A. Factors Driving Globalization: How to Get Started (5 mins.)
1) What is globalization?
2) Define the term and process
B. Ways To find International Real Estate Clients: Who Are They? (10 mins)
1) Finding an international residential or commercial real estate buyer/seller
2) Attend the international conferences to investigate how user-friendly certain countries are conducting and choosing their continent of choice. Finding an international arena to sell Massachusetts property abroad or to find international real estate for a Massachusetts investor
3) International Real Estate Conferences that exist strictly for real estate brokers and investors
4) Identifying international real estate associations of real estate professionals that are trusted by consumers. Information is available on-line such as:
i. MIPIM (International Property Market; www.mipim.com), FIABCI (The International Real Estate Federation; www.fiabci-usa.com), World Association of Property Investment & Construction (www.wapic.com)
ii. International Consortium of Real Estate Associations (www.realtor.org), Foreign Bilateral Cooperating Association of Partners of NAR (National Association of Realtors; www.realtor.org)
iii. Royal Institute of Chartered Surveyors (www.rics.org)
iv. Fellow Realtors Institute (www.crea.ca)
v. Certified International Property Specialist (www.realtor.org/international)
vi. CoreNet Global (www.corenet.org)
5) Identifying real estate designations and organizations strictly for international real estate investors and brokers
6) Discussing international real estate brokerage designations, CIPS (Certified International Property Specialist), FRICS (Fellow, Royal Institute of Chartered Surveyors)
C. US and State Organizations (10 mins)
1) International resources that brokers can utilize to help clients looking for real estate abroad and vice-versa
2) Massachusetts Office of International Trade and Investment
3) See MassDevelopment (www.massdevelopment.com)
4) See Mass. Alliance for Economic Development (www.massecon.com)
5) The Export Opportunity Hotline/Small Business Foundation (www.exim.gov)
6) Discussion on the Export-Import Bank of the United States
D. Nuances of the Business: Business Etiquette/Negotiating with Foreign Investors (40 mins)
1) Possible References for students beyond this class: “Kiss, Bow or Shake Hands”
2) “Do’s and Taboos Around The World” by Axtel
3) “Business: Ultimate Resource” by Daniel Goldman
4) See www.moving.com
5) Cultural Nuances and Negotiating Styles
6) The differences in negotiating
7) Sample greeting gestures
8) Shaking hands may be different in each country
9) Understanding proper business etiquette
10) Understanding proper social etiquette
11) Real estate financing, offers and decision-making variables differ
12) Examples of countries
13) Review of the U.S. Foreign Corrupt Act
14) Discussions on Feng Shui and how it may impact marketing residential real estate and attracting residential international buyers
15) How “Numbers” may impact the marketing of real estate
16) U.S measurement in square feet versus other countries
17) Measuring space has different methods in different countries both in residential and commercial real estate
E. Terrorism Insurance and the Patriot Act (5 mins)
1) Presidential Order after 9/11: Prohibits anyone from doing business knowingly or not with terrorists or those who support them
2) Commercial landlord or broker leasing to a person listed on the US terrorist list
3) Researching commercial tenants to see if they are on the US Terrorist list: See the U.S. Treasury website.
F. Foreign Investment in Real Property Act (10 mins)
1) Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
2) Researching the IRS website to understand the tax consequences on the sale of residential and commercial real estate
3) Individual Real Estate capital gains tax rates
4) How the IRS can withhold money from a broker or responsible party at the closing of real estate if FIRPTA is not compliant
5) An international investor buying residential or commercial in the US had a major advantage of no taxes on the sale of U.S. owned real estate (That is not the case anymore)
6) Congressional discussions to remove FIRPTA to attract foreign real estate investors
7) FIRPTA has an impact on the sale of vacation homes as well as commercial properties
G. Vehicles of Ownership (15 mins)
1) Many countries do not have fee simple title
2) Many countries do not have Registry of Deeds and/or documents are not public information
3) Contacting and referring to a local attorney on ownership vehicles is imperative before your international business commences
4) Explaining deed or title to international buyers
H. Getting Paid: How are real estate brokers compensated? (15 mins)
1) Consulting, Commission or Fixed Fees
2) Mass. requires brokers selling within the Commonwealth, an interest in real property located in a land development that is located outside the Commonwealth, to register the owner or developer with the Board (254 CMR 6:00) and subjected to Board’s voluntary decision to inspect
3) Form of payment differs drastically from continent to continent (commissions may not necessarily be the form of payment in many countries for a broker)
4) International brokerage fees and ways payment may vary from U.S. practices
5) Commissions, licensing issues (non-issues), salaries and commission payments may not be standardized (consumer representation may vary)
6) Examples of international payments: tenant/buyer brokers may be paid upon exchange of contracts or offers, hourly fees, abortive fees, incentive fees for saving money, reimbursements, VAT reimbursement (internationally known as a federal sales tax, value added tax) and minimum agent’s fees (brokers may be salaried with bonuses)
7) Licenses may not necessary be required in many countries for real estate brokers
8) Many countries require written contracts as brokers to represent and to be compensated by the party you represent. In many countries, agency engagement is only permitted with a written agreement (see MGL c.112, Section 87PP on licensees).
9) Differentiating a Letter of Intent (LOI) or Offer to Purchase in the U.S. with the Heads of Terms (HOT)
I. What are the Essentials? (10 mins)
a) Tax and Ownership Liabilities/Currency Issues
b) There are special foreign taxes in the US as well as abroad
c) Real estate investors from Massachusetts buying abroad may be subject to repatriation issues and it may not be possible to direct the investment dollars back to the U.S.
d) Different countries have different rules on repatriation of capital gains and original investment dollars
e) Currency and exchange rates
Suggested References on this Topic outside of Class:
1. Suggesting Reading on Global Economics: “World is Flat” by Tom Friedman; “Mystery of Capital” by Profl. DeSoto; “Clash of Civilization” by Prof. Sam Huntington
2. Foreign Investment in Real Property Tax Act of 1980: IRS Website
3. Feng Shui websites
4. “Kiss, Bow or Shake Hands” by Morrison, Conaway and Borden
5. “Do’s and Taboos Around The World” by Axtel
6. “Business: Ultimate Resource” by Daniel Goldman
7. See www.moving.com by Monster Board