to steer people of a certain ethnic group towards one area or house, it is wise to remain cognizant of cultural factors that may impact the potential buyer pool. This can range from advertising in foreign-language papers, staging the home to appeal to foreign buyers (e.g., consider Feng Shui elements) and weighing offer strength in light of all circumstances.
Without question, the quintessential American melting pot is alive and well in Silicon Valley. Whether a buyer or seller, an understanding of the various factors that impact foreign buyers will help you best structure the transaction to achieve the best possible result.
This story contains 696 words.
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