Discussion Question

Transcription

Discussion Question

International Real Estate
for Local Markets
(formerly Essentials of International Real Estate)
Course Manual
Certified International Property Specialist Network
National Association of REALTORS®
International Operations Division
430 North Michigan Avenue
Chicago, IL 60611-8047 USA
v2007
1.800.874.6500 ext. 8412 US & Canada
1.312.329.8412 Internationally
Fax: 1.312.329.8358
[email protected]
www.realtor.org/international
In Memory of
A. Alexander Bul
CIPS, CPM, CRE
CIPS International Real Estate for Local Markets (formerly Essentials of International
Real Estate) is dedicated to the memory of Alex Bul, who passed away on November
24th, 1991, at the age of 69. Alex was president emeritus of the Henry S. Miller
Management Corp. and a former Dallas Assistant City Manager. He also headed the
Ryan Reilly Center at the University of Texas.
Alex was a true leader in international real estate education. In addition to teaching for
ASREC, ULI, IREM, FIABCI and BOMA, he taught many education sessions at
National Association of REALTORS® annual meetings. Alex was instrumental in
developing this course and the CIPS designation. He was a member of the International
Operations Committee's subcommittee on education, marketing, and publications, and a
vital member of the curriculum development work group.
Alex was always available to his students and colleagues, and he could always be
counted on for excellent instruction due to his experience in managing Dutch pension
fund real estate investments. This course is a continuation of the excellent work he
started.
CIPS International Real Estate for Local Markets
Notes to the Facilitator
Each CIPS course manual is organized to help you present the material.
Each chapter begins with an overview, objectives and application section
that introduces the material and explains how the lesson learned will apply
directly to an international practice. The chapters contain some presentation
notes and indicate when to use an overhead. The exam questions are
indicated next to the content to be covered. Key point reviews and
discussion questions are listed at the end of each chapter. Information that
is subject to frequent updates is placed in the appendix. Materials for the
course include a set of transparencies, a final exam and an exam answer
sheet.
General Notes

Your introduction of the class sets the stage for the day.
Introduce yourself and establish a relaxed, friendly environment
so that learning can take place. Welcome students not only to
class but also to the NAR CIPS Network.

Begin by asking students to introduce themselves and explain
what they expect or hope to learn from the course. Capture the
answers on a blank transparency or flip chart (a student may
assist with the writing). At the conclusion of the class, review
the expectations with the class to make sure students have
received the information they wanted. Be prepared to offer
suggestions and/or resources for material not covered in class.

Also ask students to define international real estate. Emphasize
that you do not have to visit another country to learn about
international real estate – you can learn a lot just by working
with foreign investors in your own country.

Emphasize networking. Allow time for students to meet each
other and network. Suggest that students exchange business
cards during class breaks. Also suggest that they note their
specialties on their cards.

Use the overview, objectives and application sections to
introduce the topic of the chapter. Read these with the students.

Use the transparencies as aids to develop and lead discussions,
but feel free to use additional materials (i.e., recent articles,
sample advertisements, etc.) to help you teach.
© 2007 National Association of REALTORS®
Notes to Facilitator 1

Ask students to share their personal experiences. This adds extra
depth to understanding as well as interest.

Let students know that they do not have to master technical,
theoretical or detailed material in order to pass the examination.
The course aims only to develop awareness of the topics
discussed. Anyone who is attentive and participates will be able
to pass the exam.

Allow students time to complete the self-review section at the
end of the chapters. This will enable them to put together a
personalized learning action plan, which will be helpful after the
course is over.
Teaching Tools
The following tools and exercises will facilitate learning and interaction in
the classroom. Many of these have been suggested by current CIPS
instructors and have been found to be particularly helpful in conveying the
course material. Feel free to incorporate those that you feel are appropriate
for the particular course you are teaching. Keep in mind that students from
some cultures may be uncomfortable participating in certain exercises, so be
sure to select exercises that are appropriate for your student population.
Periodicals
Distribute newspaper and magazine articles (with copyright
permission) to present current information. Involve class in
discussions about current events and situations. Make students
aware of widespread financial resources, such as The Wall Street
Journal (all versions), The Financial Times, The Economist and The
International Herald Tribune. It may be helpful to show students a
copy of each so that they know what the periodicals look like. You
may also want to have copies of periodicals available for class
exercises.
Maps
When you are discussing different sections of the world, post a
blank map on the overhead. Provide the class with a list of countries
and ask them to indicate the location of the countries on the map. If
time permits, you may want to ask for capital cities as well.
International Name Tents or Flags
Use name tents with international flags. Award a prize to the first
person to name the most countries. Or you may purchase a set of
international flags – or other props – to place around the classroom.
Use these props to encourage questions and discussion.
© 2007 NATIONAL ASSOCIATION OF REALTORS®
Foreign Consulates
Whenever possible, invite representatives from foreign consulates to
address the class.
Question Collection
Pass around index cards and have participants write down any
questions they have. Pass the cards around the room and ask
participants to put a checkmark on the card if they, too, have that
question. Collect the cards and answer the questions – or pass them
back to the students and have them answer one another’s questions.
Identify Subject Experts
At the beginning of class, have participants write their names on an
index or flipchart with the statement, “I can answer questions about
___________.” Toward the end of class, have participants respond
to the question, “I still have questions about __________.” Use the
subject experts in the room to help you answer the questions.
The “Who Cares” Question
When presenting information to the class, stop and ask, “Who cares
about knowing this information?” Allow students to raise their
hands, and then explain WHY certain information is important for
them to know. This will enhance both learning and retention.
Good Luck Tokens
For fun, and to encourage and show support, tape a dollar bill under
each attendee’s seat with a note that says, “Good luck making your
first dollar in international real estate.” At some point during the
class, ask students to look under their seats.
Buzz Groups
Form small groups to learn any parts of the course, particularly
those concepts you feel are more difficult, and have the group report
back to the class. Be sure to assign specific time guidelines.
Share Experiences
Periodically ask a participant to stand and share details of an
international transaction and what he or she learned from that
transaction. The participant can then call on another student. You
may have time to progress to a third person. If you do this
throughout the day, it will allow participants to teach each other
from their own experiences – and it will break up the lecture.
Cultural Role Play
Use role-playing to demonstrate cultural behaviors, such as greeting,
exchanging business cards, etc. Be sure to allow time for all
students to practice afterward.
“International Companies”
Divide class into small groups representing international companies.
Allow each group to select a CEO, create a mission statement, set
goals and create a logo. Each “company” then presents its
investment goals to the class.
Market Analysis
Ask students to close their books. Conduct a market analysis
(CMA) and post the list on a chart or overhead. Then allow class to
open their books again, and point out that they already know how to
do it.
Speak Another Language
If possible, speak in another language for a minute or two. This is a
graphic demonstration of how people feel when they are dealing
with language barriers.
Telephone Books
Ask attendees to list three countries in which they have an interest.
Pass telephone books among the class and have them locate at least
one that represents their areas of interest. Once they are in a group,
suggest that they use telephone books as a resource for finding
information, networking opportunities, or potential clients. Then
allow them to talk among their groups as to any other suggestions
for finding information. If time permits, have them share these
suggestions with the entire class.
Top 5 Lists
Have students get in pairs and discuss the top five things a real
estate professional must know to facilitate an inbound or outbound
transaction. Have them report these back to the class – record them
on the flipchart. (This technique can also be used for other subject
matter.)
Pose Key Questions
Pose three or four questions before or after lunch. The questions
should be similar to the more complex exam questions. Write them
on a flipchart. Then ask students to circulate throughout the room to
discuss the answers to the questions with other students. (This can
also be done over lunch.) When the group reconvenes, have
students provide answers they came up with, then provide them with
the accurate responses. This technique can also be used prior to
your lecture on a particular subject. Ask a question that students do
not know the answer to. Allow them to respond, then provide a
lecture that includes the information that answers your question.
Gallery Walk
Write down four or five key questions or subject areas on flipcharts
and situate them throughout the room. (For example, “What I am
taking away from this course: _________.”) Ask students to “get up
and take a gallery walk.” During the walk, they should record the
information on each flipchart. At the end of the exercise, have
volunteers read what is on each flipchart.
Key Point Searches
At the beginning of a chapter, write key points or terms on a
flipchart. Divide the class into small groups, assign them to specific
terms, and have them search through the chapter for the
definition(s). Have the group’s report their answers – and how the
terms relate to real estate – back to the rest of the class. (This
exercise can also be used at the end of a course as a review in which
students search for terms throughout the entire manual.)
Small Team Review
After you have covered several difficult chapters, ask the class to
break into teams of two or three to: 1) clarify the content, 2) create
examples or illustrations that support the concept, and 3) identify
areas that are still unclear. Have the group report back to the class,
then respond to any areas that are still unclear.
Goal-Setting
Toward the end of the class, ask students to write down their
personal goals for international real estate. Select one or two goals
and have the entire class brainstorm about possible steps to take to
reach each goal.
Ball Toss Review
At the end of the course, or at the end of each chapter, toss a soft
ball to a student. The student must then share something he or she
learned in class (preferably something they didn’t know before) and
toss the ball to another student.
Table of Contents
Introduction _______________________________________ 1 - 1
SECTION 1: Conducting International Business
Chapter 1: Globalization ____________________________ 1 - 3
Chapter 2: Capital Flow _____________________________ 1 - 9
Chapter 3: Currency Issues _________________________ 1 - 21
Chapter 4: Investment Trends _______________________ 1 - 37
Chapter 5: U.S. Regulations on Inbound Investments____ 1 - 63
SECTION 2: Professionalism in a Diverse Marketplace
Chapter 6: Local Market Demographics _______________ 2 - 1
Chapter 7: Cultural Issues and Practices_______________ 2 - 9
Chapter 8: Cross Cultural Relationships ______________ 2 - 41
Chapter 9: Transaction Expectations _________________ 2 - 49
Chapter 10: Ethics and Equal Service _________________ 2 - 61
SECTION 3: The World of International Real Estate
Chapter 11: Professional Goals ______________________ 3 - 1
Chapter 12: Create and Launch A Business Plan _______ 3 - 21
Chapter 13: Marketing and Selling Practices ___________ 3 - 35
Appendix __________________________________Appendix - 1
Glossary ___________________________________ Glossary - 1
Resources ________________________________Resources - 1
Table of Contents 1
Introduction
Time: 30 minutes
International Real Estate for Local Markets is the first of six international
courses developed by the international section of the NATIONAL
ASSOCIATION OF REALTORS® (NAR). This course is designed to
introduce real estate professionals to the basic skills and knowledge
necessary to facilitate international real estate transactions. This is one of
the courses required to earn the Certified International Property Specialist
(CIPS) designation.
Welcome students to the
course and the NAR CIPS
Network. Your welcome sets
the tone for the class. The
objective is to set a friendly
and relaxed environment
where learning can take
place.
The course is designed to benefit experienced international professionals,
individuals with real estate experience who are considering international
specialization, and the NAR general membership.
Introduce yourself and give
a brief summary of your
experience. Depending on
class size, the instructor may
have each student give a
brief personal introduction
with BRIEF being the
operative word.
Course Objectives
As the first CIPS course, International Real Estate for Local Markets
introduces participants to the unique dimensions of international practice.
The course is designed to create an awareness of:
•
Globalization of economies
•
International capital flow
•
Effects of currency exchange on transactions
•
Basic principles and trends in international investment
•
U.S. regulation of inbound investment
•
Cross-cultural relationships
•
Diversity and inclusive real estate practices
•
Fair Housing Act and its effect on marketing and selling practices
•
Roles and expectations in international transactions
Outline the schedule for the
day, including lunch and
break times. Indicate the
location of bathrooms and
telephones.
Conduct the opening
exercise.
Introduction 1
Course Overview
International Real Estate for Local Markets is presented in three sections
beginning with Section 1: Conducting International Business. These
chapters provide information necessary to work in the global marketplace
including:
o
International business environment
o
Sources and flow of capital
o
Currency
o
Investment trends
o
U.S. Regulations on unbound investments
Section 2: Professionalism in a Diverse Marketplace, is a study of diversity
and fair housing practices in the local market designed to raise awareness
and sensitivity to multicultural issues. A growing understanding of these
issues provides a sound foundation for working with different cultures and
the needs and expectations of these individuals during the buying and
selling process. Topics covered include:
o
Local Market Demographics
o
Cultural Issues and Practices
o
Cross-Cultural Relationships
o
Transaction Expectations
o
Ethics and Equal Service
Section 3: The World of International Real Estate focuses on preparing to
work and succeed in the global economy. Topics addressing these issues
include:
o
Professional Goals
o
Create and Launch a Business Plan
o
Marketing and Selling Practices
Participants will learn to:
Introduction 2
o
Modify marketing and selling practices to attract and service a
multicultural constituency
o
Develop and expand opportunities for networking in the local and
international markets
o
Create a culturally inclusive business plan
Activities and Class Procedures
This course incorporates a variety of activities designed to involve students,
such as work group assignments, group presentations, exercises and
discussions.
Participants are strongly encouraged to ask questions and engage in class
discussions and group exercises. Due to the range of experience levels
among students, there is great opportunity to learn from one another. Your
active involvement will only enrich your learning experience over the
course of the program.
Final Exam
At the end of the course, participants will be given an open book multiplechoice exam to test and reinforce achievement of the course's learning
objectives. Following successful completion of the course, each student
will receive a CIPS course certificate in 6 weeks.
Resources
The appendix of this manual contains many resources for expanding on the
material presented in this course. These resources are as up-to-date as
possible. It is the real estate professional’s responsibility to remain current
on trends and issues in the ever-changing real estate market. The following
websites are useful resources for the CIPS courses. They are:
•
CIPS Network/National Association of REALTORS®:
•
Denver University Global Real Estate Project: burns.dcb.du.edu
•
International Consortium of Real Estate Associations (ICREA):
www.WorldProperties.com
Introduction 3
Introduction 4
_____________________________________________________________
Section 1:
Conducting International Business
Introduction
Chapter 1: Globalization
Chapter 2: Capital Flow
Chapter 3: Currency
Chapter 4: Investment Trends
Chapter 5: U.S. Regulations on Inbound Investments
Section 1 - 1
_____________________________________________________________
Introduction
Overview
The International Real Estate for Local Markets course begins with an
overview of globalization in the real estate market and the accompanying
factors which apply to conducting business in the new global marketplace.
The study of diversity and fair housing practices in an ever-changing local
market is designed to raise awareness of practitioners which will lead to
increased sensitivity to multicultural issues, practices, and traditions. This
new awareness will provide a sound foundation for working with ethnic
groups, immigrants, and foreign nationals in a global economy.
Participants will have the opportunity to:
•
Examine different cultures and the needs and expectations of these
cultures during the buying and selling process
•
Modify marketing and selling practices to attract and service ethnic,
immigrant, and international clients
•
Develop and expand opportunities for networking in the local and
•
Apply what they have learned by creating an inclusive business plan
The course addresses the international business environment including the
sources and flow of capital and currency, investment trends, and
government influences on foreign investment. A variety of issues will be
examined, including laws, regulations, and taxes that are associated with an
inbound real estate investment.
Opening Exercise – This and the following exercises
are in your instructor notes only
The opening exercise provides an opportunity for you to meet and introduce
yourself to other class participants. It also helps everyone to focus on the
purpose of the course and enjoy the opportunity to learn.
Your facilitator will ask you to participate in one of the following exercises:
The Story of Your Name
Form groups of three to five people. Each person should introduce
him/herself and tell the story of his or her name by answering the following
questions:
Section 1 - 1
Introduce
yourself.
Review the class
procedures.
Present the
overview.
Select one of the
opening activities
on this page or the
next to use in your
class.
At the end of this
exercise, ask each
group to select the
most interesting
story presented
(making sure, that
the person whose
story is being shared
is willing to have his
or her story repeated
in front of the whole
class).
_____________________________________________________________

Why did your parents give you your first name or middle name?

What is the story of your last name?

Did you have a high school nickname? What was it and how did
you get it?
Un Regalo (A Gift)
Introduce yourself, and tell about a gift that you bring to the context of the
day. The gift or regalo is something unique about you that others may not
know simply by looking at you. It might be a character trait (patience,
perseverance, appreciation of diversity), a talent (speak another or several
other languages), or something about your background (worked with a
special group or in another country).
About Me
Introduce yourself and finish the following two sentences:

Occasionally when people meet me, see me, or interact with me,
they think that I am…

If they would get to know me better, they would understand that...
Thinking about Diversity
Form groups of three to five people. Write the word diversity in the center
of a sheet of flip chart paper. Then, write at least ten words that come to
mind when thinking about diversity. A group spokesperson will share the
list of words with the rest of the class.
Dot Group
See instructions at end of Chapter 2
Section 1 - 2
_____________________________________________________________
Chapter 1: Globalization
Overview
This lesson introduces concepts of modern economic globalization: what it
is, how it has come about, and how it affects the international real estate
professional.
Objectives
Read the overview,
objectives, and
application with
students.
Upon completion of this chapter, the participant will be able to:
•
Identify the major causes of economic globalization
•
List factors promoting globalization
•
Recognize the impacts of globalization
•
Identify the effects of globalization on the practice of real estate
Time: 30 minutes
Ask for any
questions.
Application
An awareness of the trend toward a single world economy enables
practitioners to take advantage of ever-increasing opportunities for business
with a variety of cultures. Understanding the economic and cultural
decision-making processes
of different social groups is a valuable tool
for initiating, enhancing, and succeeding in international transactions.
Section 1 - 3
Optional exercise:
Ask students to name
the various countries
or nationalities with
which they have done
business. List the
countries on the flip
chart. This list is a
good example of
modern globalization.
_____________________________________________________________
Globalization
Economic globalization is the movement by countries, companies,
organizations, and people toward a single market environment.
Historically, people have understood an economy as a system functioning
within a single country. Today, world economies have evolved into
regional and global networks.
The net effect of a free market economy is that all the “sub economies” of
individual countries are tied into a single network of supply and demand for
products, services, capital, and resources. Included in this global system of
supply and demand is the demand for real estate.
Factors Promoting Globalization
Unrestricted Boundaries for Capital Flow and Investment
• Restrictions on importing and exporting capital have been relaxed to
increase international business
Exam Question #1.
One of the key
factors behind
globalization is:
B: Development of
round-the-clock
financial markets.
•
Global economic communities (such as the European Common Market)
and international trade agreements (such as the North American Free
Trade Agreement) have been formed
•
Restrictions on capital flow across national boundaries, such as in
certain Asian markets like Hong Kong and Singapore, are limited or
nonexistent
Round-the-Clock Financial Markets
• Stock exchanges in London, New York, and Tokyo, trade 24 hours a
day tying the major financial markets closely together
New Alliances and Agreements
Various types of agreements between countries lead to interdependence of
economies and facilitation of capital flow. Nations and groups may agree
to:
•
Trade
•
Share technologies and workforces
•
Specialize
•
Reduce taxation or other barriers and provide incentives
•
Equalize the exposure and treatment of domestic and foreign investors
Section 1 - 4
_____________________________________________________________
Refer to the Appendix of this manual for a general list of groups and
agreements. As you develop your practice, you will compile your own list
of helpful organizations.
Economic Specialization
• Countries “specialize” in the production and export of certain products
and services to gain a competitive advantage
•
Specialization creates economic efficiencies and benefits
•
Specialization develops dependence on other countries for commodities
not produced at home
o Middle Eastern countries export oil to much of the world
o In return, they import most manufactured products
Floating Currency Exchange Rates
• Rather than fixed exchange rates, countries now allow global economic
conditions to influence currency exchange rates
•
This practice has increasingly tied the economies of nations to one
another in determining international buying power.
•
The World Bank and the International Monetary Fund play a large role
in promoting a global economy through loans, drawing rights, and
funding.
Increased Demand Caused by Population Growth
• As populations grow, demand for goods and services increases
•
The end result is a dependence on international trade to meet needs
The Spread of Free Market Philosophy
• Liberalization of attitudes and the influence of world banking
organizations have:
o Encouraged private ownership in the former Warsaw Pact and
Communist-controlled countries of Eastern Europe
o Facilitated the integration of formerly closed economies into the
Western economic system
o Promoted international investment by pension funds, mutual funds,
and other financial vehicles
In April 2004, the
Bank for International
Settlements reported
that traditional
foreign exchange
markets had an
average daily
turnover of USD$1.9
trillion.
Section 1 - 5
_____________________________________________________________
Natural Events
• Natural events affecting the environment and climate, have a direct
impact on the availability and price of products and services.
•
Dependence on trade with (or aid from) other countries often provides
new opportunities for international trade.
Dependence on Foreign Capital
• Many countries must look beyond their borders for sources of capital to
fund domestic growth and development
“When I’m traveling in
Russia and the former
Soviet Republics, I can
often access my
E-mail through the
Internet more easily
than I can make a
phone call.”
-CIPS instructor
•
Funding for projects rely on international investment
o Electric power plants in India
o Three Gorges Dam on the Yangtze River in China (said to be the
largest civil engineering project of the 20th century),
Capital Accumulation
• As nations and investor groups accumulate capital, they increasingly
look beyond their borders for places to invest
•
Emerging markets are primary targets
Communication and Computer Technologies
• Advances in communication and computer technology have contributed
significantly to globalization
Exam Question #2.
•
Communication is instantaneous and geographic distance is irrelevant.
Examples include:
What is the effect
of the United
Nations and other
international
organizations on
the process of
globalization?
A: They are
contributing to
globalization
because nations
are less able to act
in vacuums of selfinterest.
o The Internet
o Laptop computers
o Fax machines
o Cellular and portable phones
o Electronic funds transfers
o Translation services
o Video telephoning
o Speech-to-document translation
o International databases
o Satellite teleconferencing
Section 1 - 6
_____________________________________________________________
Nongovernmental Organizations
• The United Nations (U.N.) has increased its role in international
relations
•
Participation by the U.N. to help resolve international conflicts and act
as a mediator in international events has reduced the ability of nations to
act in vacuums of self-interest
•
Thousands of trade and professional organizations (including NAR)
have begun to look beyond their own borders for opportunities, ideas,
partners, and talent
•
Companies and organizations employ people around the world
Impacts of Globalization{ XE "Impacts of tion" }
•
Countries continue to capitalize on their strengths by specializing in the
production and export of particular goods and services
•
Specialization creates a global interdependence among nations
•
Economic strength is defined in terms of trade balances, currency
exchange differentials, and productivity
•
Countries must adapt to the trend or lose global competitiveness
•
The pressure to open societies to free market trade has begun to
transcend political systems, ideologies, and cultural identities
Effects of Globalization on Real Estate Business
• Global investors enter and leave various international markets to create
business opportunities and seek investments—particularly in real estate.
•
International investors expect real estate professionals to have
knowledge about world markets, economies, and international business
transactions.
Exam Question
#3.
One effect of
globalization on
real estate
investment is:
A: Investors
increasingly look
for real estate
opportunities in
other countries.
Optional Activity
Ask two or three
participants to
share stories
about how they
have seen
globalization
affect their real
estate practices.
Section 1 - 7
_____________________________________________________________
Key Point Review
•
Major factors behind globalization include:
o Unrestricted boundaries for capital flow
o Increased free market trade
o Formation of global alliances
o Expanded technology
•
The critical factors that led to an international world economy have
become part of our daily lives
•
As the population of the world continues to grow, globalization will
continue to influence and affect our lives
•
Internationalization will increase opportunities for real estate
professionals who want to expand their horizons
Discussion Questions
1. What implications of a global market are apparent in your local real
estate practice?
2. What innovations, technological or otherwise, could you suggest to keep
real estate brokerage practices in step with increasing globalization?
Divide the class into
small groups to
discuss the
questions.
Ask each group to
make a brief
presentation to the
class.
Section 1 - 8
_____________________________________________________________
Chapter 2: Capital Flow
Overview
This lesson introduces the concept of capital flow across national borders.
Objectives
Upon completion of this chapter, participants will be able to:

Describe historical precedents for the use of foreign capital

Identify theories of capital flow

Describe how capital flows in today’s global market

Identify major influences on capital flow
Read the overview,
objectives, and
application with the
class.
Ask for questions.
Application
Foreign clients rely on local real estate professionals to provide information,
select potential investment properties, and perform many of the services
needed to buy and sell real estate. Practitioners need to have a working
knowledge of the international economic system to meet the expectations of
foreign clients.
Time: 30 minutes
Section 1 - 9
_____________________________________________________________
Emphasize that
capital flow has
been going on for a
long time, and is
now a part of the
world’s effort to
create stability,
growth, and
progress for
everyone.
Explain that though
the world’s
geography has not
changed, we now
have more
information, faster
communication,
better transportation,
larger markets, and
more sophisticated
financial
instruments.
Exam Question #19.
International capital flow
is:
C: A market aspect that
has existed since
ancient times.
Historical Perspective{ XE "Historical Pertive" }
Capital flow is the movement of:
•
The international flow of capital is not a new phenomenon
o Ancient Rome was a heavy investor in regional and local economies
o In the Middle Ages, the rise of banking houses and the mercantile
system helped develop the concept of long-term lending to finance
widespread commercial enterprises
o The foundation of the New World (the Americas) was a result of
funding from British, French, Spanish, and Dutch stock societies,
trading companies, and governments
o Europe continued to invest in American industries, such as mining,
textiles, chemicals, transportation, public utilities, and public works
systems, throughout the nineteenth century
•
World wars depleted available capital and deterred foreign investment
•
Since World War II, a new international monetary system has emerged
o New system is based on international agreements to promote the
growth of world trade through:

Cooperation

Elimination of exchange controls

Stabilization of exchange rates

Loans to assist nations with balances of payment deficits

Foreign investment is now a major component of most
economies in the world
Exam Question #20.
Since World War II, a
new international
monetary system has
evolved based on
international
agreements to:
B: Eliminate currency
exchange controls.
Section 1 - 10
_____________________________________________________________
Overview of Capital Flow{ XE "Overview of Cap}
Capital flow:
•
Fosters the growth and development of economies
o Developing economies use the capital of foreign investors to finance
growth through expanded production, new or existing
o Increased production increases employment which increases
consumption resulting in industrialization and high productivity
o Foreign investment increases revenues through taxes
o Increased revenue allows government to provide needed services
and employment
o Foreign investment spurs domestic competition in improved
financial systems and services and sound banking management
o Foreign investors look for better profits from investments abroad
o Cash flow to developed economies offer better interest rates and tax
treatments which boost profit ratios
What Flows?
• Capital flow consists of currency, assets, capital goods, debt, and credit
•
Real estate is regarded as a capital good or an asset that has the
capability of producing income
Why?
• Capital flow is essential to fostering the growth and development of
economies
•
The effects of capital flow can be measured in:
o Changes in trade balances
o Current balances
o Creditor or debtor status
o Accumulation of capital
o Need for foreign capital infusion
Section 1 - 11
Exam Question 21:
Which of the
following best
describes
international capital
flow?
B: It is the flow of
investment
resources from one
country to another.
_____________________________________________________________
Ask students to take
out paper currency and
a credit card. Ask them
which form of payment
is used most frequently.
(Answer: credit cards.)
When?
• Capital flow occurs in every international transaction
o Acquisition and disposition processes
o Receipts of income
o Payments of fees
o Expenditures on improvements and operating expenses
Discuss how money is
moved electronically.
•
As economies grow, money is available to develop more resources,
which creates demand for new skills, provides new jobs, and attracts
workers
Where?
• At the international level, exchanges of long- and short-term assets
occur through the foreign exchange market
•
Market is comprised of buyers, sellers, and intermediaries
How Much?
• The amount that flows depends on a number of elements
o Transaction amount
o Exchange rate
o Sources of funds
Theories of Capital Flow{ XE "Theories of Ca" }
Present the three
theories of why and
where capital flows.
Ask students to
evaluate the merits of
each theory.
Group Question
How does devaluation
of a currency
encourage investment
from other countries?
Economists have developed several theories to explain capital flow. While
examining the theories of capital flow, remember that no one theory works
all of the time. There is no simple formula for examining economic
conditions to determine whether capital is likely to flow in or out. A few
basic theories are presented below.
1. Bargain Rate Theory
•
Capital flows to the point of relative weakness
o
A stronger currency will flow into a market with a weaker
currency because it has more buying power
o Prices are perceived to be at bargain rates
o To remain competitive in the global economy, it is not uncommon
for a country to devalue its currency to encourage investment from
other nations
Section 1 - 12
_____________________________________________________________
2. Loss Avoidance Theory
•
When a nation’s currency declines (has less buying power than another
currency), foreign investors avoid buying that nation’s financial assets,
such as stocks, bonds, and other securities
•
There is a fear that the financial assets may also decline in value and
may erase any advantage that might be gained from exchange rates
3. Market Linkage Theory
•
This theory is based on the belief that economies are linked by a single
global system which says global markets rise and fall together
o Since the late 1990s, the U.S. dollar has been declining, and the U.S.
trade deficit has been increasing
o The trade balance has improved with regions that maintain floating
exchange rates, such as the European Union and Canada
o The total deficit has worsened with the economies that peg their
currencies to the U.S. dollar, namely China, Hong Kong, and
Malaysia
o Lower U.S. dollar values, compared to the euro and Canadian dollar,
mean U.S. exports are less expensive than European and Canadian
exports
o This affects Europe’s and Canada’s competitive standing in the
world economy
o The central banks of China and Japan are the primary lenders for
financing the U.S. deficit
o If they lose confidence in the U.S. and invest in euros instead of
dollars, the global dynamic will change
Section 1 - 13
_____________________________________________________________
Influences on Capital Flow
Regardless of the theory, most economists recognize the following factors
as among those that influence where and why capital flows.
Exam Question #22.
Which of the following
affect capital flow?
State of the Economy
•
D: A country’s debt to
equity ratio.
Balance of payments
o Determines a nation’s status as a net debtor or net creditor with
respect to other nations
o Investors use these statistics to follow trends in an economy
o Improving economies attract investment
•
Gross Domestic Product (GDP) and Gross National Product (GNP)
o The overall production of a nation reveals the health of its economy
o Rising GDP and GNP rates indicate a growing economy and
opportunities for investment
•
Political events
o General stability of a government and its ability to influence the
business climate has a positive influence on the flow of capital from
foreign investment
•
Inflation rate, cost of living, and currency value
o Changes in the value of a domestic currency can attract or ward off
foreign investment
•
Interest rates
o This percentage indicates the cost of borrowing money and the
amount that can be earned through lending it
o High interest rates discourage borrowing and reduce capital flow
•
Domestic consumption/savings
o The level of disposable income in banks or other savings
instruments, which is available for lending
o High savings rates increase the amount of money available for
lending
•
Liquidity
o Describes the relative ease of converting different types of assets to
cash in a given economy
o Highly liquid assets are relatively easy to convert to cash
Section 1 - 14
_____________________________________________________________
o The amount of time an investor must hold an asset is a serious
consideration when making an investment
•
Business cycles
o Trends in supply and demand will indicate the direction of capital
flow in or out of a market
The following table illustrates changes in external debt for the ten countries
with the highest external debt in the world.
Comparison of 2002 (Top) and 2006 (Bottom) External Debt
Top 10 Countries in Billions (B)/Trillions (T) US dollars
U.S.
Brazil
Mexico
Australia
Argentina
China
Russia
Indonesia
S.
Korea
Turkey
862B
251/b
191B
176.8B
155B
149.4B
149B
135B
128.2B
118.3B
10.04T
176.5B
178.3B
585.1B
109B
305.6B
287.4B
130.4B
249.4B
195.6B
Source: CIA Factbook 2002 and 2006
Group Question
National Resources
•
Economic Specialization
o The specialized capabilities such as natural resources or skilled labor
o More lucrative to export abundant resources and import scarce
products or services
•
Supply and Demand
o The gaps between domestic demand and foreign supply, and vice
versa
o These are opportunities companies look for when investing
•
Labor Supply
o Wages and other factors, such as the availability, skill and education
of the workforce.
o These considerations determine where and when capital is invested
Section 1 - 15
What explanation
is there for the
increase or
decrease in debt of
these 10
countries?
_____________________________________________________________
Opportunities to Invest
•
Investment choices
o All of the available avenues for investing accumulated capital such
as financial instruments, money market instruments, domestic real
estate, foreign real estate and other foreign direct investment
o More choices create more opportunities for investment
Trade
•
Export and import volume, balance of trade
o The volume of transactions and the status of net exports vs. net
imports
o Closely watched indices for determining the flow of capital
•
Restrictions and regulations
o Tariff barriers
o Presence of taxes, limitations, quotas, and government prohibitions
o These may restrict cash flow and/or investment
•
Uniform manufacturing and professional standards
o Use of modern production methods and quality control
o Ensure universal marketability and the flow of goods across borders
o These standards ordinarily attract investment
Section 1 - 16
_____________________________________________________________
Capital Flow in Today’s Global Market
Compared to the past, today’s flows of capital and real estate ownership are
international in scope because:
•
Markets are larger
•
Transactions are larger
•
Changes in market conditions occur more rapidly and more universally
•
Information about market conditions is more available
•
Financial instruments and structures are more sophisticated and more
institutionalized
•
Tax treaties are more prevalent
•
Money mangers of huge corporate capital pools and pension funds
reduce investment risks by diversifying in international markets
•
Banking and real estate laws now control and protect capital flow in
•
Changes in financial institutions have created a relatively controlled
environment for international capital flow
Note
Briefly discuss the
difference between
capital and money
markets.
o International Monetary Fund
o International banking system
o Agreements on foreign exchange
International Financial Markets
Capital Markets
• Capital markets exchange long-term assets
o Maturity greater than one year
o Government notes and bonds
•
o
Corporate bonds
o
Common stocks
o
Mortgages
Group Discussion
Ask students to use
current events to
illustrate the flow of
capital in the
international market.
Participants in capital markets include:
o Borrowers such as businesses
o Investors
o Governments
Section 1 - 17
_____________________________________________________________
o Lenders
o Pension funds
Note
Though real estate is
not a part of these
markets, it interacts
with them during
international
transactions.
o Real Estate Investment Trusts (REIT)
o Mutual funds
o Real Estate Mortgage Investment Conduits (REMIC)
•
Real estate
o
Long-term capital flow
o Considered a stabilizing force
o Will become more volatile as securitization grows
•
Money Markets
Money markets exchange short-term assets
•
Maturity less than one year
•
Money markets financial instruments
Exam Question
#24.
o U.S. treasury bills (T-bills)
Governments
participate in
money markets
because:
o Negotiable certificates of deposit
B: They have
ongoing
borrowing and
lending needs
just like
corporations.
o Federal Reserve Bank deposits and other federal funds
o Bankers’ acceptances (letters of credit for international trade)
o Commercial paper (unsecured corporate IOUs)
•
Money market participants (Borrows)
o Governments
o Non-financial corporations
o Finance companies
o Commercial banks
o Other depository institutions
•
Money market participants (Lenders)
o Commercial banks
o Non-financial corporations
o Governments
o Foreign banks
o Financial intermediaries
o Individuals (usually through intermediaries)
Section 1 - 18
_____________________________________________________________
Key Point Review
•
Foreign capital continues to play a necessary role in the growth and
development of all countries
•
Capital flows through the exchange of financial instruments in
international capital and money markets
•
There is no simple way to predict the direction or magnitude of
capital flow between two countries
•
Three theories help explain capital flow
Read key points aloud
to the class.
Check for
understanding of
chapter content.
o 1) Bargain Rate Theory
o 2) Loss Avoidance Theory
o 3) Market Linkage Theory.
•
Economic, social, and political factors influence international capital
flow
•
The forces that influence capital flow also influence real estate
1. What are the possible dangers of relying on foreign capital to finance
domestic real estate? Do the benefits outweigh the risks?
2. Why is capital flow important to you as a real estate professional?
Section 1 - 19
Read and discuss
with class.
_____________________________________________________________
Section 1 - 20
_____________________________________________________________
Chapter 3: Currency Issues
Overview
Relationships between the value of currency, the value of real estate, and
the flow of capital are complex and significant. This chapter explores the
impact of these issues in an international real estate transaction.
Read overview,
objectives, and
application with students.
Ask for any questions.
Objectives
•
Define currency and the factors affecting its value
•
Describe the flow of money in a basic international real estate
transaction
•
Identify economic and regulatory influences on exchange rates
•
Describe how exchange rates affect real estate transactions
Currency value and
exchange rates are
very crucial in
international real
estate.
Application
•
Currency exchange values influence international transactions
•
Changes in exchange rates affect the value of a property at various
stages of real estate investment and ownership
•
A real estate professional may be called upon to advise clients of any
threats or opportunities in light of currency fluctuation
Section 1 - 21
Real estate
professionals must
have some
understanding of
the monetary
system to
understand a
transaction.
How Currency Works{ XE "How Currency
Works" }
•
o The process requires freeing money which might be spent on the
production of consumer goods
Demonstration
Show students
various currencies.
Compare and
contrast with one
another (size,
colors, symbols,
etc.). Pass
samples around
the class.
The creation of capital depends on the use of a system of money
o This money can be applied to the building of factories, equipment
and other capital goods
o Money is a way to measure capital
What Is Currency?{ XE "What Is Currency?" }
•
Currency is a medium of exchange
o Goods and services are exchanged for money
o Money can later be used to buy other goods and services
•
Currency is a means to preserve, move, and enhance wealth
o A temporary storehouse of purchasing power
o The proceeds of one exchange are “stored” in money until the time
of another exchange or sale
•
Currency is a symbol of buying power
o It is a numerical representation in units that can be added,
subtracted, multiplied, or divided
o The total units quantify buying power and/or exchange power
•
Currency is a physical measure of value
o A commodity
o Currency can be purchased and/or exchanged to make more money
o Institutions, as well as individuals, buy and sell currencies for profit
o When exchanged, currency is a very liquid commodity
Section 1 - 22
Factors Influencing the Value of Currency
•
The value of a currency in its own economic system is subject to daily
influences
•
Some of those influences include the following:
1. Gross Domestic Product (GDP)
• The GDP is the value of all goods and services produced in a country
during a given period
•
The GDP includes production by foreign-owned facilities within a
country
•
The GDP does not include production by domestic companies abroad
•
The GDP is a widely used measure of a nation’s total economic
performance in a year
2. Gross National Product (GNP)
• GNP measures all production of a country’s firms, regardless of where
the firms are located
3. GDP and GNP Factors
• When monetary value is added at any stage of production, both GDP
and GNP increase
•
Over time, these figures show cycles of expansion or contraction in an
economy
•
A decrease per capita would indicate that production did not keep pace
with the population for that particular period of time
•
These figures are compiled for all economies, and should be one of the
trends you examine if you do business overseas
•
Neither GDP nor GNP accounts for the underground economy
•
The underground economy is a significant part of how things get done
4. Inflation
• The rise in costs of equivalent goods over time
•
People have money to spend but goods are not readily available
•
Competition for limited goods causes people to pay more to buy them
•
The price is inflated and the value of the currency declines
•
The price of goods over time can reveal changes in the value of a
currency within an economy
Section 1 - 23
5. Money Supply
• The money available for productive use in an economy
•
The Money Supply categories shrink and grow at different rates
•
Attitudes of spenders, savers, borrowers and lenders impact the amount
of money available for investment
•
In the United States of America the money supply is represented and
defined as follows
o M1 Money Supply

Currency and coins held by the public

Demand deposits (checking accounts) owned by the public at
commercial banks

Other cashable deposits such as cashier’s checks, bearer bonds,
credit card cash advances, and automatic teller machines
o M2 Money Supply

Consists of M1 money supply plus:
•
Money market mutual fund shares
•
Savings deposits and certificates of deposit under $100,000
•
Overnight repurchase agreements
o M3 Money Supply

Consists of M1 and M2 money supply plus:
•
Time deposits larger than $100,000
•
Repurchase agreements with maturities greater than one day
•
Institutional money market funds
6. Monetary Policy
• A measure taken by governments to change or control:
o The degree of liquidity of an economy’s wealth
o Inflation
•
The availability of money has a direct bearing on:
o Capital formation
o Capital flow
Section 1 - 24
•
The supply and demand of money and goods can change the value of a
currency within an economy

•
A government must be able to affect the supply of money in a
country
The United States uses the following money policies:
o The Federal Reserve

Lowers its discount rate for banks

Lower rates allow them to borrow more money

They may then lower the rate at which they lend money

A lower interest rate makes borrowing more attractive to the
consumer

This increases the money supply
o Liquidity

Requirements determine how much of a bank’s assets must be
kept available on demand

The more money banks must keep liquid, the less they have to
lend out on a long-term basis

This decreases the money supply
o The Federal Reserve buys and sells securities in the open market

Buying securities
•
Adds money to the member bank’s reserves
•
Adds money to the seller’s account by putting more money
into the system
•
This increases the money supply
Selling securities
•
Draws down the money supply
•
Puts money in the Federal Reserve reserves
•
This decreases the money supply
7. Fiscal Policy
• Federal taxation or spending policy designed to:
o Increase employment
o Stabilize pricing
o Maintain growth in the economy
Section 1 - 25
•
Government purchases may be increased, and taxes may be reduced to
release more disposable income into the economy
•
Exchange rates
o Determine the amount of one currency a person can obtain in
exchange for another
o Fluctuate and are an important factor in international transactions
o Are influenced by:

GDP

Inflation rate

Buying power

Money supply
o Influence the timing and cost of international transactions
Currency Exchange
Note
Refer students
to a list of
countries and
their
corresponding
currencies in the
Appendix.
•
When different currencies are involved in a transaction, they must be
exchanged in some way
•
Three mechanisms of exchange include:
1. Bank Draft
In a transaction in which a French exporter is selling goods and services to a
Canadian importer, the Canadian importer buys a draft from a Canadian
bank. This bank has a correspondent relationship with a French bank. The
draft is a check, payable to the French exporter in euros, drawn from the
Canadian bank’s commercial account in the French bank. The French
exporter deposits this check in his bank account and receives payment in
euros.
Sells goods or
services to…
French
Exporter
{ XE
Euros Paid
to French
Exporter
Draft is presented
"BanktoDraft"
French}bank
where funds are
drawn from the
Canadian bank’s
commercial
account in the
French bank
Canadian
Importer
Buys draft from
Canadian Bank.
Draft is payable to
the French Exporter
in euros.
Section 1 - 26
2. Bill of Exchange
In the same transaction, the French exporter issues a “you owe me”
document in Canadian dollars and “sells” this bill of exchange to his French
bank for euros. The French bank sends the bill of exchange to its
correspondent Canadian bank, which presents it to the Canadian importer
for “acceptance” (signing). The Canadian importer must then deposit
Canadian dollars into the French bank’s account at the Canadian bank.
•
Issues a “You Owe Me” (Bill of
Exchange) document in Canadian
dollars
•
Sells the bill of exchange to his
French bank for euros
French bank
•
Sends the bill of exchange to its
correspondent Canadian bank
Canadian bank
•
Presents bill of exchange to
Canadian importer for acceptance
Canadian Importer
•
Deposits Canadian dollars into the
French bank account at the
Canadian bank
French Exporter
3. Wire Transfer{ XE "Wire Transfer" }
•
Funds are electronically transferred between banks
•
Timing of the transaction is very important

In an afternoon or overnight transfer, there could be a change in the
currency rate before the funds arrive

There may also be fees or tax charges on the transfer
Influences on Rate Fluctuation
•
Foreign exchange is an important component of international business
•
Develop a relationship with an expert in the field of currency exchange
•
Tracking the following elements can provide insight into how exchange
rates are likely to change:
o Balance of trade between countries
o Balance of payments between countries
o Exchange rate policies
o Government actions
Section 1 - 27
Exam Question #35:
When the United
States imports foreign
goods and pays for
them in dollars, there
is a tendency for the
value of the dollar to
fall because:
A: Foreign banks now
own a larger supply of
dollars in relation to
their own currency.
Balance of Trade and Payments
•
The exact connections among trade balances, investment rates, balance
of payments, GNP, inflation, economic strength and exchange rates are
complex. Following is example of how trade might affect the exchange
rate.
o When the United States pays for foreign goods in dollars the
payment:

Note
The euro, yen
and dollar now
compete
globally.
Decreases the supply of a foreign currency in U.S. banks
when a bank draft is used
•
A low supply of a foreign currency in U.S. banks may
not be able to meet the demand for the foreign currency
•
It may then take more dollars to buy a certain amount of
the foreign currency
Increases the supply of dollars in foreign banks when a bill
of exchange is used
•
A high supply of dollars in foreign banks may mean it
takes fewer units of the foreign currency to purchase
dollars
Exchange Rate Policies{ XE "Exchange Rate " }
•
Exam Question #36:
Since investors
typically want to
conserve their
principal and earn a
predictable and
reasonable return,
they do not like
governments that:
A: Change often and
experience large,
unpredictable
swings in ideology.
Stable Rate of Exchange
o Despite current economic conditions, governments simply declare
the exchange rate

•
Some governments have forced a stable rate of exchange
against the U.S. dollar
Floating Rate of Exchange
o Supply and demand determine the exchange rates
•
Floating managed Exchange Rate
o System designed to keep their currency within a specific range
o Allow market conditions to determine the rate

Occasionally intervene to stabilize it

The European Union, for example, has followed a policy of
maintaining relatively stable rates among member countries
by floating its currency rate together as a group against the
U.S. dollar
Section 1 - 28
Government Actions
•
Investors appreciate stability and are wary of governments that change
often, are unstable, or experience large, unpredictable swings in
ideology
•
Governments cannot control foreign exchange rates but they can
influence them
•
When a government has a chronic trade deficit, importing more goods
than it is exporting, it comes under pressure to control trade
•
A government can control trade through:
o Trade barriers:
o Tariffs – a duty or tax levied upon goods transported from one
customs area to another

Tariffs raise the prices of imported goods, thus making them less
competitive within the market of the importing country
o Non-tariff:

Subsidies to exporters

Discriminatory standards applied to imports

Agreements among countries to limit the trade of certain items

Import quotas

Exchange controls
•
The rate of exchange on profits from imports and exports
o Spending reductions

Decrease in government spending abroad
•
Foreign aid
•
Gifts
•
Guaranteed loans
Monetary and fiscal policies
•
Restriction of the money supply to raise interest rates and
lower prices and incomes
Section 1 - 29
The Effect of Exchange Rates on
International Real Estate Transactions{ XE "The
fects of Exchange Rates on Real Estate ons" }
Discuss the
importance of tracking
rates over time to
assist clients in taking
advantage of trends
and opportunities.
Pass out copies of The
Wall Street Journal or
other periodical and
ask students to identify
current exchange rates
for specific currencies.
Exam Question #37:
The value-trend of a
currency is important
in an international real
estate transaction
because:
B: The currency value
is part of the total
transaction value.
Exam Question #38:
•
The impact of exchange rate fluctuations is significant
o Currency value should be seen as part of the transaction value
o Real estate professionals who can identify and track the trends and
influences on rate fluctuations are very valuable to their clients
•
Real estate derives its market and income-producing values from market
demand for the type, location, size, and quality of a property
o In under-built markets, demand exceeds supply and the value
appreciate
o In over-built markets, supply exceeds demand and the value declines
•
Real estate value is determined by exchanging ownership for currency
o Fluctuation of exchange rates can affect the value of real estate at
the time of the transaction

A foreign investor buys a property for a certain price at a certain
time

When selling the property, the investor may discover:
•
The value of the real estate has appreciated relative to the
local market
•
The value of domestic currency has depreciated with respect
to the international exchange
•
The appreciation and depreciation may negate one another
•
Result: Failure to achieve long-range investment objectives
A client in Argentina
would like to purchase
a home in Switzerland.
If the peso
“strengthens” against
the franc, then:
A: The client can now
buy a more expensive
house with the same
amount of pesos.
Section 1 - 30
•
Consider the following hypothetical timeline for a transaction:
1
2
3
Offer
5
6
Permanent
Finance
9
Short-term
Debt
Closing
7
Finish
Improvement
10
Income
Taxed
•
Contract
4
8
Lease
Up
Income
Received
11
Sale
Gains
Taxed
Expectations of value, costs, return on investment, may be based on the
exchange rate at each point of the transaction
o Values may be realized or destroyed by a fluctuation to a different
rate at the next point of the transaction
o The potential of exchange rate fluctuations significantly influence
short- and long-term effects on the value of real estate
•
The value of real estate can impact the value of a currency
o A decline in real estate values can cause a devaluing of the assets of
owners, lenders, and investors

As seen in recent years in Japan, the overall effect can be:
•
weakening of the economy
•
tightening of the money supply
•
and a possible decline in the value of the currency itself
Section 1 - 31
Explain how time
effects value and how
international
transactions often
take longer than
domestic
transactions.
Price
• To close, a buyer may need more or less cash than was originally
anticipated due to a fluctuation in the exchange rate
o A Swiss buyer has agreed to pay $1,000,000 for a property in the
United States
o The price is equal to 1,440,000 Swiss francs at the time of the
contract (US $1 = CHF 1.44)
o At closing, the exchange rate is US $1 = CHF1.5
o The buyer now needs to convert 1,500,000 francs—instead of
1,440,000— to dollars
o The dollar has strengthened against the Swiss franc
Predicted and Actual Return
• If a property has performed as expected, an investor’s financial return
may be eroded by a change in the exchange rate
Income
• The actual income received may be less than expected or required—and
expenses could be greater—due to changes in the exchange rate
Tax
• Taxes due on previously received and spent income may have to be paid
at a higher exchange rate
Financing Costs
• A change in the exchange rate between the time of application and
closing may revalue a loan so that the effective interest rate, and the
principal itself, may be more costly for the borrower to repay
•
Exchange also affects balloon payments, takeout loans, and annual debt
service
Section 1 - 32
Converting Currency, Area, and Price{ XE "ce" }
•
Information about markets is typically given in local measures
o Real estate prices are quoted in a country’s currency units per square
meter per month
CAT is a way to
remember the steps
in the converting
process.
o In the United States of America, prices are given in dollars per
square foot per year
•
A real estate professional must be able to convert between domestic and
foreign prices
•
These skills help clients understand what the property, fees, and related
services cost in their own currency
C-A-T Formula
Step 1: Convert the Currency
•
Currency exchange rates are reported in the number of foreign units
equal to one domestic unit
•
Currency should always be calculated with the most recent exchange
rate
•
In this example, assume 104.52 Japanese yen (¥) = 1.00 U.S. dollar ($)
To convert:
U.S. dollars to yen
Yen to U.S. dollars
Use (conversion factor):
$1
= $0.00957 (U.S. dollars)
¥104.52
Example 1
To convert 850 yen to the equivalent in U.S. dollars:
¥850 × $0.00957 = US $8.13
or
If the exchange
rate for one
Singapore dollar
is 27 Indian
rupees, how many
Singapore dollars
could you get for
930 rupees?
D: 34
¥850
= US $8.13
104.52
Write the
problems out and
show students the
answers.
Exam Question
#39:
$1 = ¥104.52 (Japanese yen)
¥1 =
Visual exercise:
Hold up one U.S.
dollar and 105
yen (or some sort
of currency
representing
each) to show that
they are equal to
one another.
Section 1 - 33
Example 2
To convert US $15.30 to yen
Draw a picture of a
square foot within
a square meter so
that students can
see the difference
between the two
measurements.
$15.30 × ¥104.52 = ¥1,599.16 or
US $15.30
= ¥1,598.75
0.00957
Step 2: Convert Area
•
Suggest to the
class to
memorize the
conversion
factors—they
will be using
them often.
The most commonly used unit of space measurement outside the United
States is the square meter
To convert:
Use (conversion factor):
Square meters to square feet
1 m² = 10.7639 square feet
Square feet to square meters
1 square foot = 0.0929 m² (or
1
)
10.7639
Example 1
Property: An office space is 1,250 square meters.
Question: What is the equivalent in square feet?
1,250 m2 × 10.7639 = 13,455 sf.
Exam Question #40:
Currently, a buyer
has a home with
4,200 square feet in
the U.S. He would
like to buy a similar
property in
Germany. As the
agent, you will need
to search for a
property with close
to:
D: 390 square
meters.
Example 2
Property: An office space is 20,000 square feet.
Question: What is the equivalent in square meters?
20,000 sf. × 0.0929 = 1,858 m2
OR
20,000 sf./10.7639 = 1,858m2
Example 3
• Once you know the area conversion formula you can convert
o The price or rent per square foot to the price per square meter
o The price or rent per square meter to the price per square foot
•
To complete the price conversion to a new area denomination, multiply
the given price by the area conversion factor
Property: An apartment rents for ¥ 50/m2/month
Question: What is the rent in square feet?
¥ 50 x 0.0929 = ¥ 4.65/sf./month
Section 1 - 34
Step 3: Convert the Time Period
•
Simplest of all conversions is between months and years
o If a price is quoted per month, multiply the currency amount by 12
to get the price per year
o If a price is quoted as an annual amount, divide by 12 to get the
price per month
Putting It Together: Currency, Price per Area, and Time
Conversions
Using the three forms of conversion, it is possible to change a price quoted
in Japanese yen per square meter per month into a price in U.S. dollars per
square foot per year.
Example 1
Given: The rental rate on office space in Kobe, Japan, is 1,000 yen per
square meter per month. The exchange rate is 1 USD=¥104.52.
Question: What is the equivalent of that price in U.S. dollars per square
foot per year?
Step 1: Convert currency
¥ 1000
2
104.52 = US $9.57/m / month
Step 2: Convert price per unit of area (m2 to sf.)
TIP: To make a quick
mental estimate of the
converted amount,
remember that a
square meter is about
10 (actually closer to
11) times as large as a
square foot. Thus,
rates and prices per
square meter will be
about 10 times as large
as rates and prices per
foot.
Exam Question #41:
The rent for a
warehouse in
Capetown, South
Africa is quoted at 75
rand per square meter
per month. If the
exchange rate is 1 US
dollar = 8 South
African rand, the rent
in square feet is about:
B: $10.00
US $9.57 × 0.0929 = US $0.89/sf./month
Step 3: Convert time period
US $0.89/sf/month × 12 months = US $10.68/sf./year
Sample problems and a conversion chart of square measures are available
in the Appendix.
NOTE
Ask participants if they
would like to practice
more conversion
problems. There are
more problems in the
appendix.
The class may work
on problems alone, in
pairs, or small groups.
Suggest that the more
experienced students
practice with the less
experienced students.
Section 1 - 35
Key Point Review
Read key points
aloud to the class.
Check for
understanding of
chapter content.
Read and discuss
with class.
Answers:
1) It does not—unless
it is used in an
international
transaction.
2) Positive: It may
allow domestic
industry to expand
and be more
competitive.
Negative: It may raise
costs for consumers,
and risks retaliation
by foreign markets.
•
The value of a currency resides in its domestic buying power, and its
usefulness as a medium of domestic or international exchange
•
Exchange rates reflect the comparative strength of economies, and may
fluctuate over time
•
Currency value, exchange rate, investment, and capital flow are
interrelated, and have a major impact on international real estate
transactions
•
Trends in currency value and exchange rates should be monitored for
any threats or opportunities facing participants in an international real
estate transaction
1. How does an exchange rate fluctuation affect the value of your money
deposited in your bank
2. What is your opinion about governments using tariff and non-tariff
measures to control the international flow of capital
3. Assume that the U.S. dollar is currently appreciating against the euro.
Your client from Germany is interested in buying real estate in the
United States. How would you explain the risks caused by an exchange
rate trend in which the dollar is appreciating against his/her currency?
3) Show the investor
the trends in the
exchange rate;
discuss when a rate
change can harm an
investment; urge the
investor to use
conservative
measures of
projected return.
Section 1 - 36
Chapter 4: Investment Trends
Time: 60 minutes
Overview
Chapter 4 presents international real estate investment trends for inbound
transactions in the United States including sketches of selected investor
groups and markets throughout the world.
Objectives
Upon completion of this chapter the participant will be able to:
•
Explain principal foreign investment patterns in the United States of
America
•
Identify preferences of major investors in international real estate
•
Explain major investment targets and the important economic
conditions that attract investment
Application
•
Understanding trends in international investment is a necessary skill for
real estate professionals engaged in international transactions
•
Awareness of political and economic activity around the world provides
insight for potential investments
Section 1 - 37
Read the overview,
objectives, and
application with
students.
Ask for questions.
Foreign Investment in the United States{ XE
"Foreign Investment in the United States" }
•
Foreign acquisition of assets in the United States in 2005
o $829.2 billion, up from $768.2 billion in 2002
o The second largest on record after $1,046.9 billion in 2000
o Foreign official acquisitions of assets more than doubled from 2002,
to the highest level on record
o The increase was largely due to purchases of U.S. Treasury
securities
This chapter contains
many charts and a lot
of data. Briefly review
the charts–the idea is
to identify trends, not
scrutinize data.
Areas Investing in the United States
Total
Investment
If students need data
for a specific country,
or just want to know
more in general, refer
them to the Resources
section.
Real
Estate
Investment
Total
Investment
Real
Estate
Investment
Total
Investment
All figures are in millions of U.S. dollars
2003
2004
2005
All
Countries
1,395,159
Canada
95,707
Europe
1,001,237
Latin
America
84,134
6,120
87,259
6,254
82,530
6,194
Africa
2,196
250
1,671
261
2,564
266
Middle East
7,117
1,049
7,888
1170
9.965
N/A
Asia/Pacific
204,708
9,394
231,500
9,216
252,584
N/A
36,702.7 1,520,729
3,153
125,503
16,736 1,066,908
38,964 1,635,291
2,859
A: Nations are
expected to offer
more generous
investment
incentives, and more
liberalized financial
requirements.
2,818
19,204 1,143,614
20,618
Source: U.S. Department of Commerce, Bureau of Economic Analysis, International
Economic Accounts. Foreign Direct Investment Position in the United States on a
Historical-Cost Basis, 2003, 2004, 2005
•
In 2006, the largest European investors were the United Kingdom, the
Netherlands, Germany, France, and Switzerland
•
In the Asia Pacific regions, the largest investors were Japan and Australia
•
Israel and Kuwait were the major investors in the Middle East
41,066
144,033
Exam Question #42:
Competition for FDI
will become more
competitive
because:
Real
Estate
Investment
Section 1 - 38
Outlook for Foreign Direct Investment (FDI){ XE
"Outlook for Foreign Direct Investment (FDI)" }
In January 2004, the United Nations Conference on Trade and Development
(UNCTAD) issued its report, Prospects for Foreign Direct Investment and
the Strategies of Transnational Corporations, 2004-2007. Key projections
from this report are summarized below:
1. Prospects for global FDI are positive for both the short term (20042005) and the long term (2006-2007). This optimism is based on the
acceleration of global GDP growth, relatively low levels of interest rates
in major capital exporting countries, and the increase in domestic
investment and industrial output. All these factors result in a sense of
confidence in the economy for investors.
2. Competition for FDI will become fiercer in the years to come.
Countries are expected to offer more generous investment incentives
and increase liberalization of financial requirements and/or constraints.
3. Asia and Central and Eastern Europe are considered the most attractive
regions for FDI. It is anticipated that lower levels of FDI will be made
available for Western Europe, Africa, and Latin America. Top
recipients of FDI will likely be China, India, South Africa, Egypt,
Brazil, Mexico, Poland, Russia, the United States, and the United
Kingdom.
4. The United States, the United Kingdom, France, Germany, and Japan
will continue to be the main sources of FDI, and will be joined by China
and South Africa.
5. The overall positive trend of FDI will be counterbalanced by a number
of risks, such as oil price volatility, the rise of new protectionism, which
will impede trade and outward FDI, and terrorism threats and conflicts.
6. Overall, the positive factors are expected to outweigh the negative
factors, but the amount of FDI will be modest in comparison to the
period of 1999-2000.
Section 1 - 39
Group
Discussion
It is now 2007.
How have these
predictions played
out?
Exam Question
#43.
Favorable factors
that attract FDI to
the United States
include:
Foreign Investment in U.S. Real Estate
•
Foreign investment in USA real estate still has all of the qualities that have
attracted foreign investors for years
o Political stability
o Economic stability
o Inventory of investment-grade properties
C. Political and
economic stability.
o A system that does not discriminate against foreign investment
•
The following chart illustrates recent trends in foreign direct investment in
U.S. real estate
o Until 1996, the position in real estate had been declining from its
high point of $35 billion in 1990
o In response to the conditions caused by the Asian crisis of 1997,
investors were attracted to the stable appreciative economic
conditions of the United States
o After the terrorist attack on September 11, 2001, there was a slight
decline in FDI
o In 2003, foreign investment increased, due in part to the weakened
U.S. dollar

U.S. prices more attractive to foreign investors
60
51.7
49.9
50
40
30
38.9
39.5
40.2
1997
1998
1999
42.7
44.2
2000
2001
43.5
46.9
47.5
2003
2004
33.2
28.5
29.7
1994
1995
20
10
0
1996
2001
2002
2005
Data source: U.S. Dept. of Commerce, BEA, Int'l Accounts Data: Foreign Direct Investment Position in
the United States on a Historical-Cost Basis, 1994-2005. www.bea.doc.gov/bea/di/fdipos-01.xls.
Section 1 - 40
Comparison of FDI in USA Real Estate
2003
2006
Canada
12%
7%
Group Question
Germany
15%
16%
Netherlands
12%
4%
United Kingdom
13%
11%
Why have the
percentages of
FDI changed
from 2003-2006?
Caribbean
9%
7%
Japan
30%
13%
Australia
9%
13%
Common Preferences of Foreign Buyers in the
United States{ XE "Common Preferences of For}
•
Over time, international professionals have perceived a number of
consistent common preferences for offshore investment in U.S.
properties
•
This section examines general standards and practices and specific
characteristics
Long-Term Perspective
• Flight capital is foreign investment money placed in markets for
conservation and safety of investment
•
Long-term investments in countries like the United States and Canada
are viewed as politically and economically secure and stable
High-Equity Positions
• Foreign investors tend to buy properties outright or procure minimal
financing
•
Primary motive is placement of capital and not to experiment with:
o Leverage
o Unpredictable interest
o Exchange rate fluctuations
Section 1 - 41
Present preferences of
foreign buyers in the
United States.
Ask participants who
practice outside the
United States if buyers
in their markets have
different preferences.
Acceptable, Predictable Returns
• Foreign investors are not necessarily looking for bargains
•
Discussion
Question
Why would
investors consider
secondary
markets and
lesser quality
They want reasonable rates of return and assurance that future income
streams will remain steady and/or increase
Quality Products
• In seeking reasonable, predictable returns over the long term, foreign
investors usually invest in high-quality property
•
Recent trends indicate investors are considering secondary markets and
slightly lesser quality properties as well
Desirable Locations
• Foreign investors have invested in major metropolitan areas, such as
New York City, Boston, San Francisco, and Washington, D.C.
•
Beginning to expand into other areas, including suburbs, where they
have experience and familiarity with the market
•
Cultural patterns often affect location preferences
Detailed Research
• Foreign investors:
o Do extensive research
o Pay attention to detail
o Prefer information be presented in writing
Specialized Advisors
• Foreign investors utilize the expertise of local or foreign specialists
•
These specialists provide more information about the:
o Market
o Investment
o Tenants
o Management
Familiar Markets
• Foreign investors tend to invest in markets where there is other foreign
investment, particularly from their home country
Greater Risk
• Experienced and successful investors with established portfolios will
consider higher risk ventures, such as rehabilitation or conversion
projects
Section 1 - 42
Global Investment Outlook{ XE "Global
Investment Outlook" }
•
Key factors influencing global economies in 2005 and 2006 are:
Present Outlook
o Weakened U.S. dollar
o Rising importance of China in economic and financial markets
o Price of oil
•
Moderate financial growth, ranging from 3% to 4%, is predicted for the
United States and Europe
•
Japan is expected to have the most noticeable deceleration in growth,
down to approximately 2% from 4%
•
Expectations for Canada’s growth are approximately 2.5%
•
Mexico’s growth is targeted at 4%
•
Economists and market watchers believe the outlook, on a global basis,
is good
•
Growth tapered off during 2005, especially for the United States
•
In the United States of America and China, central banks are in the
process of reducing or removing monetary policies that helped fuel
rapid growth
•
Foreign direct investment has the potential to:
o Generate employment
o Raise productivity
o Transfer skills and technology
o Enhance exports
o Contribute to the long-term economic development of the world´s
developing countries
•
Countries seek to leverage FDI for development
Section 1 - 43
Add any personal
knowledge, or recent
events that may affect
a nation’s economy and
the subsequent
investment climate.
Investment Climates
The United States of America
•
The USA is expected to experience moderate growth
•
Serious issues adversely affecting its economy
o Currency depreciation

If decline goes too far:
•
Stock and bond markets get nervous
•
Housing markets will weaken
•
Growth will slow sharply
•
Imports will decrease
•
Protectionism pressures will rise
•
Unemployment rate will rise
o High energy costs

Threatens inflation and unemployment

USA produces 7.61 million bbl/day (2005)

USA consumes 20.73 million bbl/day (2004)
o Trade deficit that reached $750 billion in 2006
o Increasing national debt
•

External national debt is defined as the total public and private
debt owed to nonresidents repayable in foreign currency, goods,
or services

USA is the largest debtor nation in the world

June 30, 2006 estimate of national debt is 10 trillion 40 million
dollars

Payment on the debt decreases available money for war in Iraq
•
Hostilities may spread
•
Threaten oil supplies
•
Continued increases in oil prices
Global investors with very large investments in the United States may
be hesitant about future investment
o Investors may diversify into non-U.S. based assets
Section 1 - 44
•
Higher interest rates are expected
o Felt most directly by the housing market
o High rates will have a moderating effect on market
China
•
China’s economy, which has been growing at rates from 7% to 9% is
expected to slow only slightly due to:
o Tighter credit controls
o Softer global markets
•
Will continue to be:
o Major player in the global market
o Making enormous investments
o Gaining in global industrial markets
•
China is the world’s third largest market for imports
o Third largest exporter behind Germany and the United States
o Growing economic ties with other Asian nations
o Strengthen the region’s financial growth and influence
•
China’s economy is export oriented
o Disproportionately aimed at the United States

Exports are about five and half times imports from the United
States

Creates a considerable trade imbalance

The United States, the International Monetary Fund (IMF) and
Europe, have been very tolerant of this imbalance

If attitudes change, and trade-threatening legislation is enacted,
it could have deep effects on financial markets
Europe
•
European countries have been experiencing modest growth
o Weak consumer spending
o Slowdown in exports
o Minimal job creation and high levels of unemployment,
o Increased oil prices
o Constrained household incomes and low consumer confidence
Section 1 - 45
In January 2005,
The World Trade
Organization (WTO)
quotas on textiles
and clothing were
eliminated. The
WTO estimates that
eliminating the
quotas would raise
China's share of
U.S. clothing imports
to about 50% from
16% in 1995, and
China's share of
European Union
imports to 29% from
18%.
•
The euro appreciated against the U.S. dollar
o European firms had to curb rising labor costs by:

Cutting wages

Increasing hours with no increase in pay

Lowering the salary grid for new employees
o These efforts help businesses operate, but do little to increase
consumer spending

•
Spending is needed to boost overall economic growth
The three largest new European Union member states, Poland, Czech
Republic, and Hungary are all expected to sustain relatively strong growth
rate
Section 1 - 46
Japan and East Asia
•
Second most technologically powerful economy in the world
•
Third-largest economy in the world after the USA and China
o Improved growth from 2002-06
o Fears of deflation in prices and economic activity lessened

Japan's government debt totals 176% of GDP

Aging population continues as major problem
•
•
Japan’s economy has been growing for the past several years based
mostly on high exports to China
•
GDP factors
o
•
4% in 2004
o 2.2% estimated for 2006
o Decline due to:
•

General global economic slowdown

High oil prices
•
Japan working to change its economic picture from consumer-price
deflation to inflation
o Lower government general spending, particularly on road, bridge
and other project spending
o Phase out tax cuts to boost revenue
o Keep borrowing costs low for companies and the government

Central bank has a policy of holding overnight loan rates at zero
•
•
Japan holds the largest amount of public debt, and must
increase revenue in order to grow
Factors positively or negatively influencing the current forecast include:
o Development of overseas economies, including oil prices
o Demand for IT-related products
o Developments in domestic private demand
o Developments in domestic financial and foreign exchange markets
o Issues related to the financial system and the disposal of
nonperforming loans
Section 1 - 47
•
•
Deflation may
be positive or
negative.
Periods of long
deflation tend to
be detrimental
because
companies’
profits decline.
Less profit over
long periods of
time results in
production
cutbacks, salary
reductions, and
layoffs.
Unemployment
increases
The economy
cannot expand.
•
East Asia, particularly Southeast Asia, faces serious economic
challenges due to widespread poverty
o Based on various studies, close to 60% of the 3.3 billion people
living in the Asia-Pacific developing countries live on less than
USD $2 a day
o Because most people are so poor, it is difficult to build the financial
institutions needed to underpin a society
o Poverty gives rise to relatively high risks, such as domestic violence,
crime, sickness, and unemployment
o Developing countries face risks on society-wide and national levels
•

Resources are very limited

Social and national problems cannot be addressed effectively

Globalization and internal liberalization
Economic
o Trade issues
o Competition policies
The OECD consists
of 30 countries
sharing a
commitment to
democratic
government and the
market economy.
Best known for its
publications and its
statistics, its work
covers economic
and social issues
from
macroeconomics, to
trade, education,
development,
science, and
innovation.
•
Administrative
•
Social
o Initiatives have improved remittance systems for the highly migrant
workforce developed in this region
•

For some countries, workers’ remittances represent a major
source of foreign exchange earnings

In the Philippines, remittances sent home was estimated to be
USD$8 million, or 4.5% of GDP
In December 2004, Southeast Asia experienced a horrendous tsunami
o Tremendous loss of lives and untold devastation
o It will take years to recover from this disaster
o Difficult to project the difficulties that will have to be overcome
•
South Korea depends heavily on exports to drive its economy
•
Taiwan has reached a better balance between exports and domestic
spending
•
India, which has developed high-tech industries, still depends heavily on
agriculture for its economy
Section 1 - 48
Australia
• Australia’s economic growth rates have averaged 3.3% since 1990
•
Growth has exceeded other Organization for Economic Cooperation and
Development (OECD) countries including the United States, Canada,
the United Kingdom, Germany, and Japan
•
Financial services industry is Australia’s third largest economic sector
o Generates 8% of GDP
o It is one of the major centers of capital market activity in Asia
•
Australia has a liberal foreign investment policy
o Stable and resilient economy
o Steady increase in FDI
•
The Australian government encourages and supports foreign investment
o Australia’s regulatory system is transparent and efficient

Gives investors certainty about the security of their operations
o Modern and effective intellectual property (IP) regime
o No taxes on foreign firms seeking credit or loan facilities
o No restrictions on capital flows, profit remittances, capital
repatriation, transfer of royalties, or trade-related payments
•
Foreign real estate investments must be approved by the government
•
Most acquisitions are approved provided they are not contrary to
national interests
Section 1 - 49
Mexico
• According to banking and corporate executives who specialize in the
Latin American and Caribbean regions, Mexico has been revised
upward to 4.8% through 2006
•
Mexico is the world’s fifth largest producer of crude oil
o Significant benefit from recent increased oil prices
o Oil-related earnings account for 35% of the government’s revenues
o Oil reserves exceed 12.49 Billion bbl/day
•
The government is committed to economic and financial reforms
o Keep the country on a faster growth track
o Develop the domestic securities markets
o Reduce the country’s dependence on external financing
o Mexico has lacked the political consensus needed to advance these
programs
o The new President, Felipe Calderon faces many of the same
challenges that former President Fox tried to tackle

Upgrade infrastructure

Modernize the tax system and labor laws

Allow private investment in the energy sector
o The success of President Calderon’s economic agenda l depends on
his ability to garner support from the opposition
•
In Latin America, economists are projecting good growth at slightly
over 4% in the coming years
o Latin American countries have fared well by:

•
Keeping interest rates low
Low interest rates keep debt costs low
o Demand for raw materials such as iron ore and soybeans
o China has become an important destination for Latin American
commodities and manufactured goods
o China is also playing a larger role as an investor in the region
•
Long-term challenges for Latin America include:
o Increasing government efficiently
o Better education of its people
o Modernization of its ports
Section 1 - 50
South America
• South America is expected to continue its solid pace of growth at 4%
•
The economy is supported by good commodity prices and low interest
rates in most countries
•
Prices are stabilizing which translates into single digit inflation
•
Investment and consumption have strengthened allowing for growth
o Mainly attributed to exports
•
Crude oil
•
Energy producing countries, such as Venezuela, Colombia, and
Argentina are projected to do well
•
Energy-importing countries like Brazil and Chile will be challenged
o These countries, along with Argentina and Venezuela, are
commodity-producing countries
o Generating massive current account surpluses that ease the pressure
on their large external debt positions
Section 1 - 51
Current Account:
A category in the
balance of payments
account that
includes all
transactions that
either contribute to
national income or
involve the spending
of national income.
Africa
• Sub-Saharan Africa, West Africa, and Central and South Africa have
been growing at rates from 3% to 5%
•
Countries in these areas that produce oil have fared better than non-oil
producing countries
•
Inflation has been decreasing for most countries
•
MBendi, a prominent online business publishing firm says “Africa’s
opportunities, which range in risk from investing in emerging market
funds or one of the listed multinationals active in Africa to trading with
African partners, include:
Exam Question #44:
One of the main
factors that hampers
FDI in Africa is:
o Oil and gas (Angola and Libya)
o Mining (West and Central Africa)
D. Lack of quality
information about
Africa.
o Privatizations (South Africa and Nigeria)
o International trade (oil producers and SADC)
o Infrastructure (pipelines, roads, telecommunications)
o Stock exchanges that are mushrooming in many countries
o Employment for educated English and French speaking African
nationals
o Leisure industry (big game, beaches, golf, climate)
•
The biggest challenge to doing business in Africa is the lack of quality
information about Africa
•
Other challenges include:
o Fluctuating currencies
o Bureaucratic red tape
o Graft and corruption
o Nepotism
o Wars and unrest which can affect peace and democracy throughout
the region
o Lack of local capital
o Monopolies such as marketing boards, state trading firms, foreign
exchange restrictions, trade taxes and quotas, and concentration on
limited commodities

All place a disincentive on exports which unlinks Africa from
the world economy
o Lack of infrastructure
Section 1 - 52
Middle East
• GDP in the Middle East region rose 4.7 in 2004
•
The Curse of Oil
Growth is expected to be above 4% through 2006
Countries rich with oil
export it
o Major contributing factor was higher oil prices
o Non-exporting oil countries benefited indirectly from the expanded
economy
•
If the price of oil remains above the $30 a barrel mark:
o The region will continue to accumulate large surplus positions
o High oil-related incomes will boost domestic demand
•
Despite the rosy outlook for the region, enhanced reforms are needed in
the investment sector
o Economic structures
o Institutions that promote more balanced growth
o Higher employment
o Reduction in poverty
•
Current political and social conditions in Iraq will have a strong affect
over the region for the next several years
o Investors perceive high risks in the region

Reduced FDI inflows

Without FDI inflows, regional investment projects may suffer
o War in Iraq has stimulated demand for logistics and related
functions
o War has boosted several economies in the region

Revenues from the Suez Canal have skyrocketed

Tourism in Egypt has increased 34%
•
Middle Eastern and African residents chose to stay in the
region for vacations and leisure activities
Section 1 - 53
Use the proceeds to
finance the state and
the ruling elite.
There is no need to
tax the population or
let them be
represented.
The results include a
weak private sector
and an education
system that does not
generally produce
qualified graduates.
World growth league table, 2005 (Real GDP, % change)
10 fastest-growing countries
10 slowest-growing countries
Azerbaijan
34.5
Lebanon
-6.4
Equatorial Guinea
18.6
Zimbabwe
-4.4
Maldives
18.0
Seychelles
-1.0
Angola
15.0
Montserrat
-1.0
Mauritania
14.1
Cook Islands
.10
Armenia
13.4
Keribati
.30
Kuwait
12.6
Micronesia
.30
Latvia
11.7
Brunei
.40
Trinidad & Tobago
11.9
Puerto Rico
.50
Estonia
11.4
Monaco
.90
Source: CIA Factbook
Section 1 - 54
Obtaining Current Information
• Real estate professionals interested in knowing more about developing
or emerging markets can benefit from a variety of services
o The World Trade Centers Association offers a directory that lists
trade centers operating throughout the world

World trade centers provide services such as translation, trade
missions, meeting facilities, trade education classes, and
electronic messaging

There are 285 centers worldwide
o The U.S. Chamber of Commerce also offers a professional network
and directory

94 international chambers of commerce located in 82 nations

International outreach programs for small businesses

Private electronic messaging system
o CIPS Network provides a number of services to professionals who
are researching the global marketplace
•

A membership directory is distributed in over 50 countries

A full list of cooperating associations is in the Appendix

Opportunities for face-to-face business at the NAR Annual
Convention

Internet access to real estate market information on nearly 50
countries

Quarterly newsletters

Customized research from the largest real estate library in the
world
For more information on the preceding organizations, refer to the resources
section of this manual
Section 1 - 55
Traits of Foreign Buyers{ XE "Traits of Foreign
Buyers" }
•
At the risk of overgeneralization, it is possible to identify certain
investment patterns, recurrent themes, and behavioral traits for some
regional and national groups of investors
•
Investment patterns include investment objectives, property preferences
and anticipated results
•
Professionals who specialize in a particular group of investors should be
aware of these traits in far greater detail than are presented here
Asian Buyers
• Preference for prospective markets where minimal cultural differences
intersect with economic opportunity
•
Asians often feel most at home with other Asians
•
Real estate professionals may anticipate that they will give priority
either to Asian markets or to major markets with a significant Asian
presence
•
Market such as Los Angeles and Vancouver have a high Asian presence
Japan
• Japanese investors tend to favor offshore real estate
o These serve the user-oriented strategic goals of corporation
Natural resources or cheaper labor
Increasing global market share
Enhancing product acceptance through local production
Penetrating a new market
Class members have
valuable information
about working with
foreign clients. Ask
them to share their
experiences.
• The Japanese investor is driven by the need for portfolio diversification
o Limited amount of real estate opportunities in Japan
o High prices and limited returns in Japan (1%-2%) have caused
investors to look elsewhere to diversify
o Fears about the Japanese market are underscored by very high land
costs, which can equal 90% of a building’s market value in Tokyo
o Speculation is discouraged in Japan by a 90%-95% gains tax
imposed on property held for less than two years
Section 1 - 56
•
Factors stimulating Japanese investment in other nations
o Favorable currency exchange rates
o Strong personal savings rates

15% compared to 1%-3% in the United States

High local inheritance tax
•
•
Up to 85%
The USA market is a viable investment for Japanese investors due to:
o Cheap land
o Relative liquidity of the market
o Better tax incentives
o Existence of tenant side-markets
•
Japanese investors:
o Want rates of return to be greater than in the past
o Looking more closely at market values of targeted properties
o Debt equity is becoming a rival alternative to outright acquisition
•
Targets in the United States continue to include
o Los Angeles and Honolulu

Close proximity to Japan

High levels of Japanese tourism

Large local Japanese populations
Hong Kong
• Reversion of Hong Kong to the People’s Republic of China in 1997 has
influenced investment behavior
•
Individual investors have been a major component of the outbound
investment market
•
Much of Hong Kong investment has been immigration-related
o Canada has been a major recipient of immigrants
o In return there has been investment from Hong Kong
Section 1 - 57
•
Currently, planning and holding horizons are in the five-year range
o Targeted property types in the United States include
•

Residential income

Hotels

Retail

Residential.
In the future, offshore residential investment will continue to flourish
o Investors seek to satisfy dwelling and capital-conservation needs
o Investors will assume more risk to realize higher rate of return
o Investment size range is $1 50 $5 million
o Investors may be more amenable to absentee ownership than
Japanese counterparts
Exam Question #45:
European Buyers
• Events in Eastern Europe and the former Soviet Union have been the
drivers of European investment patterns since the early 1990s
Residential
investment
opportunities are
limited in Europe
because:
C: Most real estate
is inherited, and
home owners rarely
sell their property.
o Investment opportunities and pitfalls in these areas are more
pronounced than those related to German unification
o Although a massive human resource has become available for
capital enterprise in Eastern Europe, the magnitude of the need for
capital and modernization are staggering
•
Diversification remains a significant motive in both commercial and
personal spheres
•
Most real estate in Europe is inherited and tends to remain in the family
o Many investors look abroad to find desired real estate investments
•
Europeans tend to look for:
o High-quality properties in good, dependable locations
o Investments that are relatively insulated from the effects of a
fluctuating market
o Investments that will enjoy a reliable investment return
•
Individual investors tend to be sophisticated and experienced in business
o They want strong investments, not trophies
o Secondary markets and older properties are acceptable
o Residential and residential income properties are major targets
Section 1 - 58
o European investors tend to seek income first, then appreciation
o Equity positions are high, often all-cash sales
The United Kingdom
• English organizations are strong cash-position investors
o Often pay all cash
o Heavy emphasis on the exchange rate and return on capital
•
Other important considerations include:
o Tax-reporting requirements
o Establishment of local representation
o Specific type and language of the leases employed
•
Leases in England do not necessarily contain escalations, free rent, or
short terms
o Rent levels are reviewed and raised apart from a contract
o British investors do not attach much importance to the letter of the
lease

Look more closely at the commitment and financial strength of a
tenant

Reliability of an income stream
France
• French investors may now invest in a foreign country without the
intermediation of the French banking system
o This change paves the way for increased institutional investment
Sweden and Norway
• Swedish foreign investment is increasing due to:
o Loosened regulations and heavy domestic tax rates for both
individuals and institutions
Section 1 - 59
Germany
• German investors maintain both open- and close-ended funds
o Wealthy individuals
o Families who act alone or use banks as syndicates
•
There are fewer opportunities in Germany
o Higher savings rate that slows the economy
o Germany typically has cap rates of 5%-6%
o Domestic investors seek higher returns outside the country
o Tax incentive to invest in East Germany has expired causing
German investors to look to new markets
Section 1 - 60
Future Trends for Global Investment{ XE
"Future Trends for Global Investment" }
•
Globalization is not just a concept–it is a reality
Favorable trends
that influence global
investment include:
o Borders are disappearing
o Economies and real estate markets become more standardized and
interdependent
o Technologies become more sophisticated
•
Much of what influences capital flow around the world will depend on
the extent to which leadership and proactive measures are exercised by
governments
o The willingness of countries to ease barriers and open borders will
determine the speed of economic growth
•
Europe, particularly the European Union, presents a large market
o It is much easier to conduct business using a single currency,
uniform standards, more comparable pricing, and easier financing
o The democratization of Eastern Europe is producing additional
members in the European Union, as well as additional opportunities
for investment
•
Despite turmoil and economic struggle to recover, Asia will be a leader
in the twenty-first century in terms of size, GDP, and purchasing power
o It is estimated that Japanese banks alone have $1 trillion in nonperforming loans
o The Asian economies are starving for cash and will be looking for
foreign investment to ease conditions
•
Latin and South America are turning their economies around through
large industry privatization measures, and have a large demand for
foreign investment to help build their infrastructures
•
The United States' reputation for stability, easy access, and favorable tax
laws will continue to attract investment
Exam Question #46:
Section 1 - 61
A: Interdependent
economies with
fewer investment
barriers.
Key Point Review
to the class.
Check for
understanding of
chapter content.
•
Inbound foreign capital remains a significant source of real estate
investment funds in the United States
•
It is important to understand the customs, business cycles, and political
events in a particular country before making an investment
•
An international real estate professional should be familiar with the
traits and preferences of foreign investors
Discussion Question
1. Assume you have a large sum of money to invest in real estate
anywhere in the world. Where would you invest and what would you
buy?
Activity Options
Read and discuss with
class.
Break into task groups.
5 minutes to discuss
Report to class
Section 1 - 62
Chapter 5: U.S. Regulation of Inbound
Investments
Time: 60 minutes
Overview
This lesson presents a synopsis of the laws and regulations governing
foreign investment in the United States at federal, state, county, and local
levels. Tax reporting and ownership laws, and use restrictions are all
addressed.
Read the overview,
objectives, and
application with
students.
Ask for questions.
Objectives
•
o Identify federal non-tax laws, restrictions, and ownership laws
pertaining to U.S. real estate
o Explain how the Patriot Act affects real estate professionals
o Assist international clients by explaining resident status definitions
and identification forms for U.S. tax purposes
o Comply with Federal tax reporting and withholding responsibilities
Application
•
Restrictions, reporting requirements, and land use regulations
significantly affect real estate transactions
•
Some regulations impose legal responsibilities on the real estate
professional
•
It is imperative to educate yourself continuously about changing laws
Section 1 - 63
Philosophy of the United States{ XE
"Philosophy of the United States" }
•
Discuss the elements
of the U.S. investment
philosophy, and
emphasize how free
markets contribute to
inbound capital flow.
o There are very few restrictions on foreign ownership of property in
the United States
•
The United States
federal government
regulation of foreign
interests in domestic
real estate is:
Which of the
following is true
regarding land
ownership and use
by foreign citizens in
the United States?

foreign acquisition of federal lands

United States territories

Sensitive business sectors

Acquisition by parties who are associated with enemies or
hostile countries
Federal regulation of foreign real estate investment focuses on:
o Reporting, registration, and tax compliance
•
Some state and local governments maintain laws and regulations that
significantly impact foreign real estate investment
o Such laws generally apply equally to U.S. citizens and foreigners
•
The U.S. open-market approach to real estate is a major attraction for
international clients
o Laws and practices of other countries too restrictive
B: Primarily
concerned with tax
compliance and
reporting.
Exam Question #26:
Exceptions to this policy pertain to national interests and/or security
o There are restrictions on:
•
Exam Question #25:
The philosophy of the United States regarding foreign real estate
investment is consistent with its open, free-market philosophy
Federal Non-Tax Laws & Regulations{ XE
"Federal Non-Tax Laws & Regulations" }
•
Following is an outline of some of the rules and restrictions that exist in
the United States
o Laws are always changing and evolving
o Consult an attorney to ensure you have the most current information
A: Federal laws
restrict
usage/ownership by
enemies or hostile
countries.
Section 1 - 64
Restrictions Relating to National Security{ XE "Restrictions
Relating to National Security" }
• Federal lands
•
U.S. territories
•
Sensitive business sectors such as defense-related properties
•
Investments by enemies or hostile countries
Restrictions Relating to Environment and Use{ XE "Restrictions
Relating to Environment and Use" }
• Flood control
•
Environmental impact
•
Wetlands preservation
Section 1 - 65
Ownership Laws{ XE "Ownership Laws" }
• Different types of legal structures for holding properties
o Selection of an appropriate structure may require the advice of legal
and tax counsel
•
Alternative legal structures for holding U.S. real property
o Direct
Provide or ask
class to suggest
examples to
illustrate each
restriction or
requirement.
o Corporation both foreign and domestic
o Partnership both foreign and domestic
o Trust, foreign and domestic
o Real estate investment trust (REIT)
o Foreign pension plan
•
Considerations regarding how to take title include:
o Tax laws
o Laws of descent
o Bankruptcy laws
o Mortgagee requirements
o Limitation of liability
o Overall investment/usage objectives
•
A trend in limited ownership allows for reduced liability of foreign
investors
o Nonresident foreign nationals may be able to invest through a
limited liability company
•
Do not pay income tax at the corporate level
•
Shields the members from direct liability
Section 1 - 66
Non-Tax Reporting Requirements{ XE "Non-Tax Reporting
Requirements" }
• An acquisition must be reported to the Bureau of Economic Analysis
within 45 days of closing
o An agricultural land acquisition must be reported if the land:

Has been used for timber or agriculture within the last five years

Is leased for 10 years or more, is in excess of one acre in size,
and produces more than $1,000 in output per year
o Agricultural land transactions must be reported if the acquisition is
made by a:

Nonresident foreign national

Resident foreign national who is not a permanent resident for
immigration purposes

Foreign corporation or government

U.S. company with more than five percent foreign ownership
o Unless it is exclusively for personal use, a non-agricultural land
acquisition must be reported if it:

Involves a 10% or larger interest in an investment property
•
Valued at more than $1 million
•
Larger than 200 acres
o According to the Bank Secrecy Act:

Cash transactions involving amounts greater than $10,000
•
Including payments by travelers’ checks
•
Must be reported no matter who is involved in the
transaction
Exam Question # 27:
According to the Bank
Secrecy Act, cash
transactions in
amounts greater than
__________ must be
reported no matter
who is involved in the
transaction:
D: $10,000
Section 1 - 67
The Patriot Act{ XE "The Patriot Act" }
Explain a real
estate professional’s
obligations under the
Patriot Act.
•
Under the U.S. Patriot Act, the Bank Secrecy Act, and the issuance of
Executive Order 13224, financial institutions are required to
o Have customer identification and anti-money laundering programs
o These enable verification and maintenance of records about people
opening an account
o The purpose is to determine whether the account holders are
specially designated nationals or blocked persons
Exam Question #28:

These specially designated or blocked people are suspected
terrorists, or their financiers on the government’s watch list
Although the Patriot
Act does not
specifically apply to
real estate brokers,
they may be subject to
federal sanctions if
they:

The SDN list is a 150-page publication known as the Specially
Designated Nationals list
C: Provide services to
people or entities
listed on the
government’s
Specially Designated
Nationals list.
•
Federal requirements for setting up customer identification and antimoney laundering programs do not specifically apply to real estate
brokers
o Brokers may be subject to federal sanctions if they provide any
service benefiting a person or entity on the list
o Property managers are at risk if any of their tenants are on the list
“Any professional whose practice involves transactions with foreigners or
foreign properties should be aware of whom he or she is dealing with,” says
David Lereah, NAR’s chief economist and senior vice president who
oversees regulatory and industry relations.
(Source: http://www.realtor.org/cipshome.nsf/pages/Presentations?OpenDocument).
Federal Tax Laws{ XE "Federal Tax Laws" }
•
A foreign person in the United States is taxed only on income that
originates or is sourced in the United States
•
A foreign person is an alien who does not reside in the United States
o May include foreign corporations, corporations organized under the
laws of a foreign country
•
All transactions in U.S. real property are considered sourced in the
United States
•
The primary consideration in determining how federal tax laws apply to
the foreign investor is whether the foreign investor is a United States
resident or a nonresident alien
•
Tax treatment is the same for U.S. citizens, U.S. corporations, and alien
residents in the United States
Section 1 - 68
•
The international real estate professional must focus on the tax
treatment of the nonresident alien property owner
•
Consult with tax and legal experts for details
Resident vs. Nonresident Status{ XE "Resident
vs. Nonresident Status" }
Note: These terms may have different definitions for immigration purposes.
Refer to the appendix for an overview of U.S. visa and immigration laws.
•
The USA is one of the few countries in the world that taxes citizens and
residents on worldwide income
•
For income tax purposes, there are important differences between a U.S.
citizen, a resident alien, and a nonresident alien
U.S. Citizen
Taxed on worldwide income;
credits allowed for foreign taxes paid
Resident
Alien
Taxed on worldwide income;
credits allowed for foreign taxes paid
Nonresident
Alien
Taxed only on U.S.-sourced income
Definition of Resident Status for U.S. Tax
Purposes
•
An individual is considered a U.S. resident if:
o He or she is lawfully admitted as a resident at any time during a
calendar year

A green card holder is automatically considered a resident
o Physical Presence Test

He or she is present in the United States for 183 days or more
during a calendar year
o Substantial Presence Test

He or she is present in the United States for more than 30–but
less than 183–days in the current calendar year

Must be present in the United States for a weighted average of
183 days over a three-year testing period, comprised of the
current year and the two preceding years
For a detailed description of the weighted average, refer to the
Appendix.
Section 1 - 69
Emphasize the
distinction
between
resident and
nonresident
alien status for
tax purposes.
Exam Question
#29:
For tax
purposes, a
foreign national
who was
physically
present in the
United States for
183 days or
more during the
year would be
considered:
B: A Resident
Alien.
Exam Question
#30:
For tax
purposes,
holders of
permanent visas
(green cards) are
automatically
considered
residents (or
“resident aliens”)
of the United
States.
A: True.
Tax on Income Received by Nonresident Aliens
•
Income earned by nonresidents falls under two different taxing schemes
1. If a foreign person carries on a trade or business in the United
States, tax is imposed on all taxable income connected with that
trade or business
o Similar to net income earned by U.S. residents
2. Income that is not connected with a U.S. trade or business is exempt
from U.S. tax, unless the income originates from sources within the
United States and falls within certain classes of income
o Passive investment income, such as dividends, interest, rents,
and royalties
Emphasize the
liability of the
withholding agent.
Clearly present
whose funds are
withheld for tax
liability.

Subject to withholding of 30% of gross income

Exceptions:
Exam Question #31:
Passive investment
income (such as
rent) received by a
foreign owner of real
estate in the United
States is:
A: Subject to 30%
withholding tax.
•
If the nonresident alien’s rental income is determined to
be, or if alien elects it to be, connected to a U.S. trade or
business, it is taxed as if received by a U.S.A. citizen
•
Capital gains on the sale of stock and other income
realized on the sale of property, other than U.S. real
property, are not usually taxed by the United States
•
Treatment of depreciation and net operating losses differs
according to classification

If a nonresident alien is not engaged in a U.S. trade or
business, he or she may elect to be taxed on a net basis with
respect to all U.S. income

Tax treaties usually change the tax rate amount and often
alter the tax treatment for nonresident aliens

Unless the tax withholding rate is changed by a treaty, a 30%
tax withholding is required on all investment-type income
earned by a nonresident
•
Tax withheld must be reported and transmitted to the
Internal Revenue Service (IRS) within 10 days
o Capital gain on the sale of U.S. real property is taxable
regardless of the length of time a person has been in the United
States
Application of the taxing rules discussed in this chapter
requires professional assistance
Section 1 - 70
Foreign Investment and Real Property Tax Act
(FIRPTA){ XE "Foreign Investment and Real
Property Tax Act (FIRPTA)" }
Until 1980, nonresident aliens could sell property in the United States
without incurring tax liability on the gains. FIRPTA and IRS Code Sections
897 and 6039C established new requirements for taxing gains on sales of
U.S. property by nonresident aliens. Key points include:
•
Under Section 897, gain of a nonresident alien or foreign corporation on
a deposition of a U.S. real property interest is deemed to be effectively
connected with a trade or business carried on in the United States, even
if the property is a wholly passive investment of the taxpayer.
o All gains, profits, and income resulting from the sale of U.S. real
property are deemed U.S.-source income
o FIRPTA provides withholding tax rules requiring buyers of U.S. real
property from nonresident aliens withhold and remit 10% of the
purchase price, not 10% of the gain, to the IRS
•
A foreign citizen’s first contact with the U.S. income tax system may
occur when a buyer seeks to enforce the 10% withholding tax
o The nonresident alien seller may apply to the IRS for a certificate
authorizing a lower withholding tax, which may represent the actual
liability that will arise from the sale
•
FIRPTA does not require disclosure of a foreign person’s identity
during the ownership phase of a U.S. real property investment
o Disclosure of a foreign owner’s identity on various returns and
documents are required at time of sale
•
All sales of real estate by nonresident aliens and U.S. citizens are
subject to a set of reporting rules
o Designed to enable the IRS to monitor reporting and compliance
o Reports are to be filed by the settlement agent responsible for
closing the sale
New Rules for Sale of Real Estate by Foreign Person{ XE "New
Rules for Sale of Real Estate by Foreign Person" }
The IRS issued new rules for the sale of real estate by foreign persons went
into effect on November 4, 2003. Under these rules:
•
Any buyer of real estate from a foreign person must file:
o Form 8288: The Withholding Tax Return
o Form 8288A: The seller’s receipt for withholding tax
Section 1 - 71
Exam Question #32:
FIRPTA and DEFRA
generally require
that:
C: 10% of the sale
price must be
withheld by the
buyer from the
nonresident alien
seller for capital
gains tax purposes.
•
o Form 8288A should be attached to tax return forms as proof of
withholding tax paid
Exam Question #33:
Foreigners selling
U.S. real estate
must:
Foreigners selling U.S. real estate must file a tax return reporting a gain
or a loss on the sale on Form 1040NR or 1120F
•
Forms 8288 and 8288A require an ITIN (Individual Taxpayer
Identification Number) for a foreign seller or buye
o A tax return can be matched with a withholding tax return
A: File tax forms with
their ITIN (Individual
Tax Identity
Number) with the
IRS.
•
If the foreign seller or buyer does have an ITIN at the time of purchase
or sale of real estate, the transaction may proceed to closing
o withholding tax should be held
o Forms 8288 and 8288A should be filed with the IRS
•
A foreign corporation may obtain an EIN (Employer Identification
Number) through Tele-Tin or Fax-Tin—telephone and fax services
provided by local IRS Service Centers
o The EIN number is used on
•

Form 8288: U.S. Withholding Tax Return for Dispositions by
Foreign Persons of U.S. Real Property Interest

8288A: Statement of Withholding on Dispositions by Foreign
Persons of U.S. Real Property Interests [FIRPTA]
If a nonresident alien has a social security number, that is their ITIN
o That is the number to use on Forms 8288 and 8288A
•
If a nonresident alien individual does not have a social security number
o He or she must apply for it on Form W-7 when filing Forms 8288
and 8288A
o The IRS will process Form W-7, issue an ITIN, and use the ITIN on
Forms 8288 and 8288A
•
The information on Form W-7 must be validated by a valid foreign
passport
o If a valid passport is not submitted, the foreign national must submit
at least two or more documents that are current and verify his or her
identity with a name and photograph
•
If Form W-7 is not submitted with Forms 8288 and 8288A, or Form W7 is rejected
o The IRS will send a letter telling the taxpayer to complete and return
the form
o A copy of the IRS letter must accompany Form W-7
Section 1 - 72
•
If Form W-7 is not filed with Form 8288, or Form W-7 is rejected,
Form 8288 is incomplete and rejected
Interstate Land Sales Full Disclosure Act
•
Growth of second-home market, both domestic and international,
presents significant business opportunity
•
Developers may be local, out of state or out of the country
•
REALTORS® must be aware of state and federal laws involving
State laws
Approximately 30 states require qualifying developers to register with
the state government
•
Requirements apply to developers’ agents involved in marketing the
properties
•
State laws vary but generally regulate developments composed of
subdivided land with at least 10 or more units
•
Developers’ agents
involved in marketing
second homes are
regulated by:
B. Interstate Land
Sales Full Disclosure
Act
developers in the second-home market
•
Exam Question #21:
Laws apply only to a real estate salesperson directly representing a
developer or similar entity for multiple units in the development
o Rationale is to:

Give state jurisdiction over developers marketing properties in
their state

Enforce laws against developers who commit fraud
o Laws do not apply to:

Single unit transactions such as a broker listing of a single unit
in a development

Large tracts of land even if subdivided
o Registration requirements are extensive and costly to developer
Section 1 - 73
Exam Question #22:
State law
requirements under
the Interstate Land
Sales Full Disclosure
Act:
B. Contain more
liability for real estate
professionals than the
federal law.

Registration may require annual renewal
o State laws provide right of rescission if sale in violation of law
o Right can last for years after transaction is closed
o May require bonds to be posted
o May include specific contract and escrow requirements
Federal Law
•
The Interstate Land Sales Full Disclosure Act requires developers of
subdivisions to register with HUD and provide “property report” before
a contract or agreement is signed
•
Applies to developers
•
Does not pose the risks to real estate professionals representing
developers that state laws impose
•
Applies to offers of 100 or more lots
o Some requirements do impact smaller developments
o Arizona, California, Florida and Minnesota are certified by HUD
o HUD will accept developer effectively registered with these states in
lieu of standard federal registration

Agent Liability
•
Understand the laws in your state and how they impact your
business activities
•
Knowledge of state requirements allows for conducting
business within the legal boundaries of your state
•
Further Information
o Contact your state commerce department
o NAR has organized state information published at www.Realtor.org.
Section 1 - 74
Additional federal information may be found at
http://www.hud.gov/offices/hsg/sfh/ils/ilshome.cfm
Deficit Reduction Act (DEFRA){ XE "Deficit
Reduction Act (DEFRA)" }
The Deficit Reduction Act of 1984 replaced Section 6039 reporting
requirements with a withholding requirement for all transactions after
January 1, 1985. The main provisions include:
•
A designated agent must:
o Withhold, report and transmit 10% of the amount realized on the
disposition within 10 days of the transfer
o This applies to all forms of interest in real estate, including
participation loans
•
The buyer is directly responsible for the withholding tax
•
The withholding agent, often a real estate professional, is subject to civil
penalties for failure to comply
o If the failure is willful, criminal penalties may also apply
•
Real estate professionals for the buyer or seller can be held liable for up
to the amount of their commissions if they fail to disclose to the buyer
their knowledge of the seller’s false certifications or false claims of
exemption from withholding
•
Transactions may be exempt from withholding under DEFRA if:
o The buyer acquires the property as a personal residence and the
purchase price does not exceed $300,000
o The IRS provides a statement to the buyer that the seller is exempt
from withholding or has made satisfactory arrangements
o The seller furnishes an affidavit certifying that the seller is not a
foreign person
Section 1 - 75
Tax Reporting and Withholding
Responsibilities{ XE "Tax Reporting and
Withholding Responsibilities" }
Exam Question #34:
•
A withholding agent:
o Must withhold the tax amount when a property is sold
The withholding
agent in a
transaction involving
a foreign party.
o Is usually the last to control the funds before they are conveyed to
the foreign citizen
o May be a variety of people according to the IRS rules
C: May be the real
estate professional.
•

Attorney

Real estate broker

Trustee

Lessee or mortgagee of the property
Important Points:
o When selling real estate

10% of the sale price must be withheld for payment of any gains
taxes

The actual tax amount will be calculated and paid when the
seller files an income tax return

Any excess taxes paid from the 10% withholding will be
returned to the seller

Passive income, such as rent, interest, dividends, royalties, is
subject to a withholding rate of 30% of gross income, unless the
income qualifies for an exemption, or is modified by a tax treaty

The withholding agent is responsible for withholding, reporting,
and transmitting the tax

Property managers must withhold income tax on payments
received on rental property, and forwarded to the foreign
property owner
Section 1 - 76
Tax Treaties{ XE "Tax Treaties" }
•
The United States entered into treaties with a number of countries that
affect tax and withholding rates, as well as, the applicability of the
branch profits tax
•
The primary purpose of most treaties is to prevent double taxation
•
Some treaties also provide for legitimate tax reduction opportunities
•
These treaties are always changing
Refer to the appendix for a list of treaties. Information is available from the
IRS at: www.irs.gov/pub/irs-pdf/p901.pdf.
State and Local Regulations
•
Some states have laws restricting or regulating foreign land investment
•
Most state and local laws relate to disclosure, land use and taxation, for
aliens and U.S. citizens
•
Many states also have withholding laws similar to FIRPTA
o A foreign property owner may not be familiar with these laws
o It is important for a real estate professional to refer to experts such
as tax specialists
o For an outline of such restrictions which vary from state to state,
refer to the Appendix
Section 1 - 77
Explain the four
areas of taxation that
tax treaties affect.
Refer students to the
list of treaties in the
appendix. Advise
that treaties change
often, so students
should consult the
IRS or tax experts for
the most current
information.
Key Point Review
to the class.
Check for
understanding of
chapter content.
•
The United States is one of the most unrestricted and open markets in
the world for foreign real estate investment
•
Federal ownership regulations relate primarily to reporting requirements
•
Federal tax treatment depends on classification of a foreign investor as a
resident or nonresident
•
Income and gain received by nonresident aliens are subject to taxation
and withholding
•
Buyers are responsible for paying the withholding tax due; designated
agents are responsible for withholding, reporting, and transmitting the
tax
1. How do you know whether a seller is a foreign citizen?
2. What would you do if you were not sure?
3. Do you fully understand the role of the real estate professional in the
reporting and withholding process?
4. What other information do you need?
5. Does your state or local area have specific restrictions on foreign
investment in real estate?
6. What are they?
Section 1 - 78
Section 2:
Professionalism in a Diverse Marketplace
Chapter 6: Local Market Demographics
Chapter 7: Cultural Issues and Practices
Chapter 8: Cross-Cultural Relationships
Chapter 9: Transaction Expectations
Chapter 10: Ethics and Equal Service
Chapter 6:
Local Market Demographics
Time: 30 minutes
Overview
Participants will analyze local market data so they can evaluate their local
market in terms of weaknesses and strengths, opportunities and threats.
Objectives
Upon completion of this chapter the participants will be able to:
•
Research and interpret data to assess the cultural attributes in their
local markets
•
Identify opportunities to expand their practice by finding local and
international clients
•
Identify and develop needed services for underserved populations in
their local markets
•
Examine local demographic trends
Read the overview,
objectives, and
application with
students.
Ask for questions.
Application
Real estate professionals, who adapt to increasing cultural diversity in the
market, and wisely plan to meet the needs of local multicultural and
international clients, gain a competitive edge and increase business
opportunities.
©2007 NATIONAL ASSOCIATION OF REALTORS®
Section 2 - 1
Review the
demographic
highlights.
Ask participants if
they are seeing the
same trends in their
local markets.
Exam Question #11:
According to
Harvard University’s
housing projection
research,
immigrants will
contribute for what
percentage of net
household growth in
the coming
decades?
A: Approximately
2/3.
Demographics{ XE "Demographics" }
A quick review of demographics on a national level will help the
understanding of real estate trends in local markets
According to the 2002 U.S. Census Bureau:
•
The Hispanic community is the fastest growing demographic group in
the country
•
During the 1990s, the overall population increase was 12.6%, while the
nation’s Hispanic population grew 47%
•
Home ownership for Hispanics reached a new high of 46% in 2004
•
The Asian-American population is expected to triple from 10.7 million
in 2003 to 33.4 million by 2050
•
The 2002 median income of Asian households was $52,018 compared
to $42,409 for all households
•
Asian and Pacific Islanders have the highest proportion of college
graduates, with 47% of people over age 25 holding a bachelor’s degree
or higher
•
By the year 2030, one out of four people will be either Hispanic or
Asian in ethnic makeup
•
Baby Boomers have record income levels, and are poised to inherit
large amounts
o Unlike previous generations, they are not downsizing homes
o Boomers are buying amenity-filled homes
o Boomers are also driving a strong demand for second homes
According to the Nation’s Housing Report released in 2004 by Harvard
University, “Immigrant minorities accounted for 27% of households in 2003,
and will contribute at least two-thirds of net household growth in the coming
decades.”
•
NAR research released in 2004 revealed:
o First-time home buyers accounted for 3.23 million home sale
transactions, including new and existing homes and condominiums
o First-time home buyers accounted for four out of ten home
purchases
o Compared to repeat buyers, first-time home buyers are likely to
speak a language other than English, reflecting a higher share of
recent immigrants among first-time buyers
Section 2 - 2
o The average first-time home buyer is 32 years old, has an income of
$54,500, and is likely to purchase a town house or row house in an
urban area
Expanding Immigrant Locations{ XE "Expanding
Immigrant Locations" }
•
According to the Center for Social and Demographic Analysis of the
State University of New York, Albany, immigration to the United States
has been averaging one million newcomers per year
o Based on data from the 2000 census, the Center found that twentyfive metropolitan areas already match the projected population mix
for 2030 as follows:

At least 25% of the population will be either Hispanic or Asian

Less than 60% will be Caucasian
•
In the 1990s, about 65% of all immigrants to the United States were
located in ten metropolitan areas–New York, Los Angeles, San
Francisco, Chicago, Miami, Washington D.C., Houston, Dallas, San
Diego, and Boston
•
New locations for Hispanics and Asians, are metropolitan areas
providing job opportunities at the high- and low-ends of the economic
scale
•
Growth of immigrant populations is no longer a regional phenomenon
Note the range of
cities where
immigrants are
locating. Immigrant
populations are no
longer only found in
major metropolitan
areas.
Ask participants what
changes they see in
their local markets that
reflect a growing
immigrant population.
Examples may include
new retail or
restaurant choices,
resources provided by
local governments or
real estate practices,
etc.
o Growth in the biggest cities is likely to be slower
o Immigrants will increasingly move to the fringes or suburbs
•
Some of the following cities are not considered major metropolitan
areas, and have seen increases in immigrant populations
o The Hispanic population increased by more than 100% in Las Vegas
from 1994 to 2004
o Cities where the Hispanic population has increased by more than
50% since 1997 include Atlanta, Portland, Orlando, West Palm
Beach, Salt Lake City, Seattle, Austin, and Phoenix
o Cities where the Hispanic population has increased more than 40%
since 1997 include Yakima, Tampa, Colorado Springs, Minneapolis,
Oklahoma City, Bakersfield, and Modesto
o Prominent destinations for Asian immigrants include Las Vegas and
Atlanta
o Since 1997, the Asian population has increased 93% in Las Vegas,
and 70% in Atlanta
Exam Question #12:
One factor that
encourages
immigrants in the
United States to
move to areas other
than major
metropolitan areas
is:
C: Job openings at
the high-end and
low-end of the pay
scales.
Section 2 - 3
o Other cities with a high percentage of Asian immigrants include
Phoenix, Dallas, Houston, Minneapolis, Portland, Boston, Seattle,
Detroit, Denver, and Miami
Analyzing Demographics{ XE "Analyzing
Demographics" }
Discuss the key
indicators for
analyzing
demographics.
Knowing which data is important and how to analyze it allows you to
understand what is happening in your local market. Specifically,
understanding and interpreting demographic data suggests new
opportunities to expand your practice by acquiring new clients and offering
needed services.
The following are key indicators used to understand trends and identify
opportunities
Population and Households
•
This data allows you to quantify the current market size and estimate
growth
o Population is the number of people living in a geographic area
o Households consist of one or more people living in the same
housing unit, regardless of relationship to one another
o Anticipated household or population growth can indicate future
housing needs
Income
•
Income indicates spending power
o Allows focus on different markets
o Should not be the sole indicator for selecting markets
Age
•
Personal expenditures change with age
•
Different housing needs may result
Occupation
•
Occupations provide an overall picture of income and housing
affordability
Ethnicity
•
Section 2 - 4
Ethnicity of an area should influence your choices for advertising media
Housing
•
Home ownership, housing turnover, and rental and vacancy rates
provide insight about the economic stability and changing patterns of an
area
Comparisons
•
Demographics are especially useful when presented in comparison with
previous and projected data
•
Real estate professionals will find it helpful to compare similar
communities and state statistics
•
Comparison of community data allows establishment of a baseline
•
The baseline allows interpretation of trends over time
•
Comparing state statistics provides a broader benchmark for comparing
communities
•
This information can be useful for analyzing business opportunities
Local Economics{ XE "Local Economics" }
•
Analyzing local economic data allows confirmation or questions
regarding current thinking about the local economy
o Determine if the market is growing, declining, or stable
Discuss economic
indicators of the
local market.
o Determine the Strengths, Weaknesses, Opportunities and Threats
(SWOT Analysis) of an area
•
Good indicators of the local economy include:
o Personal Income Trends: a measure of economic activity
o Earnings Mix: a indication of the types of employment an area
o Labor Force and Unemployment: the size and stability of the local
economy
o Local Firm Employment: businesses that will draw employees and
create housing needs
o Local Housing Construction: indicator of economic health of a
community
Sources of Data
•
Review the sources of
data.
Ask participants to
share one of their
favorite or best
resources for
demographic data.
The Bureau of Economic Analysis (BEA) prepares regional economic
accounts for the United States
o Provides estimates of state and local area personal income
Section 2 - 5
o Prepares quarterly and annual estimates of personal income by type
of income and place of residence
o Provides estimates of labor and proprietor earnings by major
industry
o Visit www.bea.gov/bea/regional/reis/
•
State employment departments and the U.S. Bureau of Labor Statistics
maintain labor and unemployment data
o The U.S. Census Bureau reports:

Census data

Construction statistics by place and county on new privately
owned residential housing units authorized by building permits
o Use the American FactFinder option to view, print, and download
statistics about population, housing, industry, and business
•
The CCIM Institute offers:
o Information on demographics
o Owners and investors
o Market research
o Professional services
o Financial information
o Property management
o Visit www.ccim.com.
•
Other resources maintaining and publishing data include:
o Local chambers of commerce
o County planning department or commissions
o City clerk offices
o Local offices of HUD
o Economic development agencies
o Commercial real estate firms
o Libraries and newspapers
Section 2 - 6
Using Demographic Data
•
Real estate professionals use demographic data to understand changes
and opportunities in their market
•
The goal is to provide better service to all population groups
•
Demographics are useful for understanding trends but should not be
used to exclude specific groups
Exam Question #13:
Under the Fair
Housing Act, it is
unlawful to use
demographic data
to:
o This practice is discrimination and is unlawful
o Is considered contrary to the One America Principles, and the
principles of the Fair Housing Act
D. Target specific
groups for the
purpose of
discrimination.
Section 2 - 7
Read the key
points aloud to the
class.
Check for under
understanding of
the chapter
content.
Key Point Review
•
National and local demographic data:
o Provide a picture of housing and investing trends
o Help identify buyers and sellers in the local market
o Should be used to determine changes and opportunities in a market
o Should not be used to target specific groups for discriminatory
practices
Allow ten minutes
for the exercise.
To add interest
and fun, group
people by clothing
color, birthday,
favorite sport, etc.
1. How will residential and commercial trends in your local market
impact your practice
2. Incorporate demographic data into a business plan
3. When and how should demographic data be shared with clients
4. How do you decide what data is appropriate to share
Debrief the
exercise by asking
each group to
share one valuable
idea or practice
discussed or
learned during the
exercise.
Section 2 - 8
Chapter 7:
Cultural Issues and Practices
Overview
The real estate market is changing due to increased cultural interaction
between nations, regions, communities, and neighborhoods. Evolution in
technology, communications, open market economics, and social
migrations are making the United States increasingly diverse and
heterogeneous.
Time: 90 minutes
Introduce this section by
explaining why it is
important to embrace
diversity.
Emphasize the values
underlying demographic
analysis:

Demographic analysis
precedes a
responsive, diversityoriented business
plan.

Real estate
professionals who
know their markets are
better able to serve
the dynamic and
unique needs of the
diverse populations in
their markets.
More than any other country, America has become a microcosm of the
many cultures of the world, and this trend toward increased social diversity
is certain to continue.
This new growth creates opportunities for real estate professionals who
keep pace with cultural trends in local markets and remain open to the
challenges and excitement of international real estate transactions.
Objectives
•
Access and analyze U.S. demographic information
•
Explain the importance of relationship-building
•
Examine cultural stereotypes, assumptions and biases
•
Recognize how inclusion will increase business and reduce risk
•
Offer appropriate services for immigrant and international clients
•
Develop cultural sensitivity guidelines
•
Recognize the personal and professional benefits of embracing members
of diverse cultures
Application
For many real estate professionals, an international practice often begins
with relationships that are cultivated in their local market. These
relationships can lead to connections and business on an international scale.
Caution participants that
information in this section
is designed to help them
understand the
demographics and
changes in their local
markets. Using local
demographics to target
specific groups of people
at the expense of
inclusion is contrary to
both the One America
Principles and the fair
housing principles.
Section 2 - 9
Application
•
Local demographics and trends confirm that diverse, multicultural
populations exist in local markets across the United States
•
Real estate professionals who understand and embrace diverse cultures
reap personal and professional benefits
National Statistics{ XE "National Statistics" }
The following statistics illustrate the changes in the population of the
United States.
•
On May 17, 2007 it was reported in USA Today that the nation’s
minority population topped 100 million
o This population makes up 1/3 of the USA population
o Hispanics are largest minority group at 44.3 million
•
U.S. Census chart below shows estimated growth by population group
Group Question
What do these
figures tell us?
Section 2 - 10
© 2007, National Association of REALTORS®
U.S. Population Growth Projections
80
Black alone
70
Asian Alone
Percent
60
50
All other
races
40
Hispanic (of
any race)
30
20
White alone,
not Hispanic
10
0
2000
2010
2020
Year
2030
2040
2050
Source: U.S. Census Bureau, 2004. Internet Release Date: March 18, 2004
This chart illustrates how the population by race is projected to change
over the next fifty years.
Note the projected
changes in percentages
in this chart.
Percent of Total Population
80.0
White
70.0
Black
Hispanic
60.0
Asian
Percent
50.0
All
Others
40.0
Group Question
How does this
information affect
your business
model?
30.0
20.0
10.0
0.0
2000
2010
2020
Year
2030
2040
2050
Source: U.S. Census Bureau, 2004 www.census.gov/ipc/www/usinterimproj/
Refer to the Appendix for detailed information from the U.S. Census
Bureau about national population statistics and the Census 2000
Demographic Profile Highlights.
Section 2 - 11
Observations of Cultural Variations
Examining general influences in different cultures calls our attention to the
fact that variations exist. Real estate professionals must be prepared to be
sensitive to these variations and adjust to them.
Exercise: Comparing Cultures
Refer to the following tables on cultural comparisons and to the cultural
summaries in this chapter and in the Appendix. Discuss and answer the
following question.
Imagine you are working with a buyer who is from a culture very
different from your own, or from another country. Would
differences in your culture (in the category you were assigned)
affect your normal way of doing business? If so, what would you
need to be aware of, or be prepared to change?
Section 2 - 12
Self & space
Time & time
consciousness
It is common in some cultures to...
shake hands; pat shoulders; touch
elbows or arms
People from other cultures may...
shun physical contact
maintain two feet of personal space
maintain 14 feet of personal space
touch another’s hair as a sign of
affection
be offended if another touches his/her
hair
highly value physical privacy
value physical privacy only moderately
be uncomfortable with touching during
conversation
touch each other during conversation
shake hands with persons of the
opposite sex
not shake hands with a person of the
opposite sex; some do not shake hands
with either sex
consider a slap on the back a sign of
friendliness or congratulation
be insulted by a slap on the back
consider touching, kissing, and
handholding between males and
females in public to be acceptable
consider touching, kissing, and
handholding between males and
females in public to be unacceptable
consider touching and handholding
between males to be unacceptable
consider touching and handholding
between males to be acceptable signs of
friendship
believe in using time effectively,
punctuality, time is money, time is a
limited resource, and getting down to
business is important
believe time and schedules are not
always the most important priority;
believe quality of life more important
than efficiency
be in a hurry; value getting to the point
quickly and directly
devote a lot of time to greeting,
pleasantries, and chatting before
“getting down to business;” extend
leave-taking
be punctual; expect others to be the
same
easily allow social concerns to disrupt
schedules
be impatient
spend a long time on preliminaries
Present the
differences in
perception of
self and space
between an
American and a
person from
another country.
Ask participants
to form small
groups or pairs.
Assign one or
two categories
from the charts
on the following
pages to each
pair or group.
Designate one
person or half of
the group to play
the role of the
American, and
the other person
or half of the
group to play the
role of someone
from another
country.
Ask participants
to read the
material on the
next pages and
prepare answers
to the questions.
Section 2 - 13
Relationships
Mental process
& learning
Section 2 - 14
establish “friendly” relationships quickly
take a long time to establish a
relationship
begin using personal names
immediately
maintain formality until a relationship is
established
consider it friendly to ask a new
acquaintance about jobs, family, etc.
consider it rude to ask a new
acquaintance personal questions
prefer to be alone or in pairs
prefer to be in groups
consider business relationships distinct
from personal ones
emphasize social and personal aspects
of relationships, including business
relationships
tend to reflect personal qualities in
relationships
tend to reflect social hierarchy in
relationships
be interested in short-term benefits
be interested in long-range benefits
live in nuclear and mobile families; not
have strong or extensive social ties
live in strong, cohesive families that
often include distant relatives and even
national leaders
believe information should be available
to anyone who needs it
believe information is power and can be
withheld
believe decisions should be based on
information and reason, and are open to
examination and review
believe decisions are expressions of
wisdom by the person in authority and
should not be questioned
believe decision makers should consult
others who have useful information or
insights
believe those in authority can make
decisions without consulting anyone
believe one learns best by solving
problems creatively
believe one learns best by learning
successful patterns and rules
value accurate data
not value data
be persuaded by data and logical
analysis
be persuaded by emotional, dramatic,
and patriotic arguments
revise a decision if new information
warrants it
stand firm on a decision, once it is made
Work habits &
practices
believe that success comes from hard
work
believe wisdom, luck, and time, in
addition to work, are required for
success
believe in criticizing or firing a person for
doing a bad job
believe in withholding criticism and
punishment to protect the individual’s
prestige
believe in doing whatever is necessary
to get a job done
believe in doing only what is appropriate
to one’s status
value whatever works
value symbol and process above
outcome
believe in free expression of opinion
believe in suppressing opinions that do
not support those of one’s superiors
believe time, money, and technology
can accomplish anything
believe that human capabilities are
limited
give and expect trust based on
qualifications and reputation
give and develop trust through frequent
and warm interpersonal contact
be variable in motivation to work;
depends largely on personal goals
be highly disciplined and motivated to
work
Section 2 - 15
Communication
& language
Section 2 - 16
make direct eye contact
avoid eye contact
point with the index finger
consider pointing to be rude
beckon with index finger or all fingers,
palm up
beckon with all fingers, palm down
nod head to show agreement, shake
head to show disagreement
raise head to show refusal, move head
sideways to show acceptance
smile to show agreement, acceptance,
pleasure, goodwill, amusement
smile to hide embarrassment or avoid
giving offense
say “yes” to mean “I agree” or “I accept”;
“no” to mean refusal
say “yes” to mean “I hear you”; consider
“no” to be rude
be low context: spoken words carry the
message
be high context: nonverbal cues often
override spoken message
use direct eye contact while listening
and indirect eye contact while speaking
to show attentiveness and respect
use indirect eye contact while listening
and direct eye contact while speaking to
show attentiveness and respect (some
males do not make eye contact to avoid
causing fear or prejudice in others)
view heated argument as a precursor to
violence
distinguish between arguing and fighting
consider it acceptable to insert a
comment into someone else’s
conversation
regard conversations as private; see
eavesdropping and interrupting as
offensive
resent conversational interruptions;
believe in taking turns
tolerate conversational interruptions;
believe in giving the floor to the most
assertive person
use direct eye contact to show honesty,
attentiveness, and respect
shun direct eye contact as a challenge
to authority
consider hissing at someone an insult
use hissing as an acceptable way to get
someone’s attention
Beliefs and
values
believe in pursuing only realistic goals
believe in pursuing ideals, even if
“unreasonable”
believe the individual can influence the
future
believe human action and the course of
life are determined by the will of God
believe the individual can change and
improve the environment
believe people should adjust to the
environment
believe a commitment must be honored
believe a later, conflicting obligation can
supersede an agreement or commitment
owe their primary allegiance to an
organization or principle
owe their primary allegiance to family
and friends
believe that jobs and rewards belong to
the best qualified persons
believe that jobs and rewards belong to
family, friends, and other practical
considerations
believe one cannot serve two masters
believe one can help two friends, even if
they represent conflicting enterprises
believe competition and ambition are
good
believe competition and ambition lead to
disharmony
consider change to be good
revere tradition and stability
idealize the self-made person
believe that family and class define the
person
allow stereotypes to prevent them from
seeing others as individuals
believe individuals should be judged on
their own merits, not on what group they
belong to
be primarily concerned with family,
career, self, principles
be primarily concerned with family,
friends, personal interests, and self
value consumption
value saving and conserving of
resources
consider the individual the most
important part of society
consider the group (family, tribe, etc.)
the most important part of society
consider education of dubious value or
an investment in personal success
consider education an investment in
family prestige and well-being
not trust a person’s word; require
contracts
believe in keeping their word; dislike
contracts
value honesty, regardless of who it
embarrasses
place high value on “face”
Section 2 - 17
Living habits
and practices
Section 2 - 18
consider as acceptable: personal
questions about job, family, origins,
general health; not acceptable:
questions about income, salary, sexual
preferences
consider as acceptable: personal
questions about general health, personal
history; not acceptable: questions about
family, financial data, personal habits
believe that people are basically good
believe that people are basically selfish
value informality and spontaneity
consider those who do not observe rules
to be ignorant or rude; mistrust
spontaneity
believe in taking risks
avoid risk
view public displays of emotion as bad
taste and expect public modesty
express feelings energetically and
openly in public
conform their behavior to that of the
group they are with
value manifesting who they are as
individuals regardless of what others are
saying or doing
form an opinion of another based on
that person’s conformity with standard
language and dress
value nonstandard language and dress
as an expression of individual or group
identity
try to dispel their nervousness with other
races by discussing race
be uncomfortable discussing race with
people of another race
feel that everyone likes to be informal
value being treated in a formal and
professional manner
be comfortable with banks and banking
practices
mistrust banks and fear entering them
have no respect for etiquette and
protocol
consider protocol and social
competence as important as technical
competence
assume that conflict is inevitable and
productive
avoid personal conflicts
Cultural Summaries{ XE "Cultural Summaries"
}{ XE "Cultural Summaries" }
In this section summarizes of the communication, cultural, and business
practices of particular regions will be discussed. These are broad-based
summaries and should not play the role of stereotyping. The cultural
observations are attempts to capture certain behavioral norms, not to
describe individuals nor are they intended to convey the amount of time and
research required to work with different cultures.
Recent immigrants are influenced more by their traditions and customs than
second or third generation immigrants who have assimilated American
culture and mores into their lives.
Explain to the class
that these summaries
are only
generalizations.
For international
business, it is important
for the real estate
professional to do his
or her own research
before going into a
country to do business.
When working with international clients in their homeland or as investors
in the United States, their practices and customs are a very real part of the
transaction.
Real estate professionals should do their own research before interacting in a
culture. CIPS courses also provide more information about Asian, European,
North/Central/South American, Middle Eastern, and African cultures.
Section 2 - 19
Asia
•
Asia is home to more than 3 billion people–more than half of the world
population
o This is ten times greater than the population of North America, and
six times greater than Europe’s population.
•
Asia also contains some of the fastest growing economies in the world
•
Countries in the Asian region that have played a significant role in real
estate in terms of outgoing or incoming international investment, are:
Japan, South Korea, China (Peoples Republic of China), Australia, Hong
Kong, India, Indonesia, Malaysia, Singapore, Pakistan, the Philippines,
Taiwan (ROC), Thailand, and New Zealand.
•
Some very broad cultural influences may affect business practices in this
region including:
o Hindu, Buddhist, and Confucian values and traditions
o Conflict resolution by role authority versus law
Ask students to read
through and share any
personal experiences with
regard to the cultural
summaries and business
advisories in this section.
o Legal traditions of civil law versus common law
o Hierarchical social structure
o Group priority over individual interests
o Situational logic based on circumstances rather than on reason
o Nonlinear notions of time
o A tendency to regard foreigners as outsiders
•
The following cultural sketch of Japan has been developed to provide an
introduction to the cultural themes that may exist in various regions
•
Refer to the Appendix for more cultural sketches
Section 2 - 20
Japan
Cultural Sketch
•
The Japanese tend to eliminate tension, promote group spirit, and
maintain harmony
•
Vertically structured relationships govern life; individual rights are
strictly subordinated to the interests of the group
•
Decision making is reached by consensus
•
People are racially and culturally very homogeneous; they may have
difficulty accepting outsiders
•
Logic is flexible and subjective, based on adaptation to circumstances and
feelings, rather than on fixed principles
Business Advisory
•
Use a Japanese go-between to sound out a company’s interest in a
proposal in advance; otherwise, much time and effort may be spent before
hearing the word “no”
•
Address the Japanese by their last names and the suffix “san”
•
Never suggest that they call you by your first name
•
Never discuss serious business at first meetings (heists); they are reserved
for establishing a recognized official relationship
•
Business cards
o Use business cards that include a Japanese translation on one side
o The exchange of business cards establishes one’s credentials
o Handle others’ cards very carefully
o Never write on them or put them in your back pocket
•
Participate in extensive entertainment after business hours
o Designed to develop relationships
o Business may or may not be discussed
•
Give and/or receive gifts with both hands and a slight bow
o Do not open gifts in front of the giver
•
Japanese do not like to sign restrictive contracts
•
Japanese prefer loose arrangements based on trust and goodwill
Section 2 - 21
Europe
Among the countries in Europe that continue to play a
significant role in international real estate are: the
United Kingdom, the Czech Republic, Germany, the
Netherlands, France, Italy, Spain, Austria, Belgium,
Luxembourg, the Republic of Slovakia, Poland,
Denmark, Sweden, Finland, Ireland, Greece, Portugal,
Switzerland, Turkey, and Norway.
In the region as a whole, some very broad cultural
influences may affect your real estate business
practice. These include:
•
Judeo-Christian values and traditions
•
Legal traditions of civil law versus common law (Laws that are written
by a governmental body versus precedent-setting judicial decisions
regarding specific fact-based cases)
•
Mobile social hierarchies that are influenced more by material status and
family than by set roles
•
Individualism over group interests
•
Linear notions of time
•
Logic based on reason rather than on situational dictates
•
A tendency toward openness to foreigners
Section 2 - 22
North America
North America consists of Canada, the United States, and Mexico. However,
the culture in Mexico is very different from that of the United States and
Canada. It is more similar to cultures in Latin American countries. Overall,
some very broad cultural influences may still affect business practice in
Canada and the United States. These include:
•
•
Legal traditions of common law versus civil law
•
A belief in using the law to resolve conflict
•
Mobile social strata that are more influenced by material status or family
than by set roles
•
Individuals or families have priority over other group interests
•
Linear notions of time
•
Logic based on reason rather than situational dictates
•
A tendency toward openness to foreigners
•
Great ethnic diversity
Section 2 - 23
Latin America
Latin American countries are located in Central or
South America and maintain Spanish or Portuguese
heritage. In addition to Mexico, the countries most
likely to play a role in international real estate are
Brazil, Argentina, Venezuela, Panama, Colombia,
Chile, Costa Rica, Ecuador, and Bolivia.
Generalized cultural influences that may affect
business practices include:
•
•
Legal traditions of civil law versus common law
•
Minimal respect for the law and slow judicial activity
•
Fixed social strata and limited upward mobility
•
Nonlinear notions of time
•
Logic based on emotions and situational dictates rather than on reason
•
Strong loyalties to the family
Section 2 - 24
Middle East and North Africa
•
Middle East and North African countries that will play a significant role
in international investment real estate are Saudi Arabia, Egypt, Lebanon,
Israel, Jordan, Morocco, and Yemen
•
In the absence of an interest-free banking system in the United States,
many American Muslims have resigned themselves to paying and
amassing interest although the Koran forbids this practice
•
Conservative Muslims want an alternative borrowing structure that abides
by Islamic rules
•
To conform to guidelines of the Koran, one option for Muslim home
buyers is a lease purchase agreement
o Terms call for the borrower and the finance company to pool their
money to buy a house
o The buyer then makes monthly payments consisting of a fair market
rent and repayment of capital to the lender
o The rent is divided between the buyer and the financial institution
based on how much each has invested in the property
o Each payment reduces the capital owed to the lender
o Each month, the lender’s ownership interest in the house and its
portion of the rent declines
o Eventually, all the capital is repaid and rent payments are no longer
required
o Source: New York Times [07/05/01]; Boss, Shira J.
•
American Finance House, Lariba, operates such a lease purchase program
o It is the first Islamic institution to receive financing from the Federal
Home Loan Mortgage Corporation (Freddie Mac)
•
Another option for Islamic borrowers is to receive financing via self-help
organizations that pool funds from Muslim investors to help one another
purchase homes
•
For the region overall, some very broad cultural influences may affect
your business practices including:
o Legal traditions of civil and religious law versus common law
o Social structures influenced by family not role expectations or
material accomplishments
o A tendency toward government based on Islamic law
o Nonlinear notions of time
Section 2 - 25
Present the concepts of
generalizations,
assumptions,
stereotypes, and myths.
Explain or ask
participants to share
their thoughts on the
following statements:

Assumptions and
stereotypes make it
difficult to
communicate with
individuals.
Our biased behavior,
thoughts, and
communication may
even elicit
stereotypical
behavior from others
toward us.
The best way to
eliminate our biases
is to recognize a
stereotype exists,
and to respect and
appreciate an
individual’s
uniqueness.
Assumptions, Stereotypes, and Biases{ XE
"Assumptions, Stereotypes, and Biases" }
Generalizations
•
People generalize to cope with the confusing details of life
• Generalizations are useful and necessary, as long as they remain
guidelines and do not turn into rules
• We can summarize our experiences with some safety by saying most,
many, or some of the individuals in a certain group have certain
characteristics
• This leaves us open to revise our opinions and responses as we see how
an individual confirms or contradicts a generalization
Assumptions, Stereotypes, and Myths
•
It is not safe to say that all or no individuals in a particular group have
certain characteristics
o Cannot possibly be correct

Have not met all members of the group

Individual variability within any culture is vast
o The more ignorant we are of the individuals who belong to the group,
the more the stereotype turns into a cultural myth that describes no
one and resists examination
•
By assuming all individuals of a group are a certain way, it becomes
impossible to communicate or form a relationship with the individuals
o We are attributing meaning based on our stereotype, instead of paying
attention to the individuals and the cultural cues
o In return we invite the other to apply a stereotype to us, instead of
responding to us as individuals
o Both parties make inappropriate assumptions about each other
You must recognize a stereotype for what it is, and concentrate on the
individuality of another person, noting and enjoying what is different and
unique
Section 2 - 26
Biases
•
•
•
•
Generalization and assumptions about others incline us to treat them
according to our stereotypes of their groups
We form preferences about the kind of people with whom we want to
associate
It is understandable for people to be most comfortable with others who
are of the same social, cultural or ethnic group
Biases become negative and harmful when we allow them to interfere
with treating people fairly
Categories of Cultural Stereotypes
Ask participants to
share an experience
they had when
working with someone
from a different
cultural background.
To begin acknowledging how people stereotype each other culturally, it is
helpful to recognize some of the aspects of culture that commonly appear in
our stereotypes. This list is not exhaustive, but it includes features that
should be familiar to everyone, even to those who feel that they do not have
any cultural stereotypes.

Self-Control - Others have a lower or higher degree of self-control. They are
better or worse at following rules, weighing their own needs against those of
others, and expressing or containing emotions.

Outlook on Life - Others are more organized or less organized, have
different societal aims, and place differing amounts of emphasis on the value
of life, individual, and group.

Racial Attitudes - Others are more open or closed with their attitudes about
different races.

Honesty/Reliability - Others are shifty and dishonest, or they are as
trustworthy as our own group.
What attitude or
action differed
from their personal
point of view?
What changes did
they make to
understand and
cope with the
differences?
Were they
successful? Why
or why not?
What did they
learn from the
experience?
Character - Others, as representatives of their group, are weaker or stronger
in sticking to their principles.
Time Orientation - Others think about time differently. They waste it, are
too concerned about it, or are ruled by it.
Social Classes - Others have a class structure, some are all of a single class,
or some all think the same way about class.
Religion - Others are adherents of different religions, leading to illogical
behavior, or lacking accepted religious values.
Exam Question #4:
A key to embracing
diversity is to:
C. Respect other
people and their
cultures, and have a
positive regard for
all individuals.
Section 2 - 27
Orientation to Nature - Others are in tune with nature, believe in letting
nature take its course, or believe in overwhelming and controlling nature.
Others believe themselves part of nature, or outside of nature.
REQUIRED
Exercise by
Diversity
Write six to eight
racial or ethnic groups
as headings on flip
chart pages before
class. Title one page
Real Estate
Professionals.
Have several small
sticky notes ready to
hand out.
Place flip chart pages
on walls around the
room.
Group Objectives - Others want to take over the world, or take what others
have, or impose their values.
Work Ethic - Others are lazy, spoiled, lacking in purpose, or obsessed with
work and unable to enjoy life.
Talents and Abilities - Others, by nature of belonging to a group, have or
lack certain talents.
Exercise: Stereotype Brainstorm
Write one stereotype you have heard for racial or ethnic groups listed on a
sticky note and place the sticky notes on the appropriate flip chart pages. The
stereotype can be positive or negative.
Discuss your reactions to what you have heard.
1. How did you feel about using stereotypes?
2. How did you feel about those used to describe members of your group?
You may need/want to
write one or two
examples to
encourage
participation.
3. Do they apply to everyone in a group? Are they fair?
Explain that this
exercise helps in
getting rid of
stereotypes by getting
rid of the sticky notes.
Discuss how people distinguish themselves from others in their own groups.
If there is little diversity in the area, discuss other groups: religious, disabled,
wealthy, older persons, as well as men and women.
Debrief the activity.
Read several of the
sticky notes on each
page to the group.
Ask participants to
answer the questions.
Section 2 - 28
Exploring Buying and Selling Attitudes{ XE
"Exploring Buying and Selling Attitudes" }
International and immigrant clients have different home buying and selling
experiences. Some of these experiences or preconceptions are based on the
traditions and practices of their native countries and cultures.
The following are several points that may influence the buying and selling
process. Be aware that these points do not apply in every situation or to
every client. They are commonly held views or characteristics, but they are
not absolute. Typically, but not always, the longer a foreign-born people
lives in another country, the more assimilated or universal are their attitudes.
Colors
•
Red is associated with good luck to the Chinese, but mourning to Koreans
•
White is associated with death and is used for funerals by Asians
•
Black is worn to weddings by some Asians
•
Purple is not worn to happy events by Asians
•
Yellow is associated with death in Peru, Mexico, and Iran
•
Green is Egypt’s national color and associated with Allah
o Green should not be used for wrapping paper or printed promotional
or marketing items in Egypt
o To use green is considered a desecration
Numbers
•
4 sounds like the word for death in Chinese
•
9 is the Japanese word for suffering
•
3 and 7 are lucky numbers for Koreans
•
8 symbolizes wealth and luck for the Chinese
Review the colors
and numbers and
their meanings.
Ask participants if
anyone has
experienced these
types of situations
with their clients.
How did they
resolve clients’
objections?
Are there any
common threads
shared by all
clients in the home
buying process?
Exam Question #9:
Some culturallybased beliefs,
traditions and
practices that may
influence buying
attitudes include:
D: Colors,
numbers, and
location and
orientation of the
site and/or
building.
Section 2 - 29
Location and Orientation
•
A Chinese home owner does not want his front door to face north where
the devil can see into the home and send bad luck
•
Japanese home owners want eastern or southern exposures for their
homes. The headboard of the bed in the master bedroom must not be
placed on the north wall
Offers and Contracts
Write an offer in high or low context terms to match natural cultural instincts
•
High context countries (Mexico, China, Japan, and the Middle East) will
find detailed documents a sign of mistrust. Transactions are much more
implied than spelled out
•
Low context countries, like the United States, use words to express
thoughts, and like lots of text and detail
•
Low- and moderate-income Hispanic consumers and recent immigrants
are especially vulnerable to predatory practices because they are
frequently not connected to mainstream institutions
o They may be unfamiliar or intimidated by these institutions
•
Hispanics consider home ownership a significant financial and emotional
commitment and must be ready in order to close a purchase
o Advocates and industry experts note that it can take from six months
to two years to become ready
Negotiating Styles
•
In many countries, the contract is the starting point of negotiations
o The contract will change over time to suit the needs of the parties
o This is the expected process
•
Many people expect and want to negotiate
•
Threats of legal action by sellers to enforce terms of the contract are often
not taken seriously
o The legal system in other parts of the world is slower and often less
effective than in the United States
Section 2 - 30
Marketing and Advertising
• Marketing approaches (high and low context)
•
Materials (colors and pictures, use of flags)
•
Translations should be carefully considered and checked
o Nova, the name of an American automobile, means “no go” in
Spanish
o The Pepsi jingle, “We bring good things to life” was translated to,
“Brings your ancestors back from the dead” in Taiwanese

The best way to avoid these types of errors and offenses is to talk
to your client about the process

Provide copies of the contract early in the process

Learn how different cultures make serious decisions
Home Ownership for Mexican-Heritage Families{ XE
"Home Ownership for Mexican-Heritage Families" }
In 2004, The Tomás Rivera Policy Institute, University of Southern
California, published El Sueño de Su Casa: The Homeownership Potential of
Mexican-Heritage Families. The report is part of a study about MexicanHeritage households in three large metropolitan areas–Los Angeles, Houston,
and Atlanta.
The report’s findings:
•
Previous research has shown that the Hispanic or Latino population is the
youngest ethnic minority in the United States
o Half of the Latino heads of households are under 40 years of age
o By the end of the decade, this group will enter the prime home buying
stage of its life

Home ownership rates should rise as the population ages
•
Of the Hispanic population in the United States, those of Mexican
heritage make up approximately 67 percent of the total
•
A large portion of immigrants from Mexico are hampered in the home
buying process by the following dynamics
o Many do not have formal relationships with banks or other financial
institutions
o They are unbanked and live a kind of cash-only existence
o Because of this, it is very difficult to establish a credit history
Section 2 - 31
o Many speak little English

They are poorly informed about how to get started, find a house,
make offers, negotiate, and qualify for a mortgage
o Many profess a high level of trust in real estate professionals as
resources for information
o Many are confused about the legal requirements for opening a bank
account, establishing credit, and obtaining a loan

Many believe they must be naturalized citizens, legal permanent
residents, or supply a social security number

Confusion about residency and documentation requirements exists
even though the majority of study participants have lived in the
United States for more than ten years
o Financial constraint is the most cited reason for postponing the
purchase of a home

Job insecurity makes many families question their ability to
manage the long-term debt that comes with owning a home
o Many believe that their stay in the United States is not permanent

They hesitate to enter a formal relationship with American
financial institutions

About 40 percent said they regularly send money to family
members, friends, church, or other organizations
o Most surveyed participants said that if they were to buy a home, it
would likely be in the same neighborhood in which they currently
reside

This is because many were low-wage earners and needed to live
near public transportation, schools, work, hospitals, family, and
friends
o The group surveyed stated they prefer neighborhoods with low crime
rates, good schools, proximity to work, and a neighborhood with
rising housing values
o By 2010, there will be 3.6 million more Hispanic households than
there were in 2000, accounting for 31 percent of all household growth
You may access the report at: www.trpi.org/PDFs/El_Sueno.pdf
Section 2 - 32
Home Ownership for Asian Americans{ XE "Home
Ownership for Asian Americans" }
The Asian Real Estate Association of America (AREAA), in association with
University of California, Los Angeles, conducted a survey of real estate
professionals across the nation, and released the following information about
Asian-American home ownership in 2004:
•
The Asian-American population is diverse, with many ethnic cultural,
language, and religious groups, each with its unique history and
experience
•
The top five barriers facing Asian-American home buyers are:
o Language/cultural barriers (not fluent in English)
o Lack of knowledge of the home buying process
o Unverifiable income (not reported on 1040)
o Lack of credit (not reported to credit bureaus)
o Lack of trust (fear of being cheated)
•
Asians tend to have larger median household incomes, but lower median
per capita incomes compared to figures for the total U.S. population
•
Many Asian households have undocumented income that is used or could
be used to qualify for a loan
•
Many Asians tend to choose a lender based on:
o Broker/agent relationships
o Language skills/cultural affinity
o Referral
o Type of product
o Reputation
•
In general, the Asian population is a diverse and underserved market.
•
There is a need for cultural and linguistic home ownership services,
education, and financial literacy programs
You may visit the AREAA at www.areaa.org.
Section 2 - 33
Five Cross-Cultural Listening Skills{ XE "Five
Cross-Cultural Listening Skills" }
One of the best ways to serve your clients and avoid offensive or socially
unacceptable behavior is to listen to them. There are many ways to listen, but
the most effective skill is active listening.
Active listening is interactive because it allows you to learn and adjust while
building the other person’s confidence and comfort level with the
communication process.
1. Pay attention to the person as well as the message
o For some people and for some cultures, conversation is the message
o They need a lot of talk and interaction
o Such people are not data-oriented; they are relationship-oriented
o Their business aims and decisions only emerge at length
o You must listen to the person and to the person’s culture in order to
hear the message
o In some cultures, one may spend days, even weeks, drinking tea with
a merchant before even mentioning what it was that brought the
customer into the shop
2. Do not assume you know what the other person wants
o You do not know
o Why make a mistake that can shut off communication from the start
o Let the other person inform you

For example, you do not know that a customer needs an FHA
loan, wants a good school district, or cares about the ethnic
makeup of a neighborhood

Making assumptions because of the customer’s race or national
origin can result in not providing the service the customer wants

The customer may qualify for a conventional loan or may have
cash

Schools may be less important than resale value or living near a
family business

Listen and find out
3. Emphasize and create rapport
o Read and emulate cues
o Adjust to the other person
Section 2 - 34
o Use a tone, level of formality, and style of reasoning that put the other
person at ease

For example, if the customer’s reasoning is based on emotion or
factors that seem irrational to you, such as needing a house that
faces east, you must learn to evaluate properties for this person
from this point of view
4. Share meaning
o Paraphrase what the other person says, and encourage the other
person to paraphrase you
o Sometimes this means responding to the hidden message in the
other’s words

Your customer says, “How much longer is this interview going to
last?” And you respond, “You’re in a hurry”

Paraphrasing is simply the art of putting what the other person has
said into your own words and asking if the other still recognizes
the idea
•
Avoid making unwarranted assumptions in your paraphrase
•
You are just checking for understanding
•
You may have to ask a question for clarification before
paraphrasing

“We want to live in a place where our children will be
safe,” and you reply, “I understand that you are
concerned about your children’s well-being. What
specific qualities are you looking for in the
community?”
5. Request information in a way that does not bias or inhibit the other
person’s response
o Ask open-ended questions

Open-ended questions ask for information rather than agreement
or disagreement

Typically begin with:
•
Question words: who, what, where, when, how, why
•
Invitation to talk, “Tell me about”
Review the main
points about active
listening and the
examples of openended and closedended questions.
o Ask questions that do not assume you already know the answer
Section 2 - 35
o Compare these examples

Do you know about FHA loans
•

Did you have some ideas or plans about how you will purchase
the house
•

Closed-ended question assumes the customer needs to know
about this type of loan
An almost open-ended question, but it assumes the customer
knows how the process works and is going to finance the
purchase
Tell me about how you plan to buy the home
o Open-ended question that is an invitation for the customer to explain
his or her understanding of the process, and whether any financing at
all is needed
Present the list of
norms as neutral,
safe manners to use
until one learns
more.
Business Norms and Etiquette{ XE "Business
Norms and Etiquette" }
Beyond using normal good manners, which you probably already use in the
course of business, it is important to project positive attitudes toward
diversity, as well as adjust to the other person’s need for high or low context
communication.
These have all been
reported by various
people as being
generally used and
accepted
internationally.
Here are some basics for multicultural business norms and etiquette:
Emphasize that one
should not become
overly concerned
about being correct.
Just be aware of
these norms and try
to make them
second nature.
•
Learn a few phrases of the other’s language
•
Show appreciation for the other’s customs, music, and art; do not criticize
•
Be sensitive and nonjudgmental on politics and religion; avoid discussing
these if possible
•
Build on the other’s cultural heritage to enhance communication, rather
than trying to impose your own
•
Show good intentions and consideration
•
Follow up on promises
•
Extend respect to whomever the customer cares about: the elderly,
children, family, poor, weak, unempowered, and with whatever the
customer identifies, such as religion
•
Use common sense and credit the other for also having it
•
Acknowledge mistakes and apologize when appropriate
•
Minimize talk about the United States
•
Talk less, listen more
Section 2 - 36
•
Do not tell the other what to do; you do not know what is appropriate
•
Do not ask about family unless they are present or the other person
mentions them
•
Help the other to see the big picture; share information
•
Seek to share the other’s ceremonies and celebrations
•
Recognize that you need to be more formal and take more time in doing
business than is your normal practice
•
Be punctual, even if it is not customary for the person you are visiting.
Many cultures regard lateness as a character flaw, and if they do not, they
know that an American would be insulted if another American were late
•
Be sure you obtain the correct names and connections
•
Take the blame for language difficulties
•
Do not tell or make jokes; they have a high probability of being
misunderstood
•
Show deference to the elderly; stand when they enter, wait for them to
speak or extend their hands in greeting
•
Treat members of the opposite sex with respect. Err on the side of
formality
•
Be patient and forgiving if a member of the opposite sex has trouble
determining how to treat you
o Other cultures differ on the roles of men and women in business
relationships and may have difficulty adjusting to expectations in the
United States
•
Skip the efforts to create an instant friendship
•
Respect the concept of face
o Never do anything to embarrass another person, either in that person’s
eyes, in the eyes of others, or in your own eyes
o Do not sacrifice your own face in front of others
Section 2 - 37
Behaviors to Avoid
Ask participants if
they have been in
situations where
another person’s
behavior made them
uncomfortable.
Note that
acknowledging
personal feelings
helps you to become
more sensitive to
diversity.
Just to be on the safe side, and until you learn more from your customer,
avoid the following:
•
Standing with hands in pockets
•
Using first names
•
Asking personal questions
•
Asking about family
•
Crossing legs
•
Showing the soles of your feet
•
Fleeing or invading the other’s personal space
•
Initiating any physical contact
•
Showing impatience
Exam Question #10:
A behavior that may
be offensive to
others from different
culture is:
B: Showing the
soles of your shoes
or feet.
Section 2 - 38
Exercise: Different Behaviors
The facilitator will demonstrate some nonverbal cues.
Facilitator:
1. Ask a participant to assist you during this exercise
2. Stand fairly close to the other person, much closer than is customary
in the United States
3. Introduce yourself and talk about the class
4. Talk to the other person for several seconds
5. Announce that the exercise is over
This is an
optional exercise.
Debrief the
activity by
explaining that it
is important to
notice nonverbal
behavior and
adjust your own
behavior
accordingly.
Ask the participant how he or she felt during the conversation
Ask the class if they noticed nonverbal signs of distress
Did the participant step back
A step backward, in some cultures, would be considered very rude
Nonverbal Red Flags{ XE "Nonverbal Red Flags" }
Common behaviors that signal discomfort include:
•
Re-adjusting distance
•
Averting eye contact
•
Scowling, frowning
•
Laughing at the wrong time or inappropriate laughing
•
Covering face
•
Remaining silent, not asking questions
•
Displaying impatience
Review the red
flags.
Section 2 - 39
Key Point Review
Read key points aloud to
the class.
Check for understanding
of chapter content.
•
Common aspects of life, such as time, space, work habits, decisions, and
relationships often vary among different cultures
•
To successfully manage and close an international transaction, a real
estate professional needs a good understanding and appreciation of the
cultures of the people involved in the transaction
•
Culture and tradition often strongly influence the buying and selling
attitudes of many immigrants and international clients
•
Active listening is a critically essential skill for real estate professionals
•
Research the customs and practices of the cultures with which you
conduct business so you are prepared to manage situations and
relationships with integrity
Divide the class into pairs
or small groups to discuss
the questions.
Ask each group to make a
brief presentation to the
class.
1. Have you found some general or broad-based rules of communication and
business etiquette that you rely on when working with immigrant or
international clients?
2. What are your biggest challenges when working with immigrant or
international clients?
3. How have you tried to meet these challenges?
Section 2 - 40
Chapter 8: Cross-Cultural
Relationships
Time: 60 minutes
Overview
This chapter examines cultural differences affecting business relationships.
It will identify specific areas where cultural variations are significant,
sketch some features of selected cultures, and suggest guidelines for
adapting behavior in the practice of real estate.
Read the overview,
objectives, and
application with
students.
Objectives
Ask for questions.
•
Explain the cultural and social elements that help build relationships with
foreign clients
•
Discuss high and low context cultures
•
Identify key cultural areas that influence business and personal
relationships
•
Examine cultural behaviors
•
Adapt business procedures to accommodate the needs of foreign clients
Application
International business brings people together from very different cultural
backgrounds. Because the practice of real estate depends heavily on the
establishment of relationships, it is essential to develop an understanding and
appreciation of the cultural factors influencing them.
Section 2 - 41
Building Relationships{ XE "Building
Relationships" }
Explain that the
international real estate
business depends
heavily upon building
relationships with
foreign clients. Cultural
differences play a
major part in how those
relationships should be
approached.
•
Real estate professionals understand the importance of building
relationships with clients to promote business opportunities
•
When conducting business with other cultures, relationships are the
key to successful transactions
•
In international real estate, where there is no relationship, there is no
business
•
Real estate professionals must understand and accept other cultures to
be successful in establishing international relationships
o Recognize the critical elements that define the culture

Language

Religion

Social structures

Values

Customs
o Historical context in which cultures have interacted
o Deeply rooted stereotypes or prejudices
Language
•
Language can be both a great barrier and a tremendous facilitator for
cross-cultural interaction
•
Many real estate professionals reap the benefits of understanding or
speaking a second language
•
Language provides access not only to literal meaning, but also to any
cultural undertones
o If a Japanese person refers to you as kisama, it is an insult–even
though it actually means your honorable self
o The literal meaning is only part of the message; the underlying
cultural meaning may mean something else
•
In many languages, phrases are interpreted when people understand
actual words, but are not aware of what they mean in colloquial speech
•
There are multiple ways to communicate with international clients
o Partner with someone who is fluent in another language
Section 2 - 42

Many real estate firms employ multilingual professionals who
can assist with translation and interpretation

Practice with your interpreter before business meetings

Speak in clear, concise sentences with pauses

Be sure your translator or interpreter understands the technical
terms of real estate
o Ask a fluent speaker to edit documents
o You may use translation software but be aware of its limitations
Present and discuss
the important elements
of culture about which
a businessperson
should be aware. Use
personal experience
and that of students to
illustrate various points.
o Use a mutual language

Many people around the world have some level of knowledge
of another language, such as English or Spanish

If you speak slowly and ask for understanding, you may be
able to work on certain aspects of your business
Religion
•
Religion is one of the most important cultural differences due to its
fundamental role in creating cultural identity and behavioral norms
•
Read about the theology of a certain religion so you may interact with
the associated social standards and behaviors
o You do not have to read the Confucian texts to work with an Asian
investor, but you should know that religious tradition prescribes
certain behavior among individuals
Social Structure
•
Social structure dictates respect, speech, modes of contact, roles, and
relationships
•
In some cultures, social structure is not clearly defined–it is fluid and
continues to change over time
•
In other cultures, social structure is clear and fixed
o Status may be based on entirely different principles, such as family
origin, birthright, or religion
o Being aware of culture’s view on status is important
o If you are ignorant or unprepared, you may be assigned a role
without even knowing it
o By failing to act appropriately, you could lose the possibility of
doing business
Section 2 - 43
Historical Predispositions
•
The history of a country and its people is extremely important and
broadly influences everyday life
•
Political, social, or religious beliefs often create predispositions for the
way in which a culture interacts with other nations and/or people
o In Brazil, it is wise to avoid discussing politics or any other
topics relating to Argentina, Brazil’s traditional rival
•
The way people make decisions, place trust in others, disclose
information or make eye contact is often rooted in cultural mores
Adapting to Cultural Differences{ XE "Adapting
to Cultural Differences" }
Present and go
through the methods
of adapting.
Select three or four
points under each
heading to review.
Exam Question #47:
One factor that
makes international
selling practices
different from
domestic practices
is:
A: In most countries,
a transaction
requires a prior
relationship.
Section 2 - 44
•
No generalization should be taken as a rule
•
When involved in an international transaction, it is your responsibility
to research the culture and current business practices
Cultural Interaction Guidelines
Preparation
•
In most countries a transaction requires a prior relationship
•
Educate yourself about the country’s history, arts, society, economy,
language, and geography
•
Know what offends, what creates respect, and what creates comfort
•
Obtain a contact or intermediary in the foreign country
•
It is important to be introduced through the proper channels
•
Identify the decision-making process and participants
•
Obtain information about specific gift-giving practices
•
Plan the first meeting carefully
Communication
•
Assess the mutual language capability of your overseas counterpart
•
Use a translator whenever possible keeping in mind that translations
and interpretations may be inaccurate
•
Do not assume you are being understood; pause often, repeat
frequently, ask questions, provide written backup
•
Be aware that yes does not always mean, I agree
•
Be sensitive to nonverbal behavior that may indicate the other person
does not-understand, e.g., nodding, smiling or the absence of questions
•
Recognize that colors, symbols, and nonverbal gestures may have
other meanings
•
Minimize your use of slang and jargon
•
Consider giving the foreign person a glossary of real estate terms and
jargon in his own language
o These can be obtained from the Federal National Mortgage
Association, Fannie Mae
•
Respect the role of silence during the conversation
o Pause to allow time to think
•
Meaning of eye contact varies from culture to culture
•
Do not rely on the telephone
o Follow up with letters and face-to-face contact
Business Practices
•
Communicate in writing before your visit
•
Always make an appointment
•
Carefully time your approach to discussing business issues
•
Slow down
o The pace of decision-making varies from culture to culture
•
Be prepared to do without lawyers and accountants
o Rely on personal relationships
•
Many cultures do not value or respect the written contract
•
Respect the use of business cards; in some countries, it is an essential
ritual
•
Give and take refreshments; accept hospitality graciously
•
Be prepared, but do not expect to conduct business after hours
Role Behavior
•
Maintain proper levels of formality
•
Show proper respect for authority
•
Do not contradict or criticize in front of others
•
Dress conservatively
•
Follow the accepted practices of expressing emotions
Section 2 - 45
o Expect difficulties because you do not belong to a class or group in
a particular culture
o Use introductions, personal references, and other modes of
referring to group membership
o Seek out means of establishing common ground

Relationships may be enhanced by perceived similarities of
both parties
o Be prepared to sell yourself as much as, or more than your real
estate opportunity

Explain your real estate license, your CIPS (or other)
designations, the REALTOR’S® Code of Ethics, and any
memberships you may have in professional associations
o Use the proper forms of address
o Wait to be invited before using first names or any other indications
of familiarity
o Allow the foreign person to lead the conversation unless you have
the highest rank in the group
o Cultivate a positive regard for other cultures

Sincere goodwill can cause mistakes to be overlooked
o Be a good guest
Section 2 - 46
Key Point Review
•
Cultural differences have a huge impact on relationships and business
practices
•
Learning about and adapting to the cultures of others is a prerequisite
to finding international real estate opportunities
•
A real estate professional must know how to develop a relationship
before any business is possible
1. How would you cope with a business situation in which the clientele
will never fully accept you?
2. What are the most difficult areas of cultural adaptation?
3. Are there ways for you to learn about other cultures in your own
community?
to the class.
Check for
understanding of
chapter content.
pairs or small groups to
discuss the questions.
Ask each group to
select a spokesperson
to share 2 to 3 key
points with the class.
Section 2 - 47
Section 2 - 48
Chapter 9:
Transaction Expectations
Overview
This lesson explores client expectations in an international transaction, and
discusses the role of the real estate professional.
Objectives
Upon completion of this chapter, the participant will be able to:
•
Identify parts of the international transaction process that may differ in
international transactions such as real estate practices and laws
•
List important adaptations that must be made to facilitate transactions
proceed smoothly
•
Clarify the roles of professionals involved in an international
transaction
•
Identify client expectations and needs
Time: 45 minutes
Read the overview,
objectives, and
application with
students.
Ask for questions.
Application
Knowledge, skills, and sensitivity to cultural differences are essential in an
international transaction. To successfully complete a transaction, and
expand business, a real estate professional must understand the
international client’s experiences and expectations for the process. It is
important to clarify the role of the real estate professional in the
transaction.
Section 2 - 49
Client Expectations of Roles{ XE "Client
Expectations of Roles" }
Present client
expectations of the
roles in an international
transaction.
•
In international real estate, there is a broad spectrum of ways in which
transactions are completed
•
The role of various professionals such as lawyers, notaries, and
bankers may vary
•
Experienced clients will have some understanding of local practices
and laws in markets where they have bought or sold property
•
New clients may approach an international investment in terms of their
own cultural experiences and expectations
This section examines major contrasts in the way clients view the roles of
professionals, the buyer and seller
Who Is the Client?
Emphasize that it must
be clear about whom
the real estate
professional is
representing.
Exam Question #48:
•
The role of the real estate professional in terms of representation, laws
of agency, and fiduciary responsibility is an area of potential
misunderstanding in international real estate
•
In many countries, it is common for buyers, rather than sellers, to be
considered the client
•
The real estate professional must decide how to position themselves
•
For long-term business, it is preferable to operate on the basis that the
buyer, not the seller, is the client
•
Always be clear about whom you are representing
•
In many states of the Unites States, if one does not have a signed
brokerage contract with the buyer, one is automatically obligated to
the seller
•
In addition to the confusion surrounding fiduciary relationships, clients
may need help understanding the facets of a local transaction,
including financing, cash needed to close, the closing statement, and
commissions
•
Learn to tactfully inform or educate an overseas buyer or seller about
the business requirements in the country where the transaction will
take place
International investors
buying real estate in the
United States often have
problems understanding:
C: Laws of agency.
Section 2 - 50
The Real Estate Professional
•
The three most important expectations that international clients have
for brokers and real estate professionals are that they:
1. Fully represent them and be completely loyal
2. Develop a relationship before pressing to make a sale or purchase
3. Have a high degree of competence in all matters relating to local
customs, the overall market, and the transaction process
•
Fulfilling these expectations requires considerable patience,
sensitivity, and technical expertise
o It is not unusual for a client to see a dozen sites, and then
deliberate for a year
o The professional who can build rapport and remain patient will
have a greater chance for success
•
Be aware of the following:
o In some cultures, such as the United States, the contract is the end
of negotiations

In many cultures, it is not

It is important to understand the negotiating ethics and
strategies used by your clients
Note that the contract
is not the end of
negotiations in many
cultures.
o International clients expect professionals to adapt to their ways, not
vice versa

If you want the business, learn the culture and the role you are
expected to play
o Clients everywhere want real estate professionals to work without
a written agreement

Have a position on how much you will do without protection
o In addition to a reluctance to sign contracts in general,
international clients may not want to sign exclusive agreements

They worry that signing an exclusive contract limits access to
the entire market
o International clients are accustomed to working with real estate
professionals, often to the exclusion of attorneys

They tend to place considerable reliance on agents, particularly
in discerning the relative merits of alternative investments
Section 2 - 51
Legal Counsel
Exam Question #49:
A real estate
professional in the
United States should
be prepared for some
resistance on the part
of an overseas client
regarding the use of:
D: An exclusive listing
agreement.
•
Attorneys play a larger role in real estate transactions in the United
States than perhaps anywhere else in the world
•
If a transaction takes place in the United States, international clients
may be surprised at:
o The degree of documentation lawyers impose
o The degree to which lawyers are involved in the selling and
negotiating process
•
International buyers and sellers often do not want attorneys to have a
high-profile role in the transaction
o Determine a client's particular sentiments
o Find a suitable level of involvement for the attorney
Note that attorneys
play a larger role in the
United State than in
other countries.
Section 2 - 52
Professional Advisors
•
International clients are accustomed to utilizing the expertise of a
number of specialists in completing a transaction
•
Professionals should expect to encounter and establish good working
relationships with the various members of a client’s staff
•
Support members may include:
o Accountants
o Tax consultants
o Financial planners.
o Investment consultants
o Attorney.
o Mortgage bankers
o Trade consultants
o Area specialists
o Researchers
Point out that
international
transactions are more
complex and require a
wider knowledge base.
The real estate
professional needs to
depend on a
competent team of
experts.
Explain that this list is
not all-inclusive–every
individual’s team is
different. Provide
examples of
professionals whom
you use in your own
practice.
o Translators/interpreters
o Notaries
o Feng-shui experts
o Numerologists
o Notaries
o Settlement real estate professionals
o Title companies
o International bankers
o Surveyors
o Appraisers
o Insurance brokers
Section 2 - 53
Translators
•
It is imperative for all parties to fully understand what is going on
throughout a transaction
•
Having a reliable translator is well advised, particularly during
negotiations in which terms are established
•
Some international clients are wary about translators
o Concerned about correct interpretation, honesty, and loyalty
o Do not assume who the translator should be, or what role the
translator is expected to play
o It is best to establish the ground rules with the client in advance,
and use translators all parties find acceptable
Point out that this in
an area of great
difference between the
United States and
other countries.
Section 2 - 54
Title and Escrow Agents
•
In the United States, title and escrow officers are necessary parties to
the transaction and closing
•
May be unfamiliar roles to an international client
•
In many countries, such things as chain of title, escrow accounts, and
title insurance do not exist
•
The real estate professional must explain the role of escrow personnel
and title companies, if they are involved
The Transaction Process{ XE "The Transaction
Process" }
Understanding different practices in the international transaction process
goes hand-in-hand with understanding different role expectations. In
particular, certain legal aspects of a real estate practice in the United States
may be common points of misunderstanding.
Clearing Title Encumbrances
•
The United States has one of the world’s most sophisticated and
comprehensive systems of recording and assuring descent of title to
grantees
o Recorded encumbrances, however, impede title transfer and must
be removed
o Fees and/or expenses are incurred during this process
o Many international clients, unaccustomed to title abstracting, will
not understand the meaning of many encumbrances, or why they
obstruct transfer
•
Title and escrow procedures often need to be explained so that the
client understands the ultimate benefit of a clear, insured, and
marketable title
Review the steps of
the transaction
process.
Exam Question #50:
One aspect of real estate
law and practice in the
United States which
usually differs from the
laws and practices of
most other countries is:
B: Title and escrow
procedures.
Real Property Interests
•
Careful explanation of the rights and interests obtained when
purchasing real property in the United States is essential
•
The bundle of rights will probably be different from what an
international buyer’s country of origin normally includes
•
In a worst-case scenario, the buyer may not be getting rights and
interests he or she expects
Use Restrictions and Loss of Ownership
•
It is often confusing to international clients who own property in the
United States that they can own property fully and lawfully, yet lose
ownership in ways over which they have no control
•
Explain the ownership terms, such as fee simple interest, eminent
domain, adverse possession, Environmental Protection Agency
judgments, and tax sales
Section 2 - 55
Does It Have To Be In Writing?
•
Many international clients dislike and try to avoid a written agreement
•
U.S. real estate professionals, in accordance with the Statute of Frauds,
must have an exclusive listing agreement in writing for it to be
enforceable
•
Weigh the risks and rewards concerning listing agreements, and
carefully explain why other documents and covenants must be in
writing
And Even If It Is In Writing...
•
Some clients will sign a contract because somebody wants them to, or
because they do not want to offend anybody
o They do not necessarily intend to abide by the contract
o When a conflict arises or circumstances change, the international
client will default and/or ask to renegotiate

In England, an accepted sale contract does not necessarily
mean the seller is committed to a buyer

Before closing, the property may be purchased by another
buyer who offers a higher price
o In some cultures, it is assumed that any agreement may be changed
due to conflicting demand, particularly if it comes from a superior
or a relative
•
To minimize problems, parties should aim for full communication
before signing contracts
•
Be sure there is trust, agreement, and mutual respect between the
parties
•
Relationships are more important than fine-print contracts in some
cultures
The Client Knows Best
•
Master the art of knowing when to talk and when to keep quiet
•
Communicate informatively rather than persuasively
•
Clients want to make up their own minds
•
Do not appear too aggressive
o North Americans, who are used to closing quickly, may appear too
aggressive and commission-hungry, which may harm the
relationship and risk the sale or purchase
Section 2 - 56
Decision-Making Styles
•
International real estate decision-making tends to take place either by
consensus, by committee, or through levels of hierarchy
o For example, in Japanese business, very strict consensus
development practices prevail
o Even for a transaction taking place in another country, the
decisions are likely to be made in Japan at the home office
o In many cultures, decisions for residential purchases are subject to
the hierarchy in the home
•
Whatever the process, international clients are going to follow their
own practices
•
Be prepared to accept and adapt to the client’s practices
•
To be sure that all decisions are understood by the parties involved,
follow up every verbal exchange with a written confirmation or
summary
o E-mail may be acceptable, but a card or letter is better
Negotiating Styles
•
Negotiation practices among international buyers and sellers vary as
much as decision-making styles
•
Some groups seek favorable results for everyone involved, while
others focus only on their personal objectives
•
It will take experience, insight, and good listening skills to manage the
negotiation process successfully
•
When negotiating abroad do not state your departure date
o Some groups may use your departure date to pressure you into lastminute concessions, knowing you would prefer to complete the
transaction, and avoid returning home empty-handed
Funds
•
Experienced international real estate professionals know where the
client has the money for the transaction.
•
Closings involving international clients have been known to fail
because the money does not arrive in time
•
Both banks and clients can be at fault for delays
•
Identify money channels to ensure a closing
•
Work to get the funds inside domestic borders before the closing date
Section 2 - 57
Tax Laws
•
Develop a relationship with a knowledgeable international tax attorney
who knows the latest requirements and laws
Use Optional Exercise
at end of Chapter on
Transaction Roles and
Expectations.
Section 2 - 58
Key Point Review
•
International business practices and customs vary
•
Clients have widely different expectations about the roles
professionals should assume in a real estate transaction
•
People from different countries have different methods of selling,
negotiating, and decision-making
•
The real estate professional must understand different methods of
selling, negotiating and decision-making
•
To avoid potential misunderstandings and problems, educate and
inform clients on the aspects of domestic law and practice
to the class.
Check for
understanding of
chapter content.
1. What methods have you used to resolve a misunderstanding or
remove an impediment during a negotiation?
Read and discuss with
the class.
2. What methods have you found most useful in trying to close a
transaction?
Section 2 - 59
Optional Exercise: Transaction Roles & Expectations (A) – In
your Instructor Notes Only
Purpose: To gain first-hand experience dealing with and resolving
differences in role expectation and understandings of domestic
laws and practice.
Instructions: In work groups, tell students to develop reponses to
the situation described in the following Secenario. Have students
choose one member of the group to record the group consensus.
Have students choose another group member to play the role of the
agent in a dialogue with the instructor.
Situation Summary: A Taiwanese investor-group wants you to find
a golf course on the west coast of Florida for under 5 million dollars.
You already know of several good possibilities, and the owners are
willing to give short-term listings if any offers are imminent. The
investors like one such property, valued at $4.3 million. But, the
trouble begins when the group asks you what they could get for it if
you could bargain the owner down to his lowest price. When you
tell the group you couldn’t exactly do that since you’d be working for
the seller, they become perplexed and irritated.
Complete the following dialogue:
Investors:
“Why can’t you negotiate him down?”
You:
“Well, legally that would be against his interests.”
Investors:
“What about ours? We’re the ones who are going to
spend all the money!”
You:
Transaction Roles & Expectations (B)
Purpose: To gain some firsthand experience dealing with and
resolving differences in role expectation and understandings of
domestic law and practice.
Instructions: In work groups, tell students to develop reponses to
the situation described in the following Secenario. Have students
choose one member of the group to record the group consensus.
Section 2 - 60
Have students choose another group member to play the role of the
agent in a dialogue with the instructor.
Situation Scenario: You represent a Japanese construction
company which has entered into a sales contract to buy a choice
parcel of land in downtown Los Angeles. Prior to closing, however,
the land was reassessed and the taxes were going to go up 20%.
Upon hearing this, the company undertook extensive deliberations
and decided not to agree to the terms of the contract anymore.
Complete the following dialogue:
Client: “This new tax increase will hurt our future earnings
considerably… it is unfortunate we did not know
beforehand.”
You: “I understand. Several other people are very upset too.”
Client: “As you know, the officers met in a teleconference
yesterday. We have decided we cannot continue with this
situation and we want you to pass the word on to the owners
over there, then start looking around for some alternate
sites.”
You:
Section 2 - 61
Section 2 - 62
Chapter 10:
Ethics and Equal Service
Time: 30 minutes
Overview
As real estate professionals, you already know and practice fair housing
laws. In this chapter, you will combine your knowledge and experience
regarding fair housing and diversity because:
•
Success in today’s markets requires awareness, communication, and
planning a diversity-oriented practice
•
Changing demographics in local markets indicate potential clients and
an opportunity to grow your business
•
Learning and applying acceptable fair housing practices help real
estate professionals serve a diverse clientele while complying with the
law
•
Real estate professionals serving international clients will be able to
explain and protect clients’ rights and investments
Present the
overview and
learning objectives
for the chapter.
Objectives
•
Identify discriminatory acts under federal fair housing laws
•
Apply the One America Principles and the philosophy of inclusion to
their real estate practices
•
Assist clients by recognizing illegal practices such as steering,
discriminatory advertising, and predatory lending practices
•
Apply the Equal Professional Service Model to your practices to
enhance professional services to all clients
Application
Building a real estate practice on a foundation of understanding and
commitment to fair housing laws, ethical treatment of clients, and equal
service to all, will enhance your opportunities for a successful
international practice.
Section 2 - 63
Building on the Foundation of Fair Housing
Briefly explain how
a diversity-oriented
practice makes
economic and legal
sense.
•
From a professional perspective, initiating a diversity-oriented practice
makes good business sense
•
From a legal standpoint, local, state, and federal fair housing laws have
established minimal standards of behavior all professionals must meet
•
This course builds on the promise of those laws that provide for equal
housing opportunities
•
An understanding of fair housing law and a commitment to equal
housing opportunities is expected of all real estate licensees, and is
embodied in the Code of Ethics of the NATIONAL ASSOCIATION
OF REALTORS®
•
Fair housing laws are designed to help you and your customers have a
full range of housing options available
•
The Equal Professional Service Model, developed by the NAR, gives
you a solid basis on which to offer the promise of these laws
Those who need more information should read the
Fair Housing Handbook published by NAR.
Exam Question #6:
Fair housing laws:
C: Help ensure
that everyone has
full access to the
housing market
with no
discriminatory
barriers.
Section 2 - 64
Fair Housing Background
•
Congress, in passing the Federal Fair Housing Act, established a
national policy to provide for fair housing throughout the United States
•
This Act prohibits discrimination on the basis of race, color, religion,
sex, familial status, handicap, and national origin
For a detailed history of fair housing legislation as well as information
about the protections fair housing laws provide, refer to the Appendix.
Additional information can be found on the U.S. Department of Housing
and Urban Renewal website, www.hud.gov.
Discriminatory Acts{ XE "Discriminatory Acts"
}{ XE "Discriminatory Acts" }
Fair Housing laws protect the public from discrimination by emphasizing
that there should be no variance in the real estate services offered to
clients.
The Fair Housing Act specifically prohibits certain practices if based on
race, color, religion, sex, familial status, handicap, or national origin. The
following acts are considered illegal:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Refusing to sell or rent housing
Refusing to negotiate for housing
Making housing unavailable
Refusing to sell or rent housing after a bona fide offer is made, or
refusing to negotiate to sell or rent, or otherwise make unavailable or
deny, a dwelling to any person
Discriminating against any person with respect to terms, conditions, or
privileges of sale or rental of a dwelling, or with respect to the
provision of services or facilities in connection with the sale or rental
of property
Setting different terms, conditions, or privileges for sale or rental of a
dwelling, or with respect to the provision of services or facilities in
connection with the sale or rental
Falsely denying that housing is available for inspection, sale, or rental
Persuading owners to sell or rent for profit, because of changes in
neighborhood composition (blockbusting or panic selling)
Denying anyone access to or membership in a facility or service
related to the sale or rental of housing
Refusing to make a mortgage loan
Failing to provide information regarding loans
Imposing different terms or conditions on a loan, such as different
interest rates, points, or fees
Discriminating in the appraisal of property
Refusing to purchase a loan
Setting different terms or conditions for purchasing a loan
Advertising or making a statement that indicates a limitation or
preference connected with the sale or rental of housing.
Section 2 - 65
Other Discriminatory Practices
•
Other practices in the real industry used to discriminate against people
include:
o Screening applicants for rental properties
o Steering clients
o Discriminatory advertising
o Predatory lending practices
Legal Screening Criteria{ XE "Legal Screening Criteria" }
•
To uphold fair housing laws, and avoid discrimination, landlords may
screen applicants appropriately by using objective criteria including:
o Ability to pay rent
o Credit history
o Rental history
Ask participants
what policies or
procedures they use
to avoid steering.
•
Limits on the number of persons living in one unit are legal
•
Students who are not self-supporting may be asked to have parents cosign their rental agreement
•
Consistency in applying the same policies to all applicants is a key
factor in complying with fair housing laws
Steering{ XE "Steering" }
•
Steering is a term used to describe an agent’s thoughts and actions
when making choices or assumptions for a buyer
•
The agent attempts to guide or steer the buyer in a certain direction
o For example, the agent may make the decision to show homes in
certain neighborhoods where the race or ethnicity matches the race
or ethnicity of the buyer
Exam Question #7:
Steering is a
practice used by
some real estate
professionals to:
o Buyers might also be steered to cities or school districts with
differing racial or socioeconomic composition
•
o Recommend homes to clients for consideration
B: Guide a client in
a certain direction.
o Editorialize about areas the client should or should not consider

•
Section 2 - 66
Agents use different approaches to engage in unlawful steering such
as:
The agent makes these types of decisions based on personal
prejudices or biases about the buyer
The Federal Fair Housing Act, as amended in 1974, 1988, and 1995,
identifies steering as an illegal activity
o The Act makes illegal any discrimination in the selling, leasing
advertising, or financing of housing; or making housing otherwise
unavailable because of the race, color, national origin, religion,
familial status, sex, or handicap
Advertising{ XE "Advertising" }
•
Advertising is another area that has the potential for discriminatory
acts
•
Avertising is subject to the Fair Housing Act, and may also be subject
to state laws that prohibit discrimination in advertising for real estate
•
Typical violations of the law involve the selective use of publications,
human models, geographic advertisements as in the location of
billboards or distribution of brochures, and equal opportunity slogans
and logos
•
Use the Fair Housing logo in all advertisements
o Although using the logo is no longer required, it creates a
presumption that you are trying to follow fair housing laws
•
Risk Management Activities
o Consistently using the logo in all advertising
o Placing the logo on business cards
o Incorporate the above uses as part of Office Policies
The Fair Housing Logo
Predatory Lending{ XE "Predatory Lending" }
•
Federal banking regulations define predatory lending as practices or
loan terms that:
o Deliberately deceive borrowers
o Strip home ownership equity
Ask participants if
they have experienced
predatory lenders.
Ask participants how
they assist their clients
so that they do not
become victims of
predatory lenders.
o Induce a borrower to refinance repeatedly with higher points and
fees
•
NAR identifies abusive and predatory lending practices as those loan
terms and deceptive claims that can result in:
o Home equity stripping
o Diminished personal credit standing
Section 2 - 67
o Violations of federal consumer protection statutes and regulations
•
A real estate professional can assist their clients by being aware of
predatory lending practices
o Do not advise clients to apply to sub-prime lenders
o Let clients make the decision about their financing options
Agencies for Reporting Discrimination{ XE "Agencies
for Reporting Discrimination" }
•
U.S. Department of Housing and Urban Development
•
1-800-699-9777
•
1-800-543-8294 (TDD)
•
State and local government human rights or civil rights agencies
•
Private fair housing groups
Protect Your Fair Housing Rights
•
An agent may have a cause of action against the discriminating party
•
A complaint may be filed on their own behalf
•
Report any incident of discrimination to an appropriate agency without
filing a complaint
Refer to the Appendix for advice about reporting acts of discrimination
Section 2 - 68
The One America Principles{ XE "The One s" }
The Department of Housing and Urban Development (HUD) created the
principles to help real estate professionals with awareness,
communication, and planning for a diversity-oriented practice. The One
America Principles were the basis for NAR’s development of a diversity
course.
•
The One America Principles
o A diverse demographic community
o Opportunity for all
o Responsibility for all
o Respect and celebration for diversity while embracing shared
values
•
The following set of principles of professional conduct for practicing
real estate professionals were created to support the One America
Principles
1. I welcome you and want to do business with you.
2. I will base my decision and opinions of you on who you are, not on
any preconceived stereotypes or ingrained value judgments.
3. I subscribe to the federal Fair Housing Act and its principles.
4. I embrace and celebrate the strength that diversity brings to our
communities and our nation.
5. I will help you find opportunities to buy the home you choose.
6. I will market home ownership to the public and reach out to people
who may not know that home ownership is a realistic option.
Ask participants to read
the One America
Principles.
Ask:
How many people
already knew about
the One America
Principles?

Are there questions,
comments, or
concerns about
incorporating these
principles into a real
estate practice?
7. I will make sure you know there is a full range of housing choices
available to you, and encourage you to consider all communities and
neighborhoods.
8. I will make every effort to maintain open two-way communication.
If we do not share a common language, I will work with you to find
someone who can interpret.
9. I have incorporated these principles in my daily operations and my
overall business plan. I would be proud to share the plan with you.
10. I am here to help you meet your real estate needs because you are the
reason I am in business.
11. Please let me know about any cultural or special needs that you have
so that our business relationship will be comfortable and successful.
Section 2 - 69
Ask the participants if
they see a relationship
between inclusion, fair
housing, and changing
demographics in the
United States.
Ask for thoughts,
comments, and/or
concerns about
inclusion, fair housing,
and demographics.
Section 2 - 70
The Philosophy of Inclusion{ XE "The Philosophy of
Inclusion" }
•
The philosophy of inclusion forms part of the foundation of the One
America Principles
•
To thrive in the growing cultural heterogeneity that characterizes our
country, we need to commit to a positive acceptance of individuals
who come from diverse cultures and backgrounds
•
This positive acceptance is more than a tolerance of other people, it is
a commitment to a social philosophy that says, “I respect other
individuals unconditionally, regardless of cultural, personal, social, or
professional differences”
•
It says to an individual, “Not only do I accept you; I accept your
culture”
•
The step beyond unconditional respect for all individuals to a sincere
positive regard for all individuals
•
Positive regard means you respect other people enough to grant them
the right to be different from yourself, and to appreciate their
differences
•
This leads to relationships where individuals from all backgrounds are
included in the cultural fabric without losing their uniqueness
•
Positive regard extends to all individuals regardless of cultural and
racial background, marital status, gender, sexual orientation, religion,
age, geographic origin, educational background, and physical and
mental capacity
•
People who embrace diversity see positive value in seeking out crosscultural relationships, both socially and professionally
•
Embracing diversity does not imply assimilation, conformance, or any
other ethic advocating that American individuals should become more
alike
•
Diversity awareness celebrates individual differences without any
imperative to change
•
The key to building inclusive cross-cultural relationships is to learn
one’s own attitudes and biases, make allowances for them, and bring
them under control
NAR’s Code of Ethics{ XE "NAR’s Code of
Ethics" }
•
REALTORS® have a long history of supporting the letter and spirit of
our nation’s fair housing laws
•
All REALTORS® pledge to conduct their business in accordance with
the tenets and spirit of the Code of Ethics
•
Article 10 of the Code of Ethics outlines an unequivocal commitment
to equal opportunity in housing
Article 10 of the Code of Ethics and Standards of
Practice
of the NATIONAL ASSOCIATION OF REALTORS®
Effective January 1, 2007
REALTORS® shall not deny equal professional services to any person for
reasons of race, color, religion, sex, handicap, familial status, or national
origin. REALTORS® shall not be parties to any plan or agreement to
discriminate against a person or persons on the basis of race, color,
religion, sex, handicap, familial status, or national origin. (Amended 1/90)
Emphasize that
NAR’s Code of Ethics
is the REALTORS®
commitment to fair
housing and diversity.
Exam Question #8:
NAR’s Code of
Ethics reinforces
members’
commitment to:
A. Fair housing
and diversity.
REALTORS®, in their real estate employment practices, shall not
discriminate against any person or persons on the basis of race, color,
religion, sex, handicap, familial status, or national origin. (Amended 1/00)
Standard of Practice 10-1
When involved in the sale or lease of a residence, REALTORS® shall not
volunteer information regarding the racial, religious or ethnic composition
of any neighborhood nor shall they engage in any activity which may
result in panic selling, however, REALTORS® may provide other
demographic information. (Adopted 1/94, Amended 1/06)
When not involved in the sale or lease of a residence,
REALTORS® may provide demographic information related to a
property, transaction or professional assignment to a party if such
demographic information is (a) deemed by the REALTOR® to be
needed to assist with or complete, in a manner consistent with
Article 10, a real estate transaction or professional assignment and
Section 2 - 71
(b) is obtained or derived from a recognized, reliable, independent,
and impartial source. The source of such information and any
additions, deletions, modifications, interpretations, or other
changes shall be disclosed in reasonable detail. (Adopted 1/05,
Renumbered 1/06)
REALTORS® shall not print, display or circulate any statement or
advertisement with respect to selling or renting of a property that
indicates any preference, limitations or discrimination based on
race, color, religion, sex, handicap, familial status, or national
origin. (Adopted 1/94, Renumbered 1/05 and 1/06)
As used in Article 10, "real estate employment practices" relates to
employees and independent contractors providing real estate related
services, and the administrative and clerical staff directly supporting those
individuals. (Adopted 1/00, Renumbered 1/05)
Section 2 - 72
The REALTOR® Fair Housing Declaration{ XE
"The REALTOR® Fair Housing Declaration" }
For the past quarter century, the NATIONAL ASSOCIATION OF
REALTORS® has worked closely with the U.S. Department of Housing
and Urban Development to promote equal opportunity in housing. In
1966, HUD and NAR created a voluntary Fair Housing Declaration for
use by REALTORS®.
REALTOR® FAIR HOUSING DECLARATION
I agree to:
Provide equal professional service without regard to the race, color,
religion, sex, handicap, familial status, or national origin of any
prospective client, customer, or of the residents of any community.
Keep informed about fair housing laws and practices, improving my
clients' and customers' opportunities and my business.
Develop advertising that indicates that everyone is welcome and no
one is excluded; expanding my client's and customer's opportunities
to see, buy, or lease property.
Inform my clients and customers about their rights and
responsibilities under the fair housing laws by providing brochures
and other information.
Document my efforts to provide professional service, which will
assist me in becoming a more responsive and successful REALTOR®.
Refuse to tolerate non-compliance.
Learn about those who are different from me, and celebrate those
differences.
Take a positive approach to fair housing practices and aspire to
follow the spirit as well as the letter of the law.
Develop and implement fair housing practices for my firm to carry
out the spirit of this declaration.
Section 2 - 73
Ask participants to
form small groups to
review the model and
text on this page and
the next three pages.
Allow five to seven
minutes for each
group to discuss:

Is the model new
or known?

How do they use
the model now or
how can they use
it in the future?

Systems or
processes they
use or can use in
the future to
reinforce the
model.
Section 2 - 74
The Equal Professional Service Model{ XE
"The Equal Professional Service Model" }
The Equal Professional Service Model offers a simple method for any
REALTOR® to set up systematic procedures to offer services without
discrimination. This model is the basis for the fair housing practices
recommended by NAR in the Fair Housing Handbook.
By applying the model to procedures and practices, you automatically
evaluate your practices to determine that you are consistently offering
equal service.
Equal Professional Service Model
1. Do I use
systematic
procedures?
No
Yes
2. Do I have
objective
information?
No
Yes
3. Has my
customer set
the limits?
Yes
4. Have I
offered a
variety of
choices?
No
No
As the model illustrates, anytime a question is answered “No,” the process returns to the first step. By following the steps of the
model, real estate professionals are forced to apply each step in succession to build and incorporate practices and procedures that
provide equal professional service to everyone.
Section 2-75
Systematic Procedures
•
Equal professional service means consistently providing the same level
of service to all your customers
•
Develop a consistent approach to greeting people, showing homes,
qualifying buyers, getting listings, conducting open houses, keeping
records, and following up with clients and customers
•
Systematic procedures and equal professional service help meet the
needs of a diverse customer base
Obtaining and Using Objective Information
•
Objectivity applies both to the information provided to customers, and
the information obtained from them
•
Provide information that is free of assumptions and biases, and ask for
information in a way that does not impose assumptions and biases
•
Giving and asking for objective information increases effective
marketing of a customers’ home or finding the home customers want
•
Customers appreciate professional problem-solving skills, objective,
factual responses to their questions, and recognition that it is the
customers, not you, who will be making the decisions
•
Information provided and implied in your advertising and marketing
should be objective
•
Objective information in advertisements make it possible for
customers to take the next step of setting the limits
Letting the Customer Set the Limits
•
Certain questions make sure the customer is setting the limits of a
home search
o Did the customer identify the necessary and desired features of the
home
o Did the customer indicate the spending limit
o Did the customer know the financial qualifications to purchase
o Did the customer express a preference for one or more
communities

Did the customer express a lack of preference for one or more
communities
Section 2-76

Did the customer express a preference for any particular type
of financing

Did the agent ask the customer for all information necessary to
search for a home
Customers are satisfied when they find what most closely meets their
needs and desires, not what aligns with agent assumptions.
Offering a Variety of Choices
•
Providing a variety of choices based on customers’ objective
information is good business
•
Customers who have had a wide choice are the most satisfied with
their selections and with their real estate professionals
•
Fair housing laws protect everyone from discrimination
•
They ensure that buyers, sellers, property owners, renters, and the real
estate professionals who serve them, have full access to the housing
markets with no discriminatory barriers
o Customers can expect that all housing in their price range is made
available:

At the most favorable terms and conditions available for that
housing

In all communities and locations where that housing exists

With complete access to all forms of financing and insurance
for the housing

With consistent professional service
•
Promote services and the availability of housing to all people through
marketing and advertising
•
Indicate that everyone is welcome in all communities
•
Diversity in today’s society does not change the effectiveness of the
Equal Professional Service Model
o By learning how to work with people who are different, you will
find that this model continues to be a useful tool
o The Model promotes the high level of service that will earn the
respect and loyalty of consumers
Section 2-77
Exercise: Fair Housing Case Study
Option 1:
groups of three to six
people. Ask each
group to read the
exercise and to
discuss and respond
to each of the
questions following the
case study.
Ask groups to appoint
a spokesperson to
share their answers
with the class.
Option 2:
Ask participants to
individually review the
case and ask
participants to
volunteer answers.
Manuel and Olivia Romero, recent immigrants from Sonora, Mexico, are
looking for a home. They have looked at housing ads in several area
newspapers, including a Spanish language publication. The Spanish
newspaper seems to advertise ads almost exclusively for lower-priced
properties in selected areas, unlike the statewide or regional publications,
which feature properties in all areas of the metropolitan markets.
The Romeros found several properties that interested them in both the
statewide newspaper and the Spanish newspaper. They first called Ron
and Rita Smith, a husband and wife team at ABC Realty who had several
ads in the statewide paper, and one ad in the Spanish paper.
Ron answered the ad call from Manuel. Ron had a difficult time
understanding Manuel and asked him if he would like an interpreter.
Manuel gave the phone to Olivia, who was more fluent in English. Olivia
arranged to meet with Ron and Rita that afternoon.
At their meeting, Ron and Rita asked some questions about the Romeros’
housing needs, size, number of bedrooms, and focused on financing
arrangements, whether they had good credit, etc. Ron pressed whether
they had been pre-qualified, and Manuel advised they would be paying in
cash. After further questioning about price range, Manuel finally said he
thought they could afford $125,000. Olivia told them they wanted a house
with three bedrooms, two baths, a garage, and a large backyard. She also
indicated that the house had to be close to a park, and near good schools
for their children.
Olivia asked if there were neighborhoods where there were many
Mexicans. Rita hesitated and said, “I think so. I can get you some
demographic information that will confirm that.”
Rita and Ron ultimately showed the Romeros five houses, four located in
predominantly Hispanic neighborhoods and one in a “mixed”
neighborhood. Manuel asked whether there were other neighborhoods
with homes that met their needs. Ron replied, “I don’t think so, especially
since you are looking for a large yard.”
Section 2-78
The Romeros ultimately bought a home for $115,000 in one of the
Hispanic neighborhoods. A few months later, Olivia was discussing their
new home with a coworker who just recently bought a similar home in a
neighborhood with a reputation for having excellent schools based on their
scholastic records. It was two blocks from a neighborhood park. They
had paid $120,000 for their house and said the neighborhood was full of
houses just like theirs. It was a very popular neighborhood because of its
large lots. Olivia immediately wondered why they had not heard about
that neighborhood, which was just a few miles away from theirs, across
the railroad tracks.
Q. 1 Answers:
Illegal target
marketing–placed ads
for Hispanic
neighborhood listing
only in Spanish
publication.
Questionable
qualifying questions–
pursued prequalification questions.
Steering–volunteered
racial demographics.
1. What possible fair housing violations or fair housing red flags can
you identify in this example? What did the Smiths do that may
have led to these possible violations?
Q. 2 Answers:
Advertise in all
newspapers, not just
selected properties in
selected publications.
Avoid questionable
questions. Use
systematic procedures
to qualify.
Do not volunteer racial
information about
neighborhoods.
2. What might the Smiths have done to avoid some of these
problems?
Section 2-79
Avoid steering. Do not
make assumptions
about what the buyer
wants. Offer a variety
of choices. Let
customer set limits.
Q. 3 Answers:
13th and 14th
Amendments to the
Constitution
3.
Name at least two laws that govern your fair housing practice.
Civil Rights Act of
1968
1866 Civil Rights Act
Equal Credit
Opportunity Act
American with
Disabilities Act
State and Local Laws
Section 2-80
Exercise: You Be the Judge
Tony Hall listed his house for sale with Robert Mitchell of Neal Jackson
Realty & Mortgage, Inc. Carol Hayes, an agent with the Neal Jackson
Company took Kwesi and Latrisa DeGraft-Hanson and their children to
see the house.
When Tony Hall answered the door, he asked to speak with Carol Hayes
inside the house while the DeGraft-Hansons waited outside. Hayes
alleged that Hall became angry and said, “We don’t need their kind here.”
Hayes was shocked by Hall’s statements and thought he was
discriminating against the DeGraft-Hansons because they were African
Americans.
Hayes left the house upset and told the DeGraft-Hansons that Hall would
not let them look at the house due to their race.
According to the DeGraft-Hansons, Hayes told them that Hall told her that
he had previously told the listing agent “that his house was not to be
shown to blacks.”
Hayes did not recall either Hall’s statement about the listing agent, or
herself mentioning the listing agent to the DeGraft-Hansons. She claimed
that it was the DeGraft-Hansons who later raised the question of whether
the listing agent would have taken the listing with understanding that the
house would not be shown to black people. In fact, another agent of the
Neal Jackson agency had previously shown the Hall house to an AfricanAmerican client.
After Hayes and the DeGraft-Hansons left Hall’s house, Hall called the
agency and allegedly told another agent that his house “was not supposed
to be shown to blacks.” The agent told Hall that he could not restrict the
sales of his property in that way. Hall then asked the agent to extend an
invitation to the DeGraft-Hansons to return to the house.
The following day, the managing broker for the Neal Jackson agency
learned of the incident and was prepared to immediately void the Hall
listing, but did not do so because the DeGraft-Hansons had indicated that
they might still be interested in viewing the property.
The DeGraft-Hansons never did revisit the property. Instead, they sent the
agency a letter demanding an apology. A signed apology from Hall was
mailed to the DeGraft-Hansons.
The agency did not show the Hall house to any other potential buyers and
eventually voided the listing contract with Tony Hall. The DeGraftHansons continued to work with Carol Hayes to look for houses, but did
not buy any of the properties shown by Hayes.
Section 2-81
Divide the class
into groups to
read and discuss
the case study.
Approximately one and half years later, the DeGraft-Hansons filed a
lawsuit against Tony Hall, Robert Mitchell, Neal Jackson Realty and its
franchisor, and Colwell Banker Real Estate Corporation. The complaint
alleged that the defendants violated the Georgia Fair Housing Act and
committed the tort of intentional inflictions of emotional distress by
agreeing to discriminate based on race.
Ask someone from
each group to share
the group’s answers to
the questions.
Debrief the exercise
by reading the court
response to the class.
1. What possible fair housing violations or fair housing red flags can you
identify in this example?
2. What is your opinion of the actions taken by agent Hayes?
3. What court action would you expect and why?
Court Response
The court found that Coldwell Banker could not be held vicariously liable
because they had no control of time and manner of the agent’s work.
Without such control, franchisors are not liable for the torts of franchisees.
The court found no evidence of racially discriminating housing practices
by Robert Mitchell and Neal Jackson Realty and Mortgage, Inc., only
evidence of discrimination by home owner Hall.
The DeGraft-Hansons based their intentional infliction of emotional
distress claim on their allegation that Robert Mitchell and Neal Jackson
Realty and Mortgage, Inc. agreed with Tony Hall to discriminate based on
race. The court found no evidence to support the claim.
Section 2-82
Personal Application
Before asking questions to obtain information consider how a person with
a different cultural perspective will feel, and modify the questions if
necessary.
Sample universal questions that may be used with any client:
Property:
“What can you tell me about the kind of home you are looking
for?”
Location:
“What types of neighborhoods are you interested in?”
Price:
“Our homes are listed by price. Do you have a price range in
mind?”
Payment:
“I would be happy to discuss financing with you if you wish.
Would this be helpful now?”
Timing:
“If you can find a house you like, how soon do you want to
move?”
Understanding:
“Perhaps you could tell me how you think the home buying
transaction takes place.” OR
“Would you like for me to walk you through the home-buying
process?”
Expectations:
“There could be a number of people involved in the purchase. Do
you need any help understanding what each person should do and
what your rights are?”
Special needs:
“Is there anything I can do or anything I need to know to make this
process easier for you?”
Next steps:
“Please tell me how you would like to proceed from here.”
Section 2-83
If time permits, ask
the class to develop
universal questions
and share the
questions with the
class.
If time is limited,
refer participants to
this section and ask
them to read the
sample questions.
Key Point Review
•
The REALTOR® Fair Housing Declaration, the One America
Principles, and NAR’s Code of Ethics form the foundation upon
which real estate professionals can build an ethical practice that
serves everyone equally
to the class.
Check for
understanding of
chapter content.
small groups to discuss
the question.
Ask each group to
make a brief
presentation to the
class.
•
Standard policies and practices that include sensitivity to diversity
make it easier to provide professional service to everyone
Discussion Question
1. As a member of the NATIONAL ASSOCIATION OF REALTORS®,
how have NAR’s Code of Ethics and the REALTOR® Fair Housing
Declaration changed you or your outlook, your business, or your
relationships in your community?
2. What guidelines should be followed to ensure equal service to all, and
to prevent discriminatory practices?
3. Balancing information, fair housing laws, and the Equal Professional
Service Model in your practice.
Section 2-84
Section 3:
The World of International Real Estate
Chapter 11: Professional Goals
Chapter 12: Creating and Launching a Business Plan
Chapter 13: Marketing and Selling Practices
Chapter 11: Professional Goals
Overview
In Chapter 11, participants have an opportunity to review and create
professional goals. These goals will serve as the foundation for their
business plan.
Objectives
•
Determine personal attitudes and practices they want to improve,
change or adopt
•
Create professional goals for an international practice
•
Examine immigration data and its impact on buying power
•
Translate professional goals into specific action statements
Time: 30 minutes
Read the
overview,
objectives, and
class.
Ask for questions.
Application
Opportunities and resources for global investment are better than ever
before. International real estate is a specialized practice that requires
initiative, skill, and appreciation for working with people from different
cultures and countries. Setting professional goals for an international real
estate practice will help achieve success and provide the freedom to enjoy
the rewards of this special professional segment.
Section 3 - 1
The Opportunities{ XE "The Opportunities" }
•
The free market philosophy is spreading
Ask participants to
state what they think
are the benefits of an
international practice.
•
The volume of foreign direct investment is increasing
•
These trends promise expanded international real estate opportunities,
both now and in the long term
Capture answers on a
flip chart.
•
The opening of China, Eastern Europe, and the former Soviet
economies to western free market enterprise represents a huge potential
market for future investment
After presenting this
section, compare
participant responses
with the material
presented in the text.
•
Recent changes in USA immigration laws have created an investor’s
visa which
o Offers foreign investors U.S. citizenship
o May provide an incentive for foreign investment
Global Resources
Wherever you live, you have local access to global resources and contacts
•
Global resources and contacts provide access to local government and
economic or cultural organizations who sponsor trade missions to other
countries
•
A real estate professional has valuable skills to contribute to a mission
•
Earning a place in such an organization expands a professional network
•
The Internet contains thousands of real estate and international
resources
o Social and economic conditions and opportunities in foreign
countries
o Real estate firms and listings
o Government programs and policies
o Currency exchanges
o Communication with professionals and clients around the world
Loyal Clients Mean Repeat Business
Section 3 - 2
•
It takes time to develop relationships with foreign clients
•
Once established, foreign clients will choose you to service their
ongoing real estate needs
•
The initial transaction may be a small
•
If you perform to their expectations, there will be additional, and larger,
transactions over the years
Income Opportunities
•
International business relies on referrals
•
Successful transactions build reputations which will attract new clients
o Developed relationships
o Provided knowledgeable and trustworthy service
•
Clients value these attributes and will refer future business
Bigger Audience for Your Properties
•
Creating an international network means global exposure for all
properties in your market area
•
International focus can give a significant competitive advantage and
result in more listings and sales
Excitement and Personal Growth
•
International real estate can be an exciting, adventuresome experience
•
It can create opportunities for meeting people from different cultures
•
Opportunities for travel to other countries
•
Many real estate professionals find the international specialty personally
rewarding as they make friendships and grow in new areas
Section 3 - 3
The Commitment{ XE "The Commitment" }
Explain the unique
features of an
international
practice that may
present challenges
to those beginning
or thinking about
international real
estate.
•
Initiating an international practice requires more time, money, and effort
to succeed than a domestic practice
•
Time to develop relationships
•
Travel further distances may be necessary
•
Transactions may take longer to close
•
International business is a long-term commitment
•
Rewards are often slower in coming
•
There is no guarantee there will be any business at the end of the
development period
•
Patience is the special ingredient in developing a lucrative international
business
•
Realize the opportunities, make a commitment and enjoy working in a
business that has unique challenges
Time
•
Expect to spend time establishing relationships before any real business
can occur
•
Transactions take longer to complete in the international arena due to
distances, time differences, money transfers, and legal issues
Money
•
Costs of networking, marketing, promoting, and general overhead are
much greater than in a domestic business
o Faxes, telephone calls, travel, legal fees, document preparation,
accounting, and tax reporting will all be more expensive when
working with international clients
Education
Section 3 - 4
•
Development of cultural understanding and international expertise
requires ongoing education and training
•
Change is constant because governments change, economies rise and
fall, and opportunities enter and exit the market
•
In addition to the CIPS programs offered by NAR, many seminars are
available on international business
•
Universities, world trade centers, firms and nonprofit associations, such
as the International Real Estate Federation (FIABCI), also offer courses
on international business
Networking
•
Formation, organization, maintenance, and cultivation of an
international network can be difficult due to different practices and
levels of development in other countries
•
Local resources, such as title companies, maps, online information,
directories and address systems, may work differently abroad or may
not exist at all
•
Participation in international real estate events at the NAR Annual
Convention presents a great opportunity to learn about other countries
and to meet key players
•
Over 20,000 professionals from the United States and approximately
1,500 professionals from more than 50 countries attend this event
annually
Adaptation
•
Differences in business practices, banking and legal procedures,
customs, or time zones require changes in the way you conduct business
•
Redefine your philosophy and attitudes concerning business associates
and clients
Personal Self-Assessment{ XE "Personal SelfAssessment" }
To learn the goals that will help create an international business plan
refer to the assessment on the following pages.
•
The purpose of this assessment is to help determine how agents interact
with people from different cultures and backgrounds
•
The assessment will identify attitudes and practices that may need
change or improvement
This assessment is for your personal use only.
Ask the
participants to
complete the selfassessment.
Explain that the
assessment is
confidential. It is
intended to help
participants
evaluate their
personal potential
in the area of
international real
estate.
It will not be shared or discussed in class.
You are encouraged to answer honestly.
There are no correct or incorrect answers.
Section 3 - 5
Personal Assessment
1. What makes you different from everyone else? Write the first things that
come to mind.
2. Imagine that you are in a social setting and meeting someone from another
country. How do you feel about this encounter? Mark as many reactions
as apply.
a. It is not a big deal.
b. I feel on edge.
c. The differences between us intrigue me.
d. I suppress how I am different.
e. I wonder why he or she is so different.
f. I gravitate away from the person.
g. I enjoy engaging the person in conversation.
h. I look for someone who has more in common
with me.
3. Assume you are a religious person, and you meet an atheist. Which of the
following, if any, describe you?
a. I accept the atheist in spite of his belief.
b. I refuse to have anything to do with the person.
c. I try to convince him of the folly of his
theology.
d. I listen to his beliefs; they might even influence
my own thinking.
Section 3 - 6
4. A recent immigrant informs you that a property you believe to be
gorgeous is unacceptable because the street address has the
“wrong” numbers in it. Your most likely response would be to:
a. Ask why an address would prevent someone
from making an offer.
b. Ask why the address is a problem, then move
on to other properties.
c. Thank the person politely and move on to the
next buyer or listing.
5. When you meet a stranger from another country, your first
emotional response is likely to be:
a. Fearful and apprehensive.
b. Interested.
c. Accepting.
d. Suspicious.
e. Respectful.
f. Reluctant.
g. Awkward.
h. Confusing.
6. If you were to create a utopia, the inhabitants would be:
a. All exactly like you.
b. All different from you.
c. Mostly like you.
d. Mostly different from you.
7. Your experience and contacts with other cultures and subcultures,
compared with those of the average American, have been:
a. Extensive.
b. Average.
c. More than average.
d. Less than average.
Section 3 - 7
8. When you meet a person from another country or culture, you
usually find that:
Debrief the
assessment in
general terms.
Ask:
What if anything,
did you think or feel
when you
completed the
assessment?
Did you identify
traits that you may
want to change?
Did you realize that
you might be
limiting your
business
opportunities
because of
personal biases or
prejudices?
a. Your stereotype of the nationality or culture is
confirmed.
b. Your stereotype had nothing to do with the
person.
c. You do not let stereotypes get in the way of
communication.
d. You do not apply stereotypes to individuals,
just to nationalities or cultures as a whole.
e. You are sensitive to how that person has
stereotyped you.
9. If you were to recognize that you had a significant number of biases
about other people, which of the following would you most likely
do?
a. Accept your biases and move on.
b. Develop ways to camouflage your biases.
c. Work to reduce biases that are excessive.
d. Try to get rid of the biases that were not
justified.
10. When you are in a group of culturally diverse people, your comfort
level:
a. Is fairly easy to establish.
b. Depends on the types of group present.
c. Depends on the individuals to whom you are
talking.
d. Is fairly difficult to establish.
Section 3 - 8
Market Assessment Checklist{ XE "Market
Assessment Checklist" }
•
Evaluate your local market’s potential for international business
•
Is the environment positive or negative according to the following
characteristics
•
If the local market has many positive attributes, it should be possible to
find and transact international business
•
If the local market has many negative attributes, it may be necessary to
look outside the local market for opportunities
•
Assess your means and desire to meet these challenges
Market Features
+
−
Property type, size, variety, and availability
Existing foreign investment
Local economic trends
Local demographic trends
Market appreciation
Accessibility and transportation
Market size
Market name recognition
Real estate market conditions
Proximity to universities and other resource
centers
Section 3 - 9
Goals and Strategies{ XE "Goals and
Strategies" }
Discuss some of
the goals and
strategies
presented in this
section.
Ask participants to
share their ideas
about possible
goals and
strategies.
•
During this course you have learned how valuing diversity and using
inclusive business approaches increases opportunities for expanding
your market
•
The next step is to develop strategies that will help realize the
professional goals you have set
•
The following examples illustrate how to translate goals into specific
actions
Local Demographic Trends
•
The analysis of local demographic data is an important first step in
developing marketing strategies and business plans that address the
specific needs of a diverse market area
•
Among the critical factors are:
o Total population
o Population by nationality or race
o Income
o Employment
o Key housing indices
•
No target marketing on the basis of race or national origin
U.S. Government Census Bureau
•
Population data can be found on the Internet at www.census.gov.
•
Quick search options are displayed on the right side of the screen
•
You may select from the following options:

State and County Quickfacts

Sample page shown below

The list of categories with available data are listed on the left

Additional links are provided at the bottom of the page

Latest Economic Indicators

New Home Sales
Federal Statistics
A good source for regional, state, and county data is www.fedstats.gov
Section 3 - 10
Local Statistics
• Other sources of information include:
o Libraries
o City or county planning departments or commissions
o Chambers of commerce
o State and local human relations commissions
o Local HUD offices
Residential Property News and Research from Around the World
• Can be found at http://www.globalpropertyguide.com/
CCIM Institute
•
The CCIM Institute, an affiliate of NAR, maintains a comprehensive
website that provides information and data to its members and NAR
Associate Members for a fee
o One helpful feature is the Site To Do Business (STDB)
o Offers information on demographics, owners and investors, market
research, professional services, financial information, property
management, and more
o Visit the website at www.ccim.com
•
The following questions help determine the status of a local market
1. Is the population in your local market growing or declining?
Debrief this section
by reviewing these
questions with the
class.
2. How has the ethnic mix of the market changed?
3. Is the per capita and/or household income rising or declining? What
does that imply for housing needs?
4. How has the change in percentages of renters and home owners
changed? What does this mean?
5. What general, qualitative conclusions can you make about the
demographic or cultural trends in your market?
Section 3 - 11
Sample Local Market Data
Optional Exercise in
Your Instructor Notes
Only: Your Local
Market
Ask participants draw a
large circle to create a
blank pie chart. Then
ask students to divide
the chart according to
what they think is the
percentage by race
(White, African
American, Hispanic,
Asian, Other) of the
population in their local
market. They can
check their estimates
by obtaining
demographic data from
one of the sources
previously cited.
Section 3 - 12
This chart is offered as an example of the type of data that should be
gathered about a local market.
The following sample report is based on data from a search of various
categories, including population by race, household income, type of
employment, tenure, median value, and median gross rent.
•
When using demographic data be aware of the following considerations:
o Traditional fair housing training has emphasized there should be no
difference of treatment on the basis of race and other factors
o Becoming culturally aware does not change that basic principle of
fair housing
o The analysis of demographic data helps to understand, reach out,
and expand marketing efforts
o Such data should never be used to limit choices or steer prospects to
or away from communities
o Demographic data should not be provided to customers and clients

Keep demographic data and information you gather for diversity
business planning separate from customer and property files

Check state and local laws concerning the collection and use of
demographic data
1990
% of total
2000
% of total
+/% change
Total population
White population
African American population
Hispanic population
Asian population
Other population:__________
Household income
Per capita income
Unemployment %
% White collar
% Blue collar
% Renter occupancy
% Owner occupancy
% Vacancy
Average home value
Average rent rate
•
Trends should compare data from two or more years
•
The Census Bureau’s Internet site delivers data for one year
• Complete information for a comparison year can be found in the
Census Bureau’s publications available at a public library, or from an
area agency maintaining local demographic data
• Start at the local planning commission or committee for your town or
county
• Calculate the percent of total and the percent change items yourself,
depending on where you obtain the data
Section 3 - 13
Goals for Services and Customers
1. Promoting listings:
Promote listings in local and international markets
2. Marketing listings and obtaining buyers:
Allocate promotional efforts, time, and budget resources according
to the size of markets
Select advertising channels to effectively include local multicultural
and international prospects in local markets.
3. Obtaining listings:
Emphasize inclusive marketing plans when obtaining listings
4. Facilitating closings:
Broaden facilitation services to ensure that all buyers get to the
closing table successfully
Goals for Reaching the Local Community
1. Get to know the community:
Embrace and celebrate the strength that diversity brings to our
communities and our nation.
Become actively involved with social and cultural organizations and
educational opportunities that will enhance knowledge of market.
Section 3 - 14
2. Gaining recognition in marketplace
Include ways to increase personal and professional profile in this
country and abroad, so people in local markets recognize me as
their real estate resource of choice.
Goals for Reaching International Markets
1. Learning about and participating in international marketing or sales
events:
Network with agencies, associations, and cultural organizations to
identify international events in which participation is an option.
Goals for Professional Development
1. Improving language and communication:
Improve communication skills with immigrant and ethnic groups.
Learn to speak a foreign language.
Provide Fannie Mae’s
number and website to
students:
2. Increasing cross-cultural awareness:
Familiarize yourself with the social and cultural backgrounds of
ethnic groups in your market to achieve a greater comfort level on
both sides when involved in a business transaction.
202-274-8000
www.fanniemaefoundati
on.org/
Increase focus and efforts to build one-on-one relationships with
prospects and customers.
Company Goals
1. Improving and expanding company image:
Develop communication to clients and prospects that shows the
company is proactive and inclusive.
Develop ways to promote the international capabilities of the
company in home country and abroad.
Section 3 - 15
Guidelines for Specializing{ XE "Guidelines for
Specializing" }
•
Professional goals may include developing a niche market or expanding
a practice to include international transactions
•
The following considerations may influence how you define a specialty
area in your local or international business
•
Consider all aspects of your practice, and develop a plan that will
provide the greatest likelihood of success and professional fulfillment
Personal Background
•
Capitalize on relevant personal experiences or insights, such as:
o Foreign language fluency
o Ties with friends or relatives abroad
o Hobbies, interests, or social and professional affiliations that may
have local or offshore ties
o Knowledge of a particular culture through your heritage
o Knowledge of a foreign market from previous travel or other
overseas experience
Professional Background
•
Links to other countries or cultures include:
o All formal education including any degrees and professional
designations

Many cultures place a high value on education and credentials
o Identify possible networks through:

Current firm

Educational institution

Organizational memberships
Current Real Estate Expertise
Successful international real estate professionals recommend continuing
what you do best rather than starting all over in a new area. If your strength
is leasing new developments, consider business in that particular area of
expertise. Most real estate careers can have an international element.
Overseas clients need these services as well.
Section 3 - 16
Market Opportunities in Your Area
•
Analyze your market area
•
Study investments that have already occurred
•
These provide a good perspective of current opportunities
•
Do not limit yourself to what has already been done
•
Consider your community in terms of its current international
connections
o Many cities, states, universities, and other organizations have
international festivals and events, host overseas visitors, and set up
exchanges or sister city connections
o Such programs provide insight to the level of international activity
in your area, and can provide an avenue for building a network
Competitors
•
Be aware of the business happening in your local market
•
If specialists have identified a need, and the demand is significant, you
may want to follow the trend
•
If demand is already being met, you may want to specialize away from
existing competition
Section 3 - 17
Succeeding in International Real Estate{ XE
"Succeeding in International Real Estate" }
Point out that this
profile was created
by several
successful
practitioners with
international
experience.
Suggest that
participants review
the profile before
completing the
next exercise,
which is to create
their goals for an
inclusive practice.
•
Based on the experience of a number of international specialists
associated with NAR, certain attitudes, traits, and business practices are
important for a success in multicultural, and/or international real estate
Traits and Attitudes
•
Patience
•
Genuine affinity for people with whom you work
•
High degree of interest in the culture
•
Resourcefulness
•
Initiative
•
Perseverance
•
Tolerance
•
Sensitivity
•
Strong listening and communication skills
•
Fondness for travel
Exam Question #18:
•
Good interpretation skills
One of the important
traits for success in
international real
estate is:
•
Commitment
•
Ability to cope with ambiguous and unforeseen events
•
Honesty
A: The ability to work
at a slower pace,
and be patient with
people without being
condescending.
•
Adaptability
•
Modesty
•
Courteousness
Section 3 - 18
Business Practices
•
Commitment to success
•
Ability to provide clear and frequent explanations of details
•
Precision in written and verbal communication
•
Respect for clients’ wishes
•
Specialization in a particular area
•
Ability to overcome clients’ prejudices
•
Consistency in business patterns
•
Ability to network
•
Collaboration with foreign colleagues
•
Collaboration with organizations
•
Dedication to full disclosure
•
Loyalty to foreign clients
•
Determination to keep promises and commitments
•
Respect for foreign business practices
•
Ability to plan and organize
•
Establishment of clear objectives
Section 3 - 19
• Key Point Review
Review the key
points of the
chapter.
Review discussion
question with the
class.
•
Opportunities and resources for an international real estate practice are
better than ever before
•
Success in an international practice requires a sincere commitment of
time, energy, and money
•
It is important to assess personal biases, and strengths and weaknesses
to prepare for and succeed at transacting international business
•
A key to success is the ability to translate professional goals into
specific actions that advance your career
Discussion Question
1. In what ways can diversity and inclusion contribute to the success of
an international real estate practice?
Section 3 - 20
Chapter 12:
Create and Launch a Business Plan
Read the overview, objectives, and application with students.
Time: 30 minutes
Ask for questions.
Overview
In this chapter participants will share ideas and practice creating strategies
for a business plan. Strategies are plans or approaches used to support the
professional goals. The final step will be to create actions to implement the
business plan.
Objectives
•
Identify the variables that influence a business plan
•
Develop strategies for initiating or expanding an international real estate
practice
•
Create specific actions to launch the business plan
Application
A good strategic plan is an indispensable road map for identifying:
•
Where you want to go
•
How and when you will get there
•
What to do along the way
•
How to measure success
Action plans should be developed to facilitate implementation of the
business plan. Action plans are a way to assign accountability, track details,
and maintain momentum.
Section 3 - 21
Introduce the
chapter.
Explain that a
business plan that
incorporates
diversity is
compatible with the
professional goals
of international
practice.
Formulate a Business Plan{ XE "Formulate a
Business Plan" }
•
A basic business plan consists of the following components:
o Your mission and goals
o Strategies to attain goals
o Action plans to implement strategies
•
Begin by identifying all the variables needing to be organized
o People involved
o Resources at your disposal
o Real estate services
•
An inclusive practice incorporates:
o A multicultural service philosophy in daily operations
o Diversity in strategic plans, practices, and staffing
Review the steps
for formulating a
business plan.
o A culturally friendly presence in the community
People
•
Identify all the people involved in your practice
o You as the real estate professional
o The company
o Buyers, sellers, renters and investors
o Local community
o Areas or countries where you want to conduct international business
•
The business goal is to supply customer service that exceeds customer
expectations
o Learn the desires and needs of each group
o Identify how you can provide the services to meet these needs
Section 3 - 22
Resources
•
What resources will help provide customer service to all clients
•
Consider the following items and add any additional resources you may
have in the space provided below
Ask participants
what additional
resources and
services they can
add to the list.
o Time
o Money
o Real estate skills
o Cultural skills and awareness
Services
•
Consider the range of services to provide to clients
•
Add other services to the list
o Listing properties for sale or rent
o Communication
o Marketing
o Servicing
o Community and professional networking activities
Section 3 - 23
Explain that the
strategies on this
page are just a few
possibilities.
Ask participants to
brainstorm about
possible strategies.
Capture the
strategies on a flip
chart. These
strategies may be
used in the
exercise.
Allow 20 to 30
minutes for this
exercise.
The number of
goals you use for
the exercise will
depend on the size
of the class and
the number of
groups formed.
Business Plan Strategies{ XE "Business Plan
Strategies" }
•
Basic goals for an individual practitioner or agency that practices
international real estate
o Increase resources to accommodate international transactions
o Add or expand services to international clients
o Network or establish international contacts in the local market
o Network or establish international contacts abroad
Exercise: Developing Strategies
Forming a strategy begins with identifying the groups you want to work
with and ways to reach and serve them. In this exercise, the class will be
divided into several groups. Each group may select a goal from the list
above, or create a different goal. Your assignment is to develop at least two
strategies that you think will support the goal.
At the end of the exercise, a spokesperson for each group will present the
group’s strategies to the class.
Goal: Increase resources to accommodate international
transactions
Strategy 1:
_____________________________________________________________
_____________________________________________________________
More than one
group can create
strategies for the
same goal.
Groups may create
their own goals
and strategies.
_____________________________________________________________
_____________________________________________________________
Strategy 2:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Section 3 - 24
Goal: Add or expand services to international clients
Strategy 1:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Strategy 2:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Goal: Network or establish international contacts in the local
market
Strategy 1:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Strategy 2:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Section 3 - 25
Goal: Network or establish international contacts abroad
Debrief the
exercise by asking
a spokesperson
from each group to
present the
strategies that
were created.
Strategy 1:
Ask the class to
vote for the best
strategies.
Strategy 2:
Ask for comments
or questions about
setting goals and
strategies.
Section 3 - 26
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Launching Your Business Plan{ XE "Launching
Your Business Plan" }
•
A business plan has no value if it is not implemented
•
The implementation process consists of planned actions that allow
attainment of goals
•
An action plan is a schedule of specific actions that addresses one
objective or goal that is part of the entire business plan
o Include the name of the person or group responsible for completing
a specific action
o Identify the anticipated start and stop dates for specific actions
•
Following is a sample action plan for advertising an agency’s
capabilities in international real estate
Sample Action Plan: Advertising in the Local Market
Goals
1. To actively promote the agency and its services to specific cultural
groups in the local market.
Review the
sample action
plan with the
class.
2. To establish contacts with local businesses, banks, and financial services
that have business relationships with local immigrant and ethnic groups
in the local market.
Strategy
1. Advertisements will be placed in local newspapers and magazines to
raise awareness of the agency’s services to local immigrant and ethnic
populations.
Action/Task
Completion
Date
Person
Responsible
Meet with advertising design company
5/1
John
Select newspapers and magazines
5/1 to 5/10
John and staff
Obtain advertising rates and schedules
5/12
Maria
Finalize ad copy
5/15
John
Place advertisements
5/20
Mary
Track responses to ad
6/1 to 9/30
Jamal
Section 3 - 27
Working With an Action Plan{ XE "Working With
an Action Plan" }
•
Each strategy of a business plan should have an action plan
•
Each step of the action plan should be a step to attaining the goal
o Action plans monitor progress toward a goal
o Aids in identifying obstacles
o Acknowledge achievement of an objective or goal
o Keeps program on track and focused
•
Include start and stop dates for specific actions
•
List other needed resources
For complex and or detailed action plans, you may want to use Microsoft
Excel or Microsoft Project software to create and revise action plans
Exercise: Writing Action Plans
Divide the class
into small groups
to complete the
exercise.
In the previous exercise, you developed at least one strategy for each of the
business goals. For this exercise, you will choose one strategy, and write
the action steps needed to support the strategy.
Assign a goal to
each group, or let
each group
select the goal.
Section 3 - 28
Goal: Increase resources to accommodate international transactions
Strategy:
_____________________________________________________
_____________________________________________________
Action Steps:
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Section 3 - 29
Goal: Add or expand services to international clients
Strategy:
_____________________________________________________
_____________________________________________________
Action Steps:
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Section 3 - 30
Goal: Network or establish international contacts in the local market
Strategy:
_____________________________________________________
_____________________________________________________
Action Steps:
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Section 3 - 31
Goal: Network or establish international contacts abroad
Strategy:
_____________________________________________________
_____________________________________________________
Action Steps:
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Section 3 - 32
Evaluate The Strategies{ XE "Evaluate The
Strategies" }
•
Determine how well the objectives were reached
•
The evaluation phase will help answer the following questions:
o How well did I (we) do
Explain that
evaluating and
modifying
strategies is part
of the process of
improving the
business plan.
o What did I (we) learn
Additional Project Evaluation Questions
•
Did the project satisfy the project goals
•
How close to schedule was the project completed
•
How close to budget was the final cost
•
How well were the clients, sponsors, etc., satisfied with the project
outcome
•
Were the objectives satisfied
•
What was learned about writing specifications that will help with the
next project
•
What recommendations do you have for future development
•
If you had the project to do over, what would you do differently
•
(If applicable) Did you work well as a team
•
What changes, if any, should be made
Section 3 - 33
Review the key
points of the
chapter.
Divide the class
into small groups
to discuss the
question.
Ask each group to
share at least one
idea about how to
generate creative
elements for
business
strategies.
Section 3 - 34
Key Point Review
•
A business plan helps organize all the variables (people, resources, and
services) that constitute a real estate practice so that all efforts are aimed
at achieving specific goals
•
Multiple strategies may be used to achieve specific professional goals
•
Action plans provide direction, focus, and accountability for completing
those tasks that help achieve professional goals
Discussion Question
1. Some of the most successful strategies contain a certain amount of
creativity. Where might you find sources of inspiration and creativity?
Do you think your search for creativity should be limited to the real
estate industry?
Chapter 13:
Marketing and Selling Practices
Overview
Marketing and selling properties involves preparing data, developing a
marketing plan, prospecting, qualifying, presenting, offering, negotiating,
and closing.
Marketing and selling practices may need to be revised or created so that
your practice incorporates diversity, and is able to serve local multicultural
and international clients.
Time: 90 minutes
Review the
overview,
objectives, and
class.
Ask for questions.
Objectives
Upon completion of this section, you will be able to:
• Apply awareness and sensitivity of cultural differences to marketing and
selling practices.
•
Use practices that make clients feel comfortable, informed, and valued.
• Identify the professional skills needed for a successful international
practice.
Application
People from different cultures and backgrounds are influenced by
experiences and traditions of their heritage. They will be encouraged to buy
or sell by approaches and practices that are familiar and comfortable to
them.
Practitioners, who understand and are sensitive to cultural values, use
marketing and selling practices that create long-term relationships. These
relationships frequently yield multiple transactions.
Section 3 - 35
Ask participants to
name types of
information that would
be included in a
market profile and
create the profile as
homework.
Types of information:
Trends (growth,
decline, or stability) in
the state and regional
economy
Basic economic
descriptions, major
industries, population,
size, demographics
Data for employment,
population, retail sales,
per capita income
County and local
market trends
Growth patterns
(current and potential)
Real estate market
trends
Market Profiles{ XE "Market Profiles" }
Market profiles are usually associated with commercial or investment
properties. They serve to inform and educate prospective buyers and
clients.
A market profile summarizes economic, demographic, and financial aspects
of the national and international market, primarily in order to substantiate
performance forecasts, valuations, and general benefits of the prospective
investment.
As homework, list the contents of a market profile in the space provided
below.
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
Summarize/review
the contents of a
market profile.
Section 3 - 36
____________________________________________________________
Market Profile for International Properties
•
A market profile should be comprehensive and detailed
o County and local market data
o State and regional and national economic summaries

The subject property listing may be competing with alternative
opportunities in other markets, so a detailed profile allows the
client to compare properties
A market profile also indicates that the real estate professional
understands how the property fits into the big picture
o If a property is in a secondary market, the market profile should pay
particular attention to the differences and advantages over primary
markets
o The ability for international clients to buy and sell in a market
should be completely detailed, because access is a major
consideration
Point out some of
the special
circumstances in
marketing and
selling to
international
clients.
Complications can
occur due to
distance,
language, costs,
lack of familiarity
with the market or
property, or the
length of time
required for the
transaction
process.
o Do not recreate the wheel for this profile

State, region, city, chamber of commerce, or convention and
visitors’ bureau has already assembled most of this information
Exam Question #14:
A market profile for an
international client
should:
A: Include details
about national, state
and local markets.
Section 3 - 37
Ask participants to
name the types of
information that might
be included in a
property profile as
homework.
Property Profiles{ XE "Property Profiles" }
•
Property profiles provide a clear, comprehensive portrait of a specific
property
•
May include tangible physical features and amenities, financial and
economic aspects, tenant and management data, facts about the
surrounding area and competing properties, and intangible items such as
reputation and prestige
•
Prepare a copy of the property profile to give to your clients
Types of information:
Maps and directions to
the property
Physical aspects:
grade, quality factors,
and obsolescence
(functional, economic
and physical)
Intangible factors
(prestige, reputation)
o It demonstrates knowledge of the market
o Provides an opportunity to review information, and formulate any
questions they may have
As homework, list the contents of a property profile in the space provided
below.
____________________________________________________________
Local and extramarket competition
____________________________________________________________
____________________________________________________________
Economic aspects:
valuation, operating
performance,
capitalization rate,
average appreciation
rate for the local area
or specific property)
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
Tenant description:
type, size, turnover,
rent rates, escalators,
concessions
____________________________________________________________
Management
description
____________________________________________________________
Amenities and
services
____________________________________________________________
Overall forecast for
performance
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
Section 3 - 38
International Property Profile
A market profile for an international property should contain detailed
information, particularly because it is difficult to foresee the buying criteria
of an offshore buyer.
If possible, assess beforehand how much experience potential clients have
had in your market. This type of information will help you immensely in
preparing for your first meeting:
•
Do they speak the language
•
Have they visited many times before
•
Is this their first trip to your country/market
•
Is this their first investment in your country/market
Explain the
special aspects of
marketing and
selling to
international
clients.
The international property profile may need to include the property’s
competitive standing with properties located outside the immediate market,
region, state, or even outside the country. Present physical dimensions in
measurements familiar to the client. You may need to convert square feet
to square meters.
Target Buyer Profile{ XE "Target Buyer Profile" }
•
The profile of the target buyer includes:
o
Location
o Size
o Investment expectations
o Historical buying patterns
o Preferred property type
o Motivation to buy
•
The target buyer profile has information about the property
o It does not target a prospective client or buyer by any preference,
limitation, or discrimination
o Such targeting is illegal under the Federal Fair Housing Act
•
Target buyer profiles guide the real estate professional to appropriate
networks, help to determine promotional channels, and direct approach
strategies
•
Effective targeting requires knowledge of the market
Discuss the value
of a target buyer
profile and the
content that it
should contain.
Section 3 - 39
For example, if an undeveloped parcel is a prime site for development, but
market conditions have discouraged merchant developers, you may target
equity developers who hold properties for their own accounts. Specific
targeting can be very helpful in identifying clients or users.
Marketing Plans{ XE "Marketing Plans" }
Note the major
purposes of a
marketing plan,
and the elements
that constitute a
marketing plan.
In the United States, companies in the real estate industry must comply with
the Fair Housing Act when they market their firm and property listings. By
law, any marketing plan, including the selection of media and publications
for advertisements, that indicates a preference, limitation, or discrimination
based on race, color, religion, sex, handicap, family status, or national
origin is prohibited.
Marketing plans for an inclusive real estate practice is intended to reach all
potential clients. The plan should address two critical issues:
1. Identification of the buyer best suited for the particular benefits of a
property
Exam Question #15:
What are the two
critical issues of an
international
marketing plan?
C: Identifying the
target buyer, and
selecting marketing
activities that fit the
budget.
2. Selection of promotional and selling activities within budgetary
constraints in order to reach the target buyer
•
A comprehensive marketing plan would include the following topics:
o Target buyer profiles (primary, secondary):

Region/country/market of the property for sale or purchase

Entity type (user, corporation, bank, individual, joint venture,
etc.)

Financial category of the client

Specific target clients according to their preferences or desires
for specific types of property
o Budgeting and resource allocation:

Financial resources

Time constraints, marketing plan duration

Selling and promotional budget
o Identification of key selling and advertising themes:

Section 3 - 40
Market area and property themes
Target audiences
o Selling plan:

Contact plan for prospects

Sales support and presentation materials

Activity level, time period
o Promotion plan and budget:
•

Advertising

Direct mail

Publicity, press releases

Special promotions
o Listing on the Internet and other available networks
The time period for marketing plans is often left undetermined
o Know how much time can be devoted to marketing without putting
budget at risk
Multicultural Marketing{ XE "Multicultural Marketing" }
•
Multicultural marketing
o Recognizes a diverse market base
•

Ethnic minorities

People of color

People in same sex relationships

Urban or suburban populations
Review the
guidelines for
multicultural
marketing.
Multicultural marketing approach
o Learn as much as possible about the traditions and beliefs of your
targeted potential clients
•
Do not assume all minorities are alike
•
There is considerable diversity within each ethnic segment
o Country of origin
o Language
o Social and cultural adaptation to the United States
•
Within the Hispanic market, there are Mexicans, Cubans, Puerto Ricans,
South and Central Americans, and Spaniards
•
Asian community includes more than twenty-four ethnic groups, each
with its own language, religion, culture, and value system
o The Asian community includes Chinese, Filipinos, Japanese, Asian
Indians, Koreans, and Vietnamese
Section 3 - 41
o Within the African-American group, there are French-speaking
Haitians who may have little in common with American-born blacks
•
Be careful when translating English into foreign languages
o Some idiomatic expressions cannot be translated word for word and
retain the same meaning
•
Use the appropriate native language media, such as foreign-language
newspapers and television broadcasts
•
Media experts know that ethnic Americans often access different media
from mainstream America from the Internet to magazines to radio and
print
o Media is digested for information, a sense of community and values
•
Hire staff members who speak the language of the ethnic group or
groups you are trying to serve
•
Be sensitive about cultural slurs, stereotypes, clichés, and taboos
•
Strive to understand the cultural nuances in communication, dress, and
family values
•
Be prepared to educate your audience
•
Get involved with ethnic communities
•
Consider hiring a specialty advertising agency or marketing consultant
Financial Budgeting for a Marketing Plan
Section 3 - 42
•
A marketing plan includes a financial budget for expected revenues and
expenses.
•
The real estate professional allocates a portion of anticipated
commissions or fees for marketing, and may draw on working capital to
cover interim cash flow needs
•
Marketing costs should run from 15% to 30% of income
•
For larger plans, budgeting should be split between selling, promotion,
and advertising expenses
The Selling Plan{ XE "The Selling Plan" }
•
A selling plan details:
o Direct contacts that will be made via letter, phone, and personal
meeting
o Indirect contacts that will be made through the business network
o Include the number of calls to be made, the support materials to be
produced, and a general activity schedule

Divide target markets into primary and secondary categories
•
Primary targets have the most interest in a particular property
and are slated for a face to face contact
•
Secondary targets may not have a direct interest in a
particular property but who are interested in good real estate
investments and are contacted by phone or correspondence
The Promotion Plan{ XE "The Promotion Plan" }
•
The property, the target audience, and budget all determine how a
property will be promoted
•
Critical tasks in advertising include media selection, art, copy,
placement schedules, and frequency of ads
•
Selling and advertising themes are the foundation of all promotional
copy and selling activities
o The best themes:

Emphasize benefits rather than features

Present overriding strengths of the property

Meaningful to the target audience
Promoting a Property Internationally
•
There are a few differences promoting in an international marketplace
o Conducting business on an international level takes more time so be
be prepared to allow more time for results to materialize
o Advertising should promote your company—not just a property

International buyers are sometimes surprised at the degree to
which some real estate professionals, particularly those from the
United States, promote themselves rather than their firms
o Advertising in the financial papers of targeted cities can be effective
if it is done consistently and frequently, otherwise, it is a waste of
money
Section 3 - 43
o International marketing efforts should be directed at developing
long-term relationships rather than obtaining expected commissions
o International selling requires greater travel and entertainment
expenses

Foreign clients prefer meeting the real estate professional
personally

They often expect you to visit them, not vice versa

Showing properties to offshore clients may also entail bearing
travel expenses for the prospective buyer
o Promotional expenses are much higher in the international arena
o Smaller real estate companies should focus on institutional
advertising that promotes the company and the market

This will help compete with larger companies that may be more
familiar to foreign clients
o Someone familiar with the culture you are targeting should review
brochures or print materials

Discuss how to
word an
advertisement
under fair
housing laws.
Color, theme, text, and graphics often have different meanings in
other cultures and countries
Advertising and Fair Housing Laws
•
Fair Housing Act restrictions on advertising apply to all forms of print
and electronic media used to sell or rent housing
o Newspapers, radio, television, websites, business cards, billboards,
flyers, signs, posters, banners, and applications are all subject to fair
housing laws
•
The laws affect what you can and cannot say about a property
o You may say anything to draw attention to features and benefits of a
property provided it is true
o You may not say or imply anything about the people, or the type of
people, that may want to rent or buy a property
For example, you may say a property has four bedrooms, is in a quiet
neighborhood, or is handicap accessible. But, you cannot use expressions
such as, “four bedroom family home,” “quiet Hispanic neighborhood,” or
“mature applicants preferred.”
•
Section 3 - 44
Reread your advertisement for words with hidden or double meanings;
keep descriptions accurate and focused on the features and benefits of
the property
•
Use the following questions to evaluate your advertisements and
promotional material:
1. What is your message really saying?
2. Do the ads exclude any potential prospects or groups?
3. Do the ads describe the services of the firm and not the target
market?
•
Placement of advertisements
o Be inclusive and make the same information available to everyone
o If advertising on a Spanish radio station, also advertise on an
English radio station
o If posting a flyer in a Asian supermarket because the property is
nearby, also post flyers in supermarkets in other parts of town
•
Personal or business marketing
o There is no restriction under the Fair Housing Act for a real estate
professional to include a picture of themselves on their website or
business card
o It is illegal for the licensee to describe the race of prospective buyers
they want to serve
•
There may be state and local laws and regulations that apply to
advertising and showing properties
o Contact your local enforcement agency to learn about specifics
o Most agencies provide printed materials about the legal details
o Read all materials, whether they apply to owners, landlords, or
tenants
Refer to the Appendix for an advertising checklist which details what is
allowed and prohibited according to the fair housing laws.
Select and conduct
one of the activities
on this page.
Ask participants to
share their ads or
state one or two key
points of their
discussions.
Exercise A: Create
an Advertisement
Ask class to work in
small groups to
create an
advertisement about
their real estate
practice that reflects
inclusive or
international
practice. Students
will share the
advertisement with
the class.
Exercise B: Beat
the Competition
In small groups,
have students
discuss the three
most important
things they would do
or say to persuade a
client to hire them
over the competition.
At the end of the
exercise, ask them
to share their ideas
with the class. How
might their message
or actions differ for
local ethnic groups
or international
clients?
Section 3 - 45
Ask participants to
read the case
study.
Directions for
debriefing the case
study are on the
next page.
Optional Exercise: Case Study
Jancik vs. HUD, 44 F.3d 553 (7th Cir. 1995)
In Jancik vs. HUD, Jancik owned a building in a large housing complex in
suburban Chicago. Jancik placed an advertisement that included the phrase,
“mature person preferred.” Suspecting a fair housing violation, the
Leadership Council for Metropolitan Open Communities, a group that
promotes fair housing, decided to test the property for fair housing law
violations.
Gunderson, a white female, spoke with Jancik by phone. After Jancik
learned that Gunderson was 36, he stated, “That’s good. I don’t want any
teenagers in there.” Jancik asked her to disclose her national origin, to
which she replied “Norwegian.” Jancik asked if she was “black Norwegian
or white Norwegian.” Gunderson asked if Jancik was inquiring about her
race, and he replied affirmatively. They arranged to meet the next day.
Allen, an African-American female, phoned Jancik two hours later. Jancik
asked Allen about her occupation, income, age, marital status, race,
children, and pets. Allen did not reveal her race, but did ask Jancik why he
needed that information. He said that he had to screen applicants because
the building’s tenants were middle-aged. He did not want anyone who
made a lot of noise, or had children or pets. Allen told him she had no
children or pets, and they arranged to meet the next day.
Upon arrival at the building the next day, both testers were told the unit was
already rented.
Based on reports filed by the testers, the Council filed a complaint with
HUD, alleging violations of advertising rules regarding familial status, and
violations of interviewing rules regarding race and familial status. The
Administrative Law Judge held that Jancik violated the Fair Housing Act,
awarded damages, and assessed a civil penalty.
Jancik appealed both federal and local civil court decisions. The Seventh
Circuit found that Section 3604© prohibits making or publishing any
statement or advertisement that indicates any preference for a buyer or
renter based on race or familial status.
The court found that the use of the words “mature person” in the
advertisement discriminated against the family status protected class as
defined in the Fair Housing Act. The court also noted Jancik’s statement
that he did not want families with children in the building. The court
affirmed the Administrative Law Judge’s finding of discriminatory
advertisements and statements.
Section 3 - 46
Court Decision
Regarding the racial claim, the Seventh Circuit found that Jancik did not
expressly indicate a racial preference, but that the context of Jancik’s racial
questions indicated intent to discriminate. Because Jancik’s questions about
race came directly after questions regarding other unlawful preferences, and
because he had never rented to a black tenant, the court affirmed the
Administrative Law Judge’s decision that Jancik discriminated on the basis
of race.
Ask participants to
describe ways that
practitioners learn
about, and become
sensitive to, language
that may express a
preference, limitation,
or discrimination in
advertising.
Discuss approaches
to becoming more
sensitive to language
that may express a
preference, limitation,
or discrimination.
Possible approaches
include:
Asking questions of
your coworkers,
especially in a diverse
office environment.
Talking to community
groups about equal
housing opportunity
issues.
Using HUD’s advice
reference and HUD’s
guidelines in the Fair
Housing Handbook.
Section 3 - 47
Explain how
prospecting is
another important
part of a business
plan.
Prospecting and Making Contact{ XE
"Prospecting and Making Contact" }
•
Prospecting must be carefully planned and include target audiences and
objectives for making contact
•
Prospecting may be defined as either:
o Direct: making personal contact with buyers, sellers or clients
Prospecting
requires focus and
planning to
achieve concrete
results.

For international clients, this happens through intermediaries,
introductions, or at trade shows and conventions
o Indirect: using a business network for information that leads to
buyers, sellers, or clients
•
In either case a pre-planned course of action is needed
•
When creating a plan, consider the following questions:
o How can the target audience be most efficiently located?
o What is the specific objective of a call to a targeted prospect?
o How should the target be approached: telephone, letter, or face-toface?
Briefly review the
steps for
prospecting for
international
clients.
Prospecting for International Clients
•
•
•
Section 3 - 48
Indirect prospecting
o
Research network materials for leads
o
Contact spheres of influence for leads
Direct prospecting
o
Primary
o
Secondary
Method of approach
o
According to custom
o
According to priority
•
•
Method of contact:
o
Face-to-face
o
Letter
o
Phone
Contact objectives:
o
Establish a relationship
o
Market a property
o
Convey a message
o
Sell yourself and your company
o
Sell the market area
o
Sell the property
•
Cultivation of a business network produces leads and referrals
•
Decide which prospects are of primary importance in achieving business
goals
•
Contact by phone or letter may initially handle lower priority leads
•
Face-to-face meetings are necessary for top priority leads, even if such
meetings are expensive
Discuss the range
of resources one
can develop.
Add your personal
examples of
international
contacts that you
have worked with in
your practice.
Section 3 - 49
Compare how
contacts are
made, and the
steps in the
process when
completing a
domestic and
international
transaction.
Methods of Approach and Contact
Methods of approach and contact will vary between a domestic practice and
an international practice. Compare the following possible sequence of
events:
Domestic
International
1. Make contact.
1. Establish indirect contact through
an intermediary.
2. Present property
and disseminate
data.
2. Establish direct contact.
3. Analyze data.
3. Establish a relationship and make
repeated personal visits.
4. Offer and negotiate.
4. Present property and disseminate
data.
5. Close.
5. Analyze data.
6. Negotiate.
7. Close.
Tokens and Gifts
Section 3 - 50
•
In many countries, it is customary to present a token or gift in
conjunction with a meeting
•
Giving gifts varies widely from country to country
•
Research in advance whether giving gifts is appropriate and what type
of gift would be appreciated
•
Refer to the Appendix for further resources
Qualifying Overseas Clients{ XE "Qualifying
Overseas Clients" }
•
Qualifying an overseas client
o Uncover a prospect’s objectives
o Determine whether the opportunity is worth pursuing
o Ongoing learning process
Ask participants to
explain “qualifying.”
Emphasize the
importance of being
tactful, especially in
international
transactions.
o Shapes the business agenda and the relationship itself
o Define the relationship before qualifying a potential client
o The success of qualifying depends on how relationship has been
established
•
•
•
Key points
Add your personal
experience or ask
participants to share
one of their
experiences with
qualifying an
overseas client.
o
What role/responsibilities does the client envision for the real estate
professional
o
How long will the relationship last
o
How are relationships established in the client’s culture
Exam Question #16:
o
What personal traits and attributes does the client value
Before qualifying a
potential overseas
buyer, the real
estate professional
should:
Identifying investment requirements
o
General nature of investment and the client’s intentions
o
Investment magnitude and/or structuring
o
Financial performance criteria
o
Property type and characteristics
o
Market, location, and site criteria
o
Alternatives under consideration
B: Use the
international real
estate network to
find out about the
investor’s previous
business record.
Investment timeline
o
Starting point for search
o
Analysis period
o
Closing deadline
o
Build-out/improvement/construction dates
o
Project completion/move-in date
o
Marketing period
Section 3 - 51
•
•
•
Identify the client’s decision-making structure
o
How are real estate decisions made
o
What are the channels of communication and reporting
o
Who has the authority to make investment decisions
Determine whether a client’s investment capability corresponds to their
stated intentions
o
What is the client’s financial capability
o
What is the organization’s experience level
Refer to your business network to see if anyone has worked with this
client
o
How have the clients structured previous investments
o
Where is the money
o
How will the money be transmitted to a seller
o
How does the client remunerate brokers
Qualifying Unsolicited Parties
•
•
Section 3 - 52
There are many window shoppers in the international market
o
Looking for free information
o
No intention of maintaining your services
Immediately begin the qualifying process
o
Client background and reputation
o
Client’s previous purchases
o
Amount of money involved
o
Location of money to be used for transaction
o
When decisions will be made
o
Who will make the decisions
o
Is potential client talking to other real estate professionals
Presenting{ XE "Presenting" }
•
Emphasize yourself and your company rather than the market and
property aspects
o Personal business practices
o Professional ethics
o Other international clients and closings
o Knowledge of the local culture, language, and customs
Discuss the nature
of making a
presentation to an
international client
who is unfamiliar
with market, the
property, and
perhaps the real
estate profession.
o Range of services
o The team of professionals who assist you
o Overseas offices and affiliations
•
Present in person
•
Provide written materials
•
Videos and other material should be formatted for overseas use
•
Property presentations
o Provide detailed market information on local, state and regional
levels
o Substantiate what you say in printed form
o Include every characteristic the client has indicated to be
important
o Provide maps of the market, county and state
o Photographs of the city, neighborhood and property

Include aerial photos if practicable
•
Take extra time to clarify terms and procedures
•
Ask the same questions in several different ways
•
Repeat the answers
•
Team up with other business professionals
•
Use translators when necessary
•
Have client visit the site to avoid any surprises later
Section 3 - 53
Point out the need
to adapt to the
client’s culture and
expectations
during the
negotiating and
closing processes.
Offering and Negotiating{ XE "Offering and
Negotiating" }
In offering and negotiating a property, pay particular attention to the
cultural values and differences. Guidelines for negotiating transactions in
the international arena include:
• Know and conform to local customs as much as possible
•
Maintain the client’s confidence in the value and fairness of the
transaction
•
Emphasize any ideas and values you share, despite disparate
background.
•
Exercise discretion and respect for all parties
•
Work around any prejudices and stereotypes that may arise
•
Follow the client’s timetable
•
Do not exceed the role you are expected to play
Closing a Transaction{ XE "Closing a
Transaction" }
•
Special considerations
o Clients and funding institutions can be very slow in processing
funds and financial instruments to close an international transaction
o Pay attention to the timely transmittal of funds
o Make sure all steps have been taken to comply with federal tax
withholding, reporting, and transmittal laws
Section 3 - 54
Transnational Referral System{ XE
"Transnational Referral System" }
The International Consortium of Real Estate Associations (ICREA) is a
group of 24 national real estate associations that have agreed to support an
international referral system. ICREA devised this referral system so their
members can easily make and receive referrals across national borders. If
someone is a member of one of the participating national real estate
organizations, he or she is a defacto member of ICREA. A list of
participating associations can be found at www.worldproperties.com.
Explain the work
of ICREA, and the
membership
benefits.
This international referral system is a legal agreement between consenting
agents who are members of national associations affiliated with ICREA.
Members of ICREA conduct real estate business using standardized referral
procedures and are bound by a binding dispute resolution process.
ICREA provides and assembles information so REALTORS® have the
opportunity to do business on a global scale.
Primary benefits ICREA offers it members:
•
Increased income
•
Additional client relationships
•
Participation in the new global marketplace
ICREA also offers a 6-hour online Transnational Referral Certification
course that teaches REALTORS® how to integrate international referrals
into their business plans and market themselves worldwide as "TRC"
(Transnational Referral Certified). For registration details, visit
http://www.realtor.org/cipshome.nsf/pages/trc.
ICREA’s website, www.worldproperties.com, contains the transnational
referral contract, arbitration forms, international real estate professional
contact database, and detailed information on how to use the referral
system.
Section 3 - 55
Networking for International Business{ XE
"Networking for International Business" }
Depending on
the cultural
backgrounds of
the participants,
the concept of
networking may
need to be
explained.
•
Stress the
importance of
being organized
and up-to-date,
just as in
domestic
practice.
An international business network is a unique combination of people,
data resources, and communication channels that enables you to:
o
Gain access to targeted markets
o
Maintain current market awareness
o
Reach prospective clients
o
Transmit information about local investment opportunities to foreign
centers of influence and prospective clients
o
Make your own services and capabilities known
NAR has a network of 66 cooperating agreements with 53 countries.
Visit www.realtor.org/international for a complete list.
Refer to the Appendix for organizations specializing in local, national and
international real estate.
Organizing a Network
•
A network is built by prospecting, researching, and investing your time
with people and organizations
•
To be effective, others must sense you are sincere, you respect them and
are willing to share your talent, knowledge, and experience
Keeping your network current requires organization and updating. A
system similar to that used for maintaining domestic contacts and sales
records is appropriate. A typical file-based system might include:
A useful tool for
condensing
information about a
market is a Hot
Sheet. See a
sample Hot Sheet
on the next page.
Section 3 - 56
•
Market files: surveys, market summary sheets, notes on contacts made,
maps for each market in your specialty area
•
Permanent prospect and client files: records of contact with phone
numbers, addresses, copies of correspondence and documents and
conversation summaries
•
Tickler file: dates for follow-up, call-back times, future convention and
meeting information
•
Map file: local, regional, and national maps; atlases; aerials; plats;
surveys
•
Spheres of influence files: information on organizations or connections
such as societies, fraternities, clubs, embassies, companies and banks
•
General file: magazines, trade journals, books, newspapers and
clippings, filed by title, subject, or market
HOT SHEET{ XE "HOT SHEET" }
Name of Country:
Date revised:
Personal contacts:
Institutional contacts:
Real estate associations:
Private sector organizations:
Accounting and legal firms:
Government agencies/contacts:
Sources of market information:
Business newspapers:
Real estate journals:
Local trade organizations:
Section 3 - 57
Currency trends:
Ranges of return rates:
Hot Spots:
Area:
Property type:
Brokerage laws/environment:
Government disposition toward overseas clients:
Remarks:
Section 3 - 58
HOT SHEET
Real Estate Market Profile of:
Market inventory estimate:
By property type:
By total footage:
Year-to-year change:
Pipeline product:
Product economic profiles:
Valuation/pricing by property type:
Income and expense profiles by property type:
Capitalization rates:
Vacancy/occupancy rates by property type:
Section 3 - 59
Absorption and construction trends:
Lease profiles by property type:
Types of leases in use:
Typical lease terms—term, rates per foot, escalators, concessions, abatements, etc:
Real property taxation:
Periodic tax, tax rate:
Transaction rate:
Financing:
Customary practices—LTVs, DCRs, security:
Owners of financed property:
Synopsis of transactions:
Process:
Conveyance:
Professional team and roles:
Real estate legal structure:
Brokerage community operation:
Section 3 - 60
____________________________________________________________
Maintaining a Network{ XE "Maintaining a
Network" }
•
Suggestions for local and national networking resources
Local Networking Resources
Resources
Information Available
Multiple Listing Service Market inventory, market demand, activity, and
(MLS)
values
Tax records
Ownership data, taxes, square footage, and size
State and local
REALTOR® boards
MLS and other meetings, actual, pending, and
upcoming activity
Commercial brokers
Foreign activity in the marke; volume; who is
buying, selling, and leasing properties;
properties in demand; and leads
Finance, insurance, and
real estate firms
Business and market studies and activities
Title companies,
mortgage, law,
accounting, property
management, and
appraisal firms
Reports, social functions, market activity,
referrals, transaction data, ownership, and
underwriting
Libraries
Articles and books on investment, foreign
cultures, real estate laws, directories of foreign
societies, fraternities, clubs, and organizations
Telephone directories
Local listings of foreign societies,
organizations, clubs, and local offices of
international firms
Newspapers
Market activity, local conditions, and offerings
Section 3 - 61
If time allows,
review the charts
on networking
resources with the
class.
If time is short,
encourage
participants to
review the charts
on their own time.
National Networking Resources
Resources
Chambers of commerce Data, reports, surveys, publications on foreign
markets, market conditions, trends, channels,
spheres of influence, foreign contacts, and leads
Government agencies
and commerce
departments
Lists of foreign organizations, laws, and market
conditions
Foreign embassies in
your country
Customs, laws, data, reports, surveys,
publications on foreign markets, market
conditions, trends, channels, spheres of
influence, foreign contacts, and leads
Foreign corporations in
your country
Real estate managers, contacts, referrals,
requirements, channels, and foreign practices
Banks (international
departments)
Finance, currency markets, economic reports,
laws, channels, and spheres of influence
NAR® International
Section at
www.realtor.org
Meetings, customs, laws, data, reports, surveys,
channels, spheres of influence, and foreign
contacts
Real estate societies,
institutes, and councils
Meetings, customs, laws, data, reports, surveys,
National trade journals
and newspapers
Relevant articles, current newspapers events,
market conditions, and leads
___________________________________________________________
Section 3 - 62
____________________________________________________________
International Networking Resources
Resources
Embassies abroad,
commercial attachés
Customs, laws, data, reports, surveys,
International Consortium Customs, laws, data, international property
of Real Estate
listings, international products, transnational
Associations (ICREA) referral system, foreign contacts, and
publications on foreign markets
Foreign offices of
domestic corporations
laws, channels, and spheres of influence
and banks
International Real Estate Meetings, customs, laws, data, reports,
Federation (FIABCI)
surveys, publications on foreign markets,
market conditions, trends, channels, foreign
contacts, and leads
World Bank,
International Monetary laws, channels, and spheres of influence
Fund (IMF)
Economic development Customs, laws, data, reports, surveys,
agencies
Foreign branches of
Foreign laws, practices, market conditions,
international real estate channels, and leads
firms
Foreign trade journals
Market conditions, currency exchange rates,
and newspapers
foreign contacts, leads, political information,
and trends
Foreign trade journals and newspapers:
Switzerland: Schweizerische Handelszeitung
UK: Estates Gazette, Estates Times, Chartered Surveyor Weekly, World
Property, Financial Times, Telegraph
Australia: Business Review Weekly
Hong Kong: Asian Money Manager
Germany: Frankfurter Allgemeine Zeitung
France: Le Monde, Figaro
Middle East: Property International
International: Euromoney, International Herald Tribune, Financial
Times, Wall Street Journal
Section 3 - 63
Note some
networking contacts
from the list.
Cultivating Your Network
Some are more appropriate for an international practice than for a
domestic practice.
Ask participants:
•
•
What networking
activities have you
found to be effective?
•
What do you do to
maintain and update
your network?
•
•
•
Exam Question #17:
What is the best way
to build up a network?
D: All of the above
(Become a CIPS, Use
your own ethnic
background, establish
relationships in your
local market).
•
•
•
•
•
•
•
•
•
•
•
•
•
Earn your CIPS designation
Always mention any business contacts you may share with clients or
prospects
Explore different business methods; share and explain yours with other
real estate professionals
A primary goal is to get a trustworthy and legitimate introduction
Check credentials and references for potential international clients
Explore methods of collaboration, e.g., referrals, fees, taxes, and
shared commissions
Be aware of a contact’s cultural and social environment
Always assume you do not know another real estate professional’s
international market and procedures
Ask questions and be prepared to explain transaction details
Recheck understandings and agreements
Avoid the courtesy yes
Market yourself; capitalize on a sale or purchase you have already
completed by networking with the people involved in the transaction
Promote yourself as a specialist in working with foreign clients
Use your own ethnic background or language skills
Join your local offshore trade missions
Use your affiliated overseas business offices
Contact local economic development commissions and present your
properties and markets
Volunteer for international organizations in your area
Talk with leasing agents
These suggestions for cultivating a network are offered by current NAR
Certified International Property Specialists (CIPS) designees.
___________________________________________________________
Section 3 - 64
____________________________________________________________
Key Point Review
•
A successful international marketing effort begins with matching
property and market profiles to target buyer profile
•
Well-prepared property and market profiles aid in the development
of appropriate selling and promotional themes, and can be used to
educate prospective clients
•
Knowing how to approach foreign prospects in their cultural
context to initiate and build relationships is essential in
international prospecting
•
Qualifying can uncover a client’s desires, motivations, and plans
without offending the client
•
Presentations to foreign clients should emphasize reputation and
international experience
•
Know whether a client has the financial capability to fund an
investment, and whether the funds will actually arrive at closing
Discussion Question
1. Prospecting, marketing, selling, and closing international
transactions can be complex and time-consuming endeavors. As
you assess your current skills, practice, and network, what do you
see as the most challenging part of the process?
2. What plans, activities, or contacts would be most beneficial to you
for initiating or growing your international practice?
Section 3 - 65
Ask participants to
form small groups
and discuss the
question.
Ask each group to
share at least one
idea about initiating
or growing an
international
practice.
___________________________________________________________
Section 3 - 66
Appendix
Chapter 10
The History of Fair Housing
13th and 14th Amendments
After the Civil War, there was a flurry of legislative activity about
granting full citizenship to blacks and former slaves. The 13th
Amendment abolished slavery and the 14th Amendment guaranteed all
persons due process and equal protection under the law.
Civil Rights Act of 1866
Among civil rights laws enacted by the Reconstruction Congress is the
Civil Rights Act of 1866, which specifically guarantees, “all citizens of
the United States shall have the same right to inherit, purchase, lease, sell,
hold and convey real and personal property as is enjoyed by white
persons.”
Civil Rights Act of 1968
Following the assassination of Dr. Martin Luther King, Jr., Congress
passed the Civil Rights Act of 1968, which included Title VIII, now
commonly known as the Fair Housing Act. It specifically prohibited
discrimination in housing because of race, color, religion, or national
origin. This, along with the Supreme Court’s decision in the Jones v.
Mayer case, which held that the Civil Rights Act of 1866 applied to acts of
individual discrimination, was the beginning of a comprehensive body of
fair housing laws in the United States.
Fair Housing Act Amendments
Amendments to the Fair Housing Act in 1974 prohibited discrimination
based on gender. Further prohibitions against discrimination because of
handicap and familial status were added in 1988. The 1988 amendments
also added procedures for administrative enforcement of the Fair Housing
Act by the U.S. Department of Housing and Urban Development, and
provided increased penalties for housing discrimination.
© 2007, NATIONAL ASSOCIATION OF REALTORS®
Appendix-1
The Law
The Civil Rights Act of 1866
The Civil Rights Act of 1866 prohibits racial discrimination in the sale or
rental of property.
Fair Housing Act
The Fair Housing Act, as amended in 1974, 1988, and 1995, declares a
national policy of fair housing throughout the United States. The law
makes illegal any discrimination in the sale, lease advertising, financing of
housing, or making housing otherwise unavailable because of:

Race

Religion

Color

Sex

Handicap

Familial status

National origin
Modifications and Accommodations for People with Handicaps
In 1988, Title VII was added to the Fair Housing Act. Title VII prohibits
discrimination against people with handicaps. It requires two types of
changes to make existing housing more accessible to people with
handicaps:

Handicapped persons must be allowed, at their own expense, to
make reasonable accommodations for the enjoyment of the
premises.

“Reasonable accommodations” must be made in “rules, policies,
practices, or services” necessary to afford handicapped persons
“equal opportunity to use and enjoy a dwelling.”
Under this law, housing providers must allow renters with handicaps to
make reasonable modifications to the premises. The term, premises,
applies to the interior of the handicapped person’s unit and lobbies, main
entrances, and other public and common use areas of a building.
The handicapped person is responsible for the cost of modifications and
must obtain approval for the modifications from the landlord. Housing
Appendix-2
providers do not have an absolute right to reject proposed modifications,
nor select or approve who will do the work.
However, a landlord may require a description of the work, reasonable
assurances about the quality of the work, and that appropriate or required
building permits will be obtained. In rental situations, the landlord may
require, with some limitations, the renter to restore the premises to its prior
condition. Restoration work can only be required where it is reasonable to
do so. For example, making a door narrow again after it has been widened
is not considered reasonable.
Prohibitions of the Fair Housing Act
Following are the prohibitions as contained in Sections 804,805, 806 and
818 of the Act.

Refusing to rent a dwelling, whether outright or subtly by using
techniques to confuse or harass the applicant, and rescinding an
offer upon learning of a person’s protected status.

Using of discriminatory terms, conditions, or privileges in the sale
or rental of a dwelling.

Using of discriminatory advertising with respect to the sale or
rental of a dwelling.

Misrepresenting that a dwelling is not available for inspection, sale
or rental, when it is in fact available, to any person of a protected
class.

Attempting to influence, for profit, someone to sell or rent a
dwelling based on fears about entry into the neighborhood by a
member or members of a protected class. This practice is
commonly known as “blockbusting.”

Denying the opportunity for sale or rental of a dwelling to people
with handicaps.

Refusing mortgage loans and/or financial assistance based on
membership in a protected class.

Discriminating in providing brokerage services.

Coercing, threatening, intimidating, or interfering with any
person’s exercise of his or her rights provided under sections 803,
804, 805 and 806 of Title VII.
Appendix-3
Exemptions under the Fair Housing Act

Single-family houses, if the owner:
o Owns, sells, or rents the house.
o Owns three or less homes at any one time.
o Does not use the services of someone in the real estate
business.
o Does not advertise in violation of Section 804(c).

House or living quarters that are occupied or intended to be
occupied by no more than four families living independently, and
the owner maintains or occupies one of the living quarters. Owner
duplexes are eligible.

Religious organizations, association, or societies can give
preference to such persons if it is not discriminatory.

Non-profit organizations or private clubs can give preference to
such persons if it is not discriminatory.

Housing for older persons is exempt from familial prohibitions.
The law also allows housing providers to adhere to reasonable occupancy
standards for the number of people who may live in a dwelling.
People who have been convicted of manufacturing or distributing illegal
drugs are not protected by the Fair Housing Act.
Americans with Disabilities Act
Title III of the Americans with Disabilities Act prohibits discrimination
against persons with disabilities in places of public accommodations and
commercial facilities.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act makes discrimination unlawful with
respect to any aspect of a credit application on the basis of race, color,
religion, national origin, sex, marital status, age, or because all or part of
the applicant’s income derives from any public assistance program.
State and Local Laws
State and local laws often provide broader coverage, and prohibit
discrimination based on additional classes not covered by federal law,
such as age, source of income, marital status, occupation, sexual
orientation, and unfavorable discharge from the military. All real estate
professionals need to keep informed about these laws.
Appendix-4
Census 2000 Demographic Profile Highlights
General Characteristics
Total population
Number
Percent
281,421,906
100.0
Male
138,053,563
49.1
Female
143,368,343
50.9
35.3
(X)
19,175,798
6.8
18 years and over
209,128,094
74.3
65 years and over
34,991,753
12.4
One race
274,595,678
97.6
White
211,460,626
75.1
34,658,190
12.3
2,475,956
0.9
10,242,998
3.6
398,835
0.1
15,359,073
5.5
6,826,228
2.4
35,305,818
12.5
Median age (years)
Under 5 years
Black or African American
American Indian and Alaska Native
Asian
Native Hawaiian and Other Pacific
Islander
Some other race
Two or more races
Hispanic or Latino (of any race)
Appendix-5
Average household size
2.59
(X)
Average family size
3.14
(X)
115,904,641
100.0
105,480,101
91.0
Owner occupied housing units
69,815,753
66.2
Renter occupied housing units
35,664,348
33.8
10,424,540
9.0
Total housing units
Occupied housing units
Vacant housing units
Social Characteristics
Number
Population 25 years and over
182,211,639
100.0
146,496,014
80.4
44,462,605
24.4
Civilian veterans (civilian population 18
years and over)
26,403,703
12.7
Disability status (population 21 to 64
years)
30,553,796
19.2
Foreign-born
31,107,889
11.1
Now married (population 15 years and
over)
120,231,273
54.4
Speak a language other than English at
home (5 years and over)
46,951,595
17.9
High school graduate or higher
Bachelor's degree or higher
Economic Characteristics
In labor force (population 16 years and
over)
Number
Percent
138,820,935
63.9
25.5
(X)
Median household income (dollars)
41,994
(X)
Median family income (dollars)
50,046
(X)
Per capita income (dollars)
21,587
(X)
Mean travel time to work in minutes
(population 16 years and over)
Appendix-6
Percent
Families below poverty level
Individuals below poverty level
Housing Characteristics
Single family owner occupied homes
Median value (dollars)
6,620,945
9.2
33,899,812
12.4
Number
55,212,108
100.0
119,600
(X)
(X)
(X)
1,088
(X)
295
(X)
Median of selected monthly owner costs
With a mortgage
Percent
Not mortgaged
(X) Not applicable.
Source: U.S. Census Bureau, Summary File 1 (SF 1) and Summary File 3
(SF 3)
Appendix-7
Advice on Reporting Acts of Discrimination
When working in the housing market, you may encounter situations that
appear to be discriminatory in violation of fair housing laws. To protect
the prospective home buyer’s rights to equal opportunity in housing, and
to keep yourself from participating in discriminatory acts, you need to take
the following steps:
If the party discriminating is your client, or is not a client of any other
REALTOR®:
Talk to the party who appears to be violating the law and explain fair
housing laws. Ask the party to act in a nondiscriminatory manner. This
request is often enough to resolve the situation, and results in the home
seeker having access to housing as guaranteed by fair housing laws.
Always follow up with a letter summarizing your discussion.
If the party discriminating is a client of another REALTOR®:
Talk to the other REALTOR® and explain your concerns. Ask the other
REALTOR® to speak with the client and end the discriminatory behavior.
Follow up with a letter summarizing your discussion.
If the discrimination is not ended or corrected, and the party
discriminating is your client:
End your relationship with that client, i.e., terminate the listing. Inform
the home seeker about what occurred, and state your belief that
discrimination was involved. Provide the home seeker with information
about filing a complaint. Follow up with a letter to the client, and to the
home seeker summarizing your discussions and actions taken.
If the discrimination is not ended and the party is not your client:
Inform the home seeker about what occurred, and your belief that
discrimination was involved. Provide the home seeker with information
about filing a complaint. Follow up with a letter to the home seeker
summarizing your discussion.
If the discrimination is not ended and the party is another
REALTOR®:
In addition to the above, you may file an ethics complaint with the NAR’s
Board of Directors alleging violation of Article 10 of the Code of Ethics.
Appendix-8
Chapter 7
Cultural Sketches
Japan
Cultural Sketch

The “Japanese way” is to eliminate tension, promote group spirit,
and maintain harmony.

Vertically structured relationships govern life; individual rights are
strictly subordinated to the interests of the group.

Decision-making is reached by consensus.

People are racially and culturally very homogeneous; they may
have difficulty accepting outsiders.

Logic is flexible and subjective, based on adaptation to
circumstances and feelings, rather than on fixed principles.
Business Advisory

Use a Japanese go-between to sound out a company’s interest in a
proposal in advance; otherwise, much time and effort may be spent
before hearing the word “no.”

Address the Japanese by their last names and the suffix “san.”
Never suggest that they call you by your first name.

Never discuss serious business at first meetings (heists); they are
reserved for establishing a recognized official relationship.

Use business cards that include a Japanese translation on one side.
The exchange of business cards establishes one’s credentials.
Handle others’ cards very carefully; never write on them or put
them in your back pocket.

Expect to participate in extensive entertainment after business
hours. This is generally to develop relationships, but business may
be discussed as well.

Give and/or receive gifts with both hands and a slight bow. Do not
open gifts in front of the giver.

Keep in mind that the Japanese do not like to sign restrictive
contracts; they prefer loose arrangements based on trust and
goodwill.
Appendix-9
South Korea
Cultural Sketch

South Korea is one of the most homogenous nations in the world,
both racially and linguistically.

Confucianism is the basis of conduct and character for most
Koreans. It calls for total loyalty to a descending hierarchy of
authority, moving from parents to family, to clan, to community, to
nation.

The South Korean culture is collective; individuals may speak for
the group, but decisions are made by consensus.

A sense of harmony (kibun) must be maintained at all times.
Class, breeding, and character are defined by the ability to control
emotions.

Men tend to dominate in public situations.
Business Advisory
Appendix-10

Be punctual, even if your Korean counterparts aren’t.

Be sincere and honest; relationships are more important to Koreans
than the actual business at hand.

Keep in mind that Koreans will often tell you what they think you
want to hear; “maybe” usually means “no.”

Recognize that Koreans are distinct from other Asians in food,
language, and culture.

Understand that giving gifts to acquire favors is common in the
workplace. Do not open gifts in the presence of the giver.

Be aware that reading faces (nunch'i) is a well-developed art in
which others are assumed to be well versed; words may be
misleading.
China
Cultural Sketch

The Chinese are masters of the oblique. What is not said is often
more important than what is said.

The Chinese will tell you what they think you want to hear.

Social status and connections are very important.

Chinese culture is collective. Decisions are made by a group
leader and individuals are expected to follow them.

The Chinese tend to make subjective decisions based on prior
experience; feelings can be accepted over facts.
Business Advisory

Use titles with a person’s surname. Be aware, however, that
Chinese names are in the following order: surname, generational
name, and birth name.

Bring business cards with the translation printed in Mandarin on
the other side.

Understand that gift-giving is technically against the law, but is
becoming a more acceptable practice. A gift from your
organization to the Chinese one is acceptable. Keep in mind that
the Chinese normally decline three times before accepting.

Remember that eye contact is important; eyes should be slightly
lowered during introductions to show deference and respect.

Allow for consensus decision making.

Be aware of feng-shui practices that are believed to harmonize life.
Feng-shui involves manipulating the environment, including the
placement of buildings and objects, to produce good fortune.

Expect business discussions to be conducted by the senior officials
of each party.
Appendix-11
Australia
Cultural Sketch

Australians are generally open-minded and trusting of others until
given reason not to be.

Rules and laws take precedence over emotions.

Individualism is important in decision making, but decisions are
always subject to company policy.

The nuclear family is the strongest socializing force.

There is a great deal of emphasis on ability rather than on rank or
wealth.

Australians are highly ethnocentric and take great pride in their
country.
Business Advisory
Appendix-12

Be punctual. Australians believe that tardiness conveys a careless
attitude.

Be direct. Australians value a forthright and honest manner. Do
not use high pressure negotiating tactics.

Approach presentations with modesty, brevity, and a degree of
casualness.

Keep in mind that academic qualifications are downplayed in
public.

Do not give gifts in a business context. However, if you are
invited to someone’s home, it is appropriate to bring a gift.

Do not discuss business in social settings unless your Australian
counterpart does so first.
United Kingdom
The United Kingdom actually consists of four countries united under one
government: England, Scotland, Wales, and Northern Ireland. (Great
Britain includes only England, Scotland, and Wales.) It is difficult to
make any regional generalizations about the United Kingdom, but the
following sketch should give you some idea of what to expect when doing
business there.
Cultural Sketch

People maintain a strong sense of identity, particularly in
distinguishing themselves from other nations.

People take great pride in both national and individual
accomplishments.

Practical and reserved behavior is the norm; people do not tend to
warm quickly to strangers or indulge in extravagant behavior.

Class and school networks are important in all contacts.

The multiracial population is not thoroughly assimilated.
Business Advisory

Know the difference between the English, the Welsh, the Scots and
the Irish; not everyone from the United Kingdom is an
Englishman. Also, the English do not consider themselves
European.

Be aware that relationships among management levels are
becoming more informal.

Expect decision making to be in the hands of an executive
committee or of an owner. The process may move slowly.

Understand that U.K. citizens tend to disdain written contracts; a
handshake or an oral agreement will do. If you must have a
contract, present it tactfully.

Feel free to discuss business at meals, but do not expect to discuss
it very seriously.

Do not regard being invited to an executive’s home as a special
favor. It is not unusual, but it may mark an important stage in the
business relationship.
Appendix-13
The Czech Republic
Until recently, Europe was deeply divided by Soviet rule and the Warsaw
Pact. Today, however, Eastern Europe is no longer under communist rule,
and both the business and cultural environments are evolving. As a result,
Eastern European countries, such as the Czech Republic, are becoming
more like their democratic counterparts in Western Europe.
Cultural Sketch

The population is well educated and maintains a 99% literacy rate.

The Czechs value relationships more than obedience to rules.

The Czechs tend to be open to most information.

Decision making is the responsibility of the individual. Individual
achievement is more important than family in determining status.

Women are treated as equal to men in all areas of society.
Business Advisory
Appendix-14

Anticipate that the decision-making process will be slow.

Consider hiring a Czech business lawyer to help you understand
changes in Czech law.

Always engage in polite conversation before getting down to
business.

Bring plenty of business cards, but do not worry about having them
translated.

Consider it a great honor to be invited to a Czech business
associate’s home; bring flowers.

Discuss business before and after–but not during–a meal.
Canada
Cultural Sketch

English and French are the official languages; French is
predominant only in Quebec.

Canadians are generally analytical and favor the objective over the
subjective.

There is a strong sense of ethnocentrism within each province,
particularly in Quebec, where citizens are considered French
Canadians.

Emphasis is placed on ability, and individual recognition is highly
valued.

Emotion is not shown in public.
Business Advisory

Use eye contact, a firm handshake, and a friendly manner when
working with Canadians.

Use titles with a surname to show respect. Do not use first names
unless your counterpart suggests you do so.

Do not be overbearing.

Allow your Canadian counterpart to be the first to bring up
business at dinner.

Be aware that invitations to dine at a Canadian home are unlikely.
If you do visit a home, however, take a gift.

Remember that business gifts are usually exchanged at the close of
business. It is common to host a dinner or entertainment for your
counterparts.
Appendix-15
Mexico
Cultural Sketch

A strong allegiance exists to the Catholic Church.

An individual is responsible for his/her own decision, but the good
of the family/group is most important.

Subjective feelings are often used as the basis for truth.

Women are well respected.

Age and rank are held in high esteem.

People are informal and open in sharing feelings.
Business Advisory
Appendix-16

Be sure that the first contact is between the highest-ranking people
in both firms.

Shake hands upon greeting and departing. Learn the abrazo
greeting: a handshake, two pats on the back, and a handshake
again.

Do not refer to the United States as America. Mexico is also the
“United States” (of Mexico) and it is in North America.

Be aware that questions are typically answered with the intention
to please, even when the information is known to be incomplete or
the requested action impossible.

Remember that people are more important than schedules;
meetings are often interrupted by personal visits.

Be aware that short-term profits are commonly preferred over
long-term results.

Choose the best possible hotels and restaurants; Mexicans are very
status conscious, and they will pay close attention to your choices.
Brazil
Cultural Sketch

Portuguese is the official language; Brazilians resent being spoken
to in Spanish.

Brazilians tend to be more analytical than their Latin American
counterparts. They examine a situation rather than prescribe to
universal laws or rules. (Nevertheless, subjective feelings can
always take precedence over facts.)

Family loyalty is the most important obligation.

Church and family provide structure and stability.

The concepts of class and status are still strong. Color, gender, and
economic/social biases continue to exist.
Business Advisory

Be prepared to wait. Punctuality is not a revered trait in Brazil,
and negotiations may move slowly.

Be sure to shake hands with everyone in a group upon both arrival
and departure. Handshakes may progress to embraces as the
relationship develops.

Be prepared to discuss all aspects of a contract simultaneously –
rather than in sequence.

Use a local accountant or lawyer for contract issues. Brazilians
may resent an outside legal presence.

Gift-giving is not required; buy lunch or dinner instead. Present a
gift later in a relaxed social setting.
Appendix-17
Saudi Arabia
Cultural Sketch

Religion and language are deeply embedded in Saudi culture. The
Arabic language receives almost mystical devotion, and the
Islamic prescriptions on proper behavior penetrate every aspect of
life.

Apart from the royal family, unstratified families and clans–rather
than classes–dominate the social structure.

In spite of much contact with the West, Saudis remain highly
traditional and resistant to foreign influences.

Male leaders are the decision makers, but they come to conclusions
through group consensus.

Tensions, allegiances, and alliances with other nations in the
region are significant and control much thinking and policy.

Public life is reserved for men only.
Business Advisory
Appendix-18

Obtain introductions and/or personal references from a Saudi
sponsor whenever possible.

Establish personal trust. This is paramount; many Saudis feel that
foreigners cheat and take advantage of them.

Schedule meetings around prayer times and the Islamic calendar.
Fridays are holy days.

Be patient. Business meetings tend to start slowly with small talk
and personal inquiries; decisions occur slowly.

Expect Saudis to take care of entertaining in their country.

Use only your right hand in passing something to another.

Never show the soles of your feet; this is considered offensive.
Chapter 12
Advertising Guidelines Checklist
According to federal fair housing law, advertising for the sale or rental of
property may not state a preference for any person or an intention to
exclude any person because of the person's race, color, religion, sex,
handicap, familial status, or national origin.
To comply with the law, avoid: ·

Using words or phrases describing the dwelling, landlord, or
tenants. Examples are: white private home, colored home, Jewish
home, Hispanic residence, adult building, or other words indicative
of race, color, religion, sex, handicap, familial status, or national
origin.·

Conveying preference to one group over another or exclusion due
to race, color, religion, sex, handicap, familial status (children
under 18), or national origin.

Using catchwords, such as restricted, exclusive, private, integrated,
traditional, board approval, and membership approval.

Using symbols or logos that imply or suggest discrimination
because of race, color, religion, sex, handicap, familial status
(children under 18), and national origin.

Writing out directions to the property that refer to well-known
racial, ethnic, or religious landmarks, or to any other major
landmark that could signal a preference for a specific type of
person.

Targeting advertisements to one particular segment of the
community.

Using only adult or white models over a significant period of time.

Using prohibited words or phrases with respect to handicapped
persons or families with children, including:
o Crippled
o Deaf
o Retarded
o Adult building
Appendix-19
o Restricted community
o Blind
o Mentally ill
o Singles
o Mature persons
o Exclusive

Advertising in:
o A strategically limited geographic area.
o Particular editions of newspapers to reach a particular
segment of the community.
o Only small papers that cater to particular ethnic or religious
groups rather than general circulation papers.
o Only selected sales offices.
The Fair Housing Act permits:

Indicating that rental property is:
o Accessible to handicapped individuals.
o Intended for and operated as housing for older persons.

Indicating age restriction for occupancy as long as children are not
excluded. Local law may prohibit discrimination on the basis of
age. Check your local statutes.

Using the equal housing opportunity logotype, statement, or slogan
in all advertising.

Using human models who:
o Represent all races and age segments of the population in
the area, including families with children and people with
disabilities.
o Vary periodically so that diverse groups in your community
are featured, such as majority and minority in the
metropolitan area, both sexes, and families with children
(when appropriate).
Appendix-20
o Portray persons in an equal social setting.
o Indicate to the general public that housing is available to all
persons, regardless of status.
Chapter 5
Substantial Presence Test
Under the provisions of the substantial presence test, an alien individual
may be considered a USA resident if he or she is present in the USA for
more than 30, but less than 183, days during the current calendar year and
meets the requirements of the three-year 183-day test. The 183-day test is
satisfied only if the sum of the following is equal to at least 183 days:
1. The number of days present in the USA during the current
taxable year, plus
2. One third of the days present during the immediately preceding
calendar year, plus
3. One sixth of the days present during the second preceding year.
For example, if the alien has been present in the United States for 122 or
more days during each of the past three calendar years, the days would be
calculated as follows:
122 Number of days present in the calendar year
+41 One third of 122
+20 One sixth of 122
=183 In this case, the alien would pass the substantial presence
test because the total number of days is at least 183.
Tax Treaties
Aruba
Australia
Austria
Barbados
Belgium
Bermuda
U.S. Income Tax Treaties
Finland
Korea
France
Luxembourg
Germany Malta
Greece
Morocco
Hungary Netherlands
Iceland
Netherlands Antilles
Canada
Ireland
New Zealand
Philippines
Poland
Romania
Sweden
Switzerland
Trinidad &
Tobago
Russia
Appendix-21
Cyprus
Italy
Norway
Denmark
Egypt
Jamaica
Japan
Pakistan
People’s Republic of
China
United
Kingdom
The U.S. also has estate tax treaties with some of these countries; gift tax
treaty with Australia; combined estate and gift tax treaties with Austria,
France, UK, Sweden and Japan.
Countries Whose Qualified Residents Are Not Subject
to Branch Profits Tax
Aruba
Hungary
Pakistan
Austria
Ireland
Philippines
Belgium
Jamaica
Sweden
People's Republic of
Korea
Switzerland
China
Cyprus
Malta
United Kingdom
Denmark
Morocco
Iceland
Egypt
Netherlands
Italy
Finland
Netherlands Antilles
Japan
Germany
Norway
Luxembourg
Austria
Barbados
Canada
Treaties that Allow Imposition of Branch Profits Tax
France
Romania
New Zealand
South Africa
Poland
Trinidad and Tobago
Russia
State & Local Regulations
While numerous states have distinct laws restricting or regulating foreign
investment, most state and local laws relate to disclosure, land use and
taxation for aliens and U.S. citizens alike. Specific requirements are
available from each state department of revenue.
State-Level Restrictions and Reporting Requirements
Most states have some kind of restrictions and reporting requirements on
foreign real estate investment. You should be familiar with them for the
states where you do business.
State-level restrictions vary, but in general, they concern:
Appendix-22

Type of property that can be owned.

Amount of property that can be owned.

Limits on duration of ownership.

How title can be acquired.

Ownership by individuals versus by business entities.
Reporting considerations include:

Income tax.

Inheritance and estate taxes.

Disclosure of owner's name and property identification.
County and Local Requirements
Counties and local governments generally have no restrictions exclusive to
offshore investors: building codes, zoning, public notices, condemnation,
environmental impact reports, recording requirements, moratoria,
assessments, landlord-tenant laws are applied to all owners equally.
Reporting considerations include:

Income tax.

Ad valorem taxes.
U.S. Immigration and Visas
Foreign investors in U.S. real estate are often concerned about how U.S.
immigration and visa laws apply to them. Clearly, their residency status is
also relevant to their tax situation. It is impossible to treat the complexity
of U.S. immigration law in a few words. U.S. immigration laws are under
constant change. A major revision took place with the Immigration and
Naturalization Act of 1996. You should consult a qualified attorney to
help you and your client understand how current law applies. Do not rely
on the following summary as legal advice. Aliens should be aware that if
they wish to remain for longer than thirty days in the U.S., they must
register with an immigration authority.
Visas
Most individuals who want to live permanently in the United States must
first enter through a temporary visa. Some of the temporary visa types are
briefly described below. Citizens of Canada and Mexico are eligible for
special treatment under NAFTA.

B-1 “Business Visitor”
This visa allows an individual to incorporate in the U.S.,
acquire property, sign contracts, and perform certain other
Appendix-23
business activities, but it does not allow the individual to
directly manage a U.S. business or receive U.S.-sourced wages.
L-1 "Intracompany Transferee"
This visa pertains to individuals who own or work for a foreign
corporation that is directly related to a U.S. corporation that
employs the individual in an executive, managerial, or specialknowledge capacity.

E-1 "Treaty Trader"
This visa is available to individuals from nations that have a
treaty of trade and commerce with the United States. The visa
allows the holder, spouse and minor dependents to live in the
United States for an indefinite number of years.

E-2 "Treaty Investor"
This visa allows a foreign individual or corporation to live in
the U.S. while actively investing in, operating, and managing a
U.S. business.

EB-5 “Million Dollar Investor”
This visa is available for individuals who plan to make a
capital contribution of $1 million to an enterprise.

H1-B "Temporary Professional Worker”
This visa allows an individual with a bachelor's degree from
the U.S. or abroad, to remain in the U.S. for six years while
employed in a professional position with a U. S. employer.

O and P “Extraordinary”
These visas are available for aliens of “extraordinary" ability in
the sciences, arts, education, business or athletics.
Permanent Visa
The alien investor or professional worker may become a permanent
resident according to the following general process:
Appendix-24

Step 1 - Establish a U.S. business enterprise and begin trade
with the United States (L-1) or begin H-1B employment.

Step 2 - Obtain an L-1 or H-1B visa.

Step 3 - Travel to the United States on an as-needed basis,
maintaining non-residence status in the United States for tax
purposes.

Step 4 - Obtain permanent residency after a year in business, if
the business is viable and the investor and corporation meet
certain requirements. In the case of H-1B professionals, the
individual and his/her family can remain in the United States
only for seven years unless they obtain permanent alien labor
certification by obtaining a bona fide job offer from a U.S.
employer in which the foreign worker and family are not
directly involved.

Step 5 - Obtain U.S. citizenship after five years from granting
of resident status.
Chapter 3
Selected World Currencies
Country
Currency
Argentina
Argentina Peso
Australia
Australia Dollar
Bahamas
Bahamas Dollar
Brazil
Brazil Real
Bulgaria
Bulgaria Lev
Canada
Canada Dollar
Chile
Chile Pesos
China
China Yuan Renmimbi
Colombia
Colombia Peso
Costa Rica
Costa Rica Colon
El Salvador
El Salvador Colon
Guatemala
Guatemala Quetzal
France
Euro
Indonesia
Indonesia Rupiah
Israel
Israel New Shekel
Italy
Euro
Jamaica
Jamaica Dollar
Japan
Japan Yen
Korea
South Korea Won
Malaysia
Malaysia Ringgit
Mexico
Mexico Peso
New Zealand
New Zealand Dollar
Norway
Norway Kroner
Panama
Panama Balboa
Philippines
Philippines Peso
Romania
Romania Leu
Russia
Russia Rubles
Singapore
Singapore Dollar
South Africa
South Africa Rand
United Kingdom
U. K. Pound Sterling
Venezuela
Venezuela Bolivar
Symbol
ARP
AUD
BSD
BRL
BGL
CAD
CLP
CNY
COP
CRC
SVC
GTQ
EUR
IDR
ILS
EUR
JMD
JPY
KRW
MYR
MXN
NZD
NOK
PAB
PHP
ROL
RUR
SGD
ZAR
GBP
VEB
For more information on
World Currencies, visit
The Universal Currency
Converter website at:
www.xe.com/ucc/
Appendix-25
Measurement Conversions
Appendix-26
1 sq. centimeter
0.1550 sq. inch
1 sq. inch
6.452 sq. centimeters
1 sq. decimeter
0.1076 sq. foot
1 sq. foot
9.22903 sq. decimeters
1 sq. meter
1.196 sq. yards
1 sq. meter
10.7639 sq. feet
1 sq. yard
0.8361 sq. meter
1 hectare
2.471 acres
1 acre
0.4047 hectares
1 sq. kilometer
0.386 sq. mile
1 sq. mile
2.59 sq. kilometers
1 hectare
10,000 sq. meters
Chapter 3 Practice Problems
1) Assume the exchange rate between Australian dollars and British
pounds sterling is A$1 = £ .397. Convert A$500 to British pounds
sterling. Convert £500 to Australian dollars.
a) A$500 = £________________
b) £500 = A$________________
2) A property measures 11,000 SF. What is its area in square meters?
Another property measures 5,000 square meters. What is its area
in square feet?
Conversion factors: 1 m2 = 10.7639 sf
1 sf = 0.0929 m2
Answers to
practice
problems:
1a) £198.50
1b) A$1259.45
2a) 1022 m2
2b) 53820 sq. ft.
3a) US $23.92
3b) US $2.22
3c) US $26.64
a) 11,000 sf. = ___________m2
b) 5,000 m2 = ____________sf.
3) Office rent in Mexico City is quoted at 255 pesos per square meter
per month. If the exchange rate between dollars and pesos is
US$1 = MXN$10.66, what is the rental rate in U.S. dollars per
square foot per year?
Conversion factors: rent = MXN$255/m2/mo.
MXN$10.66 = US$1
1. Convert currency: $__________/m2/mo.
2. Convert price per unit of area: $___________/sf./mo.
3. Convert period: $____________/sf./yr.
Appendix-27
Foreign Real Estate Cooperating Associations
The National Association of REALTORS® has cooperating agreements
with 75 international real estate associations in 56 countries. Following is
a listing of those organizations with contact information.
Argentina
Lic. Horacio A. Bielli, President
The Argentina Chamber of Horizontal Properties and Real Estate
Activities
CAP-H
Perú 570, Capital Federal
Buenos Aires Argentina
Tel: 011-54-114-342-5128
Fax: 011-54-114-345-0010
[email protected]
www.caphai.com.ar
NAR President’s Liaison: Aida Turbow
NAR Ambassador Association: REALTOR® Association of Greater
Fort Lauderdale
Argentina
Mr. Hugo Mennella, President
Camara Inmobilaria Argentina
CIA
Bartolome Mitre 784 - Piso 2
1036 Capital Federal
Buenos Aires Argentina
Tel: 54-11-5031-3333
Fax: 54-11-5031-3333
[email protected], [email protected]
Fort Lauderdale
Argentina
Mr. Carlos Ipuche, President
Colegio de Martilleros de San Isidro
CM-Arg
Rivadavia 578
San Isidro 1642 BS AS Argentina
Tel: 54-11-4743-2727
Fax: 54-11-4742-4508
www.martilleros-si.org.ar
Appendix-28
Fort Lauderdale
Australia
Mr. Graham Joyce, President
Real Estate Institute of Australia
REIA
GPO Box 234
Deakin West, ACT 2600 Australia
Tel: 61-2-628-24277
Fax: 61-2-628-52444
www.reiaustralia.com.au/
NAR President’s Liaison: Pat Combs
Austria
Mr. Udo Weinberger, President
Österreichischer Verband der Immobilientreuhänder
OVI
Favoritenstraße 24/11
Wien 1040 Austria
Tel: 43-1-5054875
Fax: 43-1-504875-18
www.ovi.at
NAR President’s Liaison: Susan Greenfield
NAR Ambassador Association: TBD
Bahamas
Mr. Larry Roberts, President
Bahamas Real Estate Association
BREA
Chamber of Commerce, Collins Avenue
P.O. Box N8485
Nassau Bahamas
Tel: 242-322-2145
Fax: 242-322-4649
www.bahamasrealestateassociation.com
NAR President’s Liaison: Chip Lubeck
NAR Ambassador Association: REALTORS® Association of the Palm
Beaches, Inc.
Belize
Rev. Macarena Rose, President
Belize National Association of Realtors
Appendix-29
BNAR
7 Craig Street
P.O. Box 434
Belize City Belize
Tel: 501-804-0195, 501-670-4045
Fax: 501-804-0195
[email protected]
http://belizenar.org
NAR President’s Liaison: TBD
Brazil
Mr. Romeu Chap Chap, President
Sindicato das Empresas de Compra, Venda, Locação e Administração de
Imóveis de Sao Paulo
SECOVI-SP
Rua Doutor Bacelar, 1043
04026-002 São Paulo - SP Brazil
Tel: 55-11-5591 1300, laerte's 55 11 5591 1285
Fax: 55 11 2578 3145
www.secovi.com.br
NAR President’s Liaison: Jose Augusto Pereira Nunes
Miami and the Beaches, Inc.
Bulgaria
Mr. Lachezar Iskrov, President
National Real Property Association
NRPA
36 A Patriarch Evtimii Blvd.
Fl.1, Apt. 3
Sofia, 1000 Bulgaria
Tel: +359 (2) 988-6890, +359 (2) 980-1470
Fax: +359 (2) 988-6891
www.nsni.bg
NAR President’s Liaison: Diane Cummins
NAR Ambassador Association: Putnam County Association of
REALTORS®
Canada
Ms. Ann Bosley, President
Canadian Real Estate Association
CREA
200 Catherine Street, 6th Floor
Appendix-30
Ottawa, Ontario K2P 2K9 Canada
Tel: 613-237-7111
Fax: 613-237-9054
[email protected]
www.crea.ca
NAR President’s Liaison: Tom Stevens
CEPI
Mr. Frans A.J. Burgering, President
Conseil européen des Professions immobilières, European Council of
Real Estate Professions
CEPI
Avenue de Tervueren 36 bte 2
B-1040 Brussels Belgium
Tel: 32-2-735-49-90
Fax: 32-2-735-99-88
[email protected]
www.cepi.eu
NAR President’s Liaison: Ruth Krinke
CEREAN
Mr. Dan Negulescu, CIPS, President
Central European Real Estate Associations Network
CEREAN
160, Stirbei Voda Av, Bl 22 B
010121, Bucharest, Romania Romania
Tel: 40-21-260-2665
Fax: +40-74-309-9991
www.cerean.com
NAR President’s Liaison: Norman Flynn
Chile
Mr. Werther Araya Steck, President
Asociacion Gremial De Corredores De Propiedades De Chile
COPROCH
Avda. Providencia, 329, Piso 2
Santiago, Chile
Tel: 56-2-341-3368
Fax: 56-2-274-9730
[email protected]
NAR President’s Liaison: Kimberly Kirschner
NAR Ambassador Association: Raleigh Regional Association of
REALTORS®
Chile
Appendix-31
Mr. Jose Antonio Alemparte Vallarino, President
Camara Nacional de Servicios Immobliarios ACOP
ACOP-CNSI A.G.
Avda. Providencia 2008-A, Piso 2,
Santiago, Chile
Tel: 56-2-366-0414
Fax: 56-2-233-5110
[email protected]
www.acop.cl
NAR President’s Liaison: Kimberly Kirschner
NAR Ambassador Association: Raleigh Regional Association of
REALTORS®
China
Mr. Chunhua Song, President
China Real Estate Association
CREA
No. 8 Building, Cui Wei Nan Li
Beijing 100036 People's Republic of China
Tel: +86-10-68161084
Fax: +86-10-6828-1299
[email protected]
www.estate-china.com
NAR President’s Liaison: Richard Mendenhall
NAR Ambassador Association: San Francisco Association of
REALTORS®
China-Hong Kong
Ms. Karen Wong, President
Society of Hong Kong Real Estate Agents
SHKREAL
Nan Fung Tower, Room 913, 9th Floor
173 Des Voeux Road Central
Hong Kong People's Republic of China
Tel: (852) 2575 1260
Fax: (852) 2838 0062
[email protected], [email protected], [email protected], [email protected]
www.hkrealtors.com
NAR President’s Liaison: Kenneth Li
NAR Ambassador Association: Houston Association of REALTORS®,
Inc.
Colombia
Mr. Sergio Mutis Caballero, President
Federacion Colombiana de Lonjas de Propiedad Raiz
Appendix-32
FEDELONJAS
Carerra 13A No. 97-24
Santa Fe De Bogota Colombia
Tel: 57-1-623-0426 or 57-1-622-6966
Fax: 57-1-623-3366
www.lonja.org.co
NAR President’s Liaison: Yolanda Velasco
Costa Rica
Mr. Mauricio Castro-Carranza, President
The Costa Rica Chamber of Real Estate
CCCBR
Apartado 1006-2100-Guadalupe
San Jose Costa Rica
Tel: 506-283-0191
Fax: 506-283-0347
www.camaracbr.or.cr
NAR President’s Liaison: Debbie Maue
NAR Ambassador Association: Arizona Association of REALTORS®
Costa Rica
Ms. Cynthia Duran, President
Costa Rica Global Association of REALTORS®
CRGAR
Attn: Cynthia Duran, Hacienda Pinilla
Post Office Box 66, Santa Cruz
Guanacaste Costa Rica
Tel: 506-681-4414
[email protected], [email protected],
[email protected]
www.costaricare.net
NAR President’s Liaison: Debbie Maue
NAR Ambassador Association: Arizona Association of REALTORS®
Czech Republic
Ing. Jaroslav Novotny, President
Association of Real Estate Offices of the Czech Republic
ARKCR
Na Chodovci 2880/3
Praha 4 - Sporilov 141 00 Czech Republic
Tel: 42-02-71762953
Fax: 42-02-7176-6401
[email protected]
Appendix-33
www.arkcr.cz
NAR President’s Liaison: Jana Herdova
NAR Ambassador Association: Chicago Association of REALTORS®,
Inc.
Denmark
Mr. Steen Winther-Petersen, National President
Danish Association of Chartered Estate Agents
DE
Islands Brygge 43
2300 Copenhagen S Denmark
Tel: 45-70 25 09 99
Fax: 45-32-64-45 99
[email protected]
www.de.dk
NAR President’s Liaison: Hanne Saglowsky
NAR Ambassador Association: Greater Las Vegas Association of
REALTORS®, Inc.
El Salvador
Ms. Mery Guevara Marquez, President
Camara Salvadorense de Bienes Raices/ El Salvador Chamber of Real
Estate
CSBR
Boulevard de Los Heroes, Condominio Los Heroes
2do. Nivel No. 2V
San Salvador El Salvador
Tel: 503-2226-1463
Fax: 503-2225-5557
NAR President’s Liaison: Luke Romero
NAR Ambassador Association: Greater Tampa Association of
REALTORS®
FeCePac-ACBR
Mr. Ivan Carlucci, President
Federation of Real Estate Associations of Central America
FeCePac
Ave. Morgan, Casa 301 A. Balboa, Ancon
Apartado 97-3580
Panama City, Zona 7 Panama
Tel: 507-228-7840
Fax: 507-228-7807
[email protected]
www.fecepac.com
NAR President’s Liaison: Carlos Fuentes
Appendix-34
NAR Ambassador Association:
Finland
Mr. Risto Volanen, President
Suomen Kiinteistönvälittäjäliitto ry.
SKVL
Malminkaari 5
Helsinki 00700 Finland
Tel: +358-9-5308-500
Fax: +358-9-5308-5050
[email protected]
www.skvl.fi
NAR President’s Liaison: Maire Rosol
NAR Ambassador Association: Utah Association of REALTORS®
France
Mr. René Pallincourt, President
Federation Nationale de l'Immobilier
FNAIM
129, rue du Faubourg Saint Honoré
Cedex 08
75407 Paris France
Tel: 33-1-44-20-77-00
Fax: 33-1-42-25-80-84
[email protected]
www.fnaim.fr
NAR President’s Liaison: Barbara Schmerzler
NAR Ambassador Association: Connecticut Association of
REALTORS®
Germany
Jens Peter Kiessling, President
Immobilienverband Deutschland
IVD
Littenstrasse 10
Berlin 10179 Germany
Tel: +49-30-27-57-260
Fax: +49-30-27-57-2649
[email protected]
www.ivd-bundesverband.net/
NAR President’s Liaison: Frank E. Kowalski
NAR Ambassador Association: Florida Association of REALTORS®
Greece
Mr. Argiris Maniatis, President
Hellenic Association of REALTORS®
Appendix-35
HAR
Odos Kerkyras 47
11362, Athens Greece
Tel: 30-182-32-931
Fax: 30-188-10-936
www.sek.gr
NAR President’s Liaison: Angela Eliopoulos
NAR Ambassador Association: Anne Arundel Association of
REALTORS®
Guatemala
Mrs Maria Luisa Perezalonso, President
Camara de Corredores de Bienes Raices de Guatemala
CCBRG
Boulevard Vista Hermosa 22-65 zona 15
Centro Comercial Metro 15, local 311
Guatemala City Guatemala
Tel: +502-369-2030, 502-369-2803
www.ccbrg.org
NAR President’s Liaison: Selma Santos
NAR Ambassador Association: Greater Tampa Association of
REALTORS®
Honduras
Mr. Phil Weir, President
Asociacion Nacional de Agencias de Bienes Raices de Honduras
ANABIR
Col. Castaño Sur, Paseo Virgilio Zelaya Rubí
Bloque C, Casa #24
Tegucigalpa Honduras
Tel: +504-566-1146
Fax: +504-669-0809
[email protected], [email protected],
[email protected]
http://www.roatan-realestate.com/
NAR President’s Liaison: Patrick Crowley
Hungary
Mr. Peter Mehrli, President
Magyar Ingatlanszövetség
HREA
Margit krt. 43-45
H-1024 Budapest Hungary
Appendix-36
Tel: 36-1-336-0072 or 36-1-315-1039
Fax: 36-1-336-0073
[email protected]
NAR President’s Liaison: Zsolt Szerencses
NAR Ambassador Association: Orlando Regional REALTOR®
Association
India
Mr. Chetan Narain, President
India Institute of Real Estate
IIRE
c/o `Narains Corp', 202, X-Cube
Opposite Fun Republic Multiplex, Off Link Road, Andheri (W)
Mumbai 400053 India
Tel: +91-22-2628-8595, +91-22-2628-3442
Fax: + 91 22 2674 7676
[email protected], [email protected], [email protected]
www.iire.co.in
NAR President’s Liaison: Shalini Madaras
NAR Ambassador Association: Denver Board of REALTORS®
Indonesia
Ir. Lukman Purnomosidi, President
Persatuan Perusahaan Realestat Indonesia
REI
Jalan Cut Nyak Arif No. 9B
Simprug Indah
Jakarta, Selatan 12220 Indonesia
Tel: 62-21-7278-9105
Fax: 62-21-7278-9155
[email protected]
NAR President’s Liaison: Atti Trueblood
NAR Ambassador Association: Georgia Association of REALTORS®
Indonesia
Mr. Tirta Setiawan, President
Asosiasi Real Estate Broker Indonesia/Indonesian Association of Real
Estate Agents
AREBI
Wisma Dharmala Sakti, Floor Mezzanine 1
Jalan Jend. Sudirman Kav 32
Jakarta 10220 Indonesia
Tel: 62 21 570 6093
Fax: 62 21 570 6093
http://www.arebi.net/
Appendix-37
NAR President’s Liaison: Atti Trueblood
NAR Ambassador Association: Georgia Association of REALTORS®
Ireland
Mr. Robert Ganley, President
Irish Auctioneers and Valuers Institute
IAVI
38 Merrion Square East
Dublin 2 Ireland
Tel: 353-1-661-1794
Fax: 353-1-661-1797
www.realestate.ie
NAR President’s Liaison: Alex Chaparro
NAR Ambassador Association: Chicago Association of REALTORS®,
Inc.
Israel
Mr. Nachman Shecter, President and Chairman of the Board
MALDAN - Association of Real Estate Brokers in Israel
MALDAN
Rechter Center
Eilat Israel
Tel: 972-8-637-5730
Fax: 972-8-637-6365
www.maldan.org.il
NAR President’s Liaison: Mark Levine
Italy
Mr. Franco Arosio, National President
Italian Federation of Real Estate Agents
FIAIP
Sede Nazionale Piazzale Flaminio, 9
00196 Roma Italy
Tel: 39-06-321-9798
Fax: 39-06-322-3618
[email protected]
www.fiaip.it
NAR President’s Liaison: Carol Kope
NAR Ambassador Association: New York State Association of
REALTORS®, Inc.
Jamaica
Ms. Lorraine Levy-Finlason, President
Appendix-38
REALTORS® Association of Jamaica
RAJ
Shortwood Professional Centre
40 Shortwood Road, Unit 14
Kingston 8 Jamaica
Tel: 876-925-6223
Fax: 876-969-3009
www.realtorsjamaica.com
NAR President’s Liaison: Matey Veissi
NAR Ambassador Association: Greensboro Regional REALTORS®
Association, Inc
Japan
Mr. Mitsugi Kawaguchi, President and General Director
All Japan Real Estate Association
AJREA (Zen Nichi)
Zennichi Kaikan
3-30, Kioichi, Chiyoda-ku
Tokyo 102-0094 Japan
Tel: 81-3-3263-7030
Fax: 81-3-3239-2198
[email protected]
www.zennichi.or.jp
NAR President’s Liaison: Takashi Misawa
Japan
Mr. Hiromichi Iwasa, President
The Real Estate Companies Association of Japan
RECAJ
Kasumigaseki Building, 7th Floor
2-5 Kasumigaseki 3-chome
Chiyoda-ku, Tokyo, 100-6007 Japan
Tel: 81-3-3581-9421
Fax: 81-3-3581-7530
www.fdk.or.jp
NAR President’s Liaison: Yukio Yamaoka
NAR Ambassador Association: Hawaii Association of REALTORS®
Japan
Mr. Kazuo Fujita, President
National Federation of Real Estate Transaction Associations
NFRETA
Appendix-39
Zentakuren Building,
2-6-3 Iwamoto-Cho,
Chiyoda-ku, Tokyo, 101-0032 Japan
Tel: 81-3-5821-8111
Fax: 81-3-5821-8101
[email protected]
N/A
NAR Ambassador Association: Virginia Association of REALTORS®
Japan
Mr. Yoshifumi Iwasaki, President
The Association of Real Estate Agents of Japan (Fudosan Ryutsu Keiei
Kyokai)
FRK
Bridgestone-Toranomon Building, 5th Floor
3-25-2 Toranomon
Minato-ku, Tokyo, 105-0001 Japan
Tel: 81-3-5733-2271
Fax: 81-3-5733-2270
[email protected]
www.homenavi.or.jp
Korea
Mr. Si-Girl Jang, President
The National Association of Real Estate Brokers
NAREB
4th Floor NAREB Building
930-42 Bongchun-8 Dong, Kwanak-Gu,
Seoul, 151-058 Korea
Tel: 82-2-879-1100
Fax: 011-822-886-4314
www.nareb.or.kr
NAR President’s Liaison: Nancy McKerahan
NAR Ambassador Association: RealSource Association of
REALTORS®
Korea
Mr. Jun Hyun Kim, President
Korea Real Estate Brokers Association
KREBA
10th Floor, Shinsung Building
820-8 Yeoksam-dong, Kangnam-gu
Appendix-40
Seoul, 135-932 Korea
Tel: 82-2-556-7772
Fax: 82-2-562-2552
[email protected]
www.kreba.net
NAR President’s Liaison: Nancy McKerahan
NAR Ambassador Association: RealSource Association of
REALTORS®
Latvia
Mr. Edgars Shins, President
Latvian Real Estate Association
LANIDA
45/47 Elizabetes Street
Riga LV-1010 Latvia
Tel: 371-7-332-034
Fax: 371-7-332-034
[email protected]
www.lanida.lv
NAR President’s Liaison: Mickey Knickerbocker
NAR Ambassador Association: Michigan Association of REALTORS®
Malaysia
Mr. K. Soma Sundram, President
Malaysian Institute of Estate Agents
MIEA
No. 88-B, Jalan SS 21/39, Damansara Utama
47400 Petaling Jaya
Selangor Darul Ehsan, West Malaysia Malaysia
Tel: 60-3-7727-7477
Fax: 60-3-7727-3693
www.miea.com.my
NAR President’s Liaison: John Pinson
NAR Ambassador Association: Palm Beach Board of REALTORS®
Mexico
Mr. Mario Aviles, President
Mexican Association of Real Estate Professionals
AMPI
Rio Rhin #52
Col. Cuauhtemoc, C.P.
06500 Mexico, D.F. Mexico
Tel: 52-55-5566-4260
Fax: 52-55-5566-4323
Appendix-41
www.ampi.org
NAR President’s Liaison: Adrian Arriaga
NAR Ambassador Association: Texas Association of REALTORS®
Netherlands
Mr. Ger Hukker, President
Dutch Association of Real Estate Brokers and Real Estate Experts
NVM
Fakkelstede 1,
Postbuss 2222
3430 DC Nieuwegein Netherlands
Tel: 31-30-608-5185
Fax: 31-30-603-5468
[email protected]
www.nvm.nl
NAR President’s Liaison: Marianne Broekmeijer
NAR Ambassador Association: Greater Lansing Association of
REALTORS®
New Zealand
Mr. Murray Cleland, President
Real Estate Institute of New Zealand
REINZ
202 Parnell Road
PO Box 5663
Auckland, 1 New Zealand
Tel: 64-9-356-1755
Fax: 64-9-379-8471
[email protected]
www.reinz.co.nz
NAR President’s Liaison: Steven Wayne
NAR Ambassador Association: Washington Association of
REALTORS®
Nicaragua
Mr. Abrahm Blandon, President
Camara Nicaraguense de Corredores de Bienes Raices
CNCBR
Global Real Estate
Rotonda Ruben Dario 1c al Sur 20 vrs abajo
Managua Nicaragua
Tel: +505-270-2413, +505278-2108
[email protected]
www.canibir.com/
NAR President’s Liaison: Lucia Sacasa
Appendix-42
Norway
Mr. Øivind Andreas Tandberg, President
Norwegian Association of Real Estate Agents
NEF
Hansteensgate 2
Oslo 0253 Norway
Tel: 47-22-54-20-80
Fax: 47-22-55-31-06
[email protected]
www.nef.no
NAR President’s Liaison: Frank Young
Panama
Mr. Jose Boyd, President
Asociacion de Corredores y promotores de Bienes Raices
ACOBIR
87-3580, Zona 7
Panama Republic de Panama
Tel: 507-228-7840
Fax: 507-228-7807
www.acobir.com
NAR President’s Liaison: Jorge Cantero
NAR Ambassador Association: Orlando Regional REALTOR®
Association
Paraguay
Mr. Jorge Figueredo-Fleitas, President
Paraguay Association of Land Development and Chamber of Real
Estate Companies
APEL - CAPEI
Edificio "Cardinal" 3 Piso - Of.10 Alberdi N 456 C/ Oliva
Asuncion Paraguay
Tel: (595 21) 490-263
Fax: (595 21) 490-263
[email protected]
www.apel-capei.com.py
NAR President’s Liaison: Carlos ThurdeKoos
Peru
Mr. Luis Isasi Cayo, President, General Committee of Buildings
Camara Peruana de la Construccion
Appendix-43
CAPECO
Av. Victor Andres Belaunde 147, Via Principal 155
Edificio Real 3 - Of. 1402, San Isidro
Lima Peru
Tel: +511-441-7042; 441-7043; 440-7032
Fax: +511-441-7028
[email protected]
www.capeco.org
NAR President’s Liaison: Luis Lama
NAR Ambassador Association: Puerto Rico Association of
REALTORS®
Philippines
Mr. Rogelio Quiambao, President
Philippine Association of REALTORS® Boards, Inc.
PAREB
Unit 302 Merchant Square Condominium
E. Rodriquez Sr. Avenue corner Mabolo St.
New Manila 1112, Quezon City Philippines
Tel: 63-2-723-1197
Fax: 63-2-723-4685
www.pareb.com.ph
NAR President’s Liaison: Susan Barlin
NAR Ambassador Association: Southland Regional Association of
REALTORS®
Poland
Mr. Alexsander Scheller, President
Polish Real Estate Federation
PREF
Swietokrzyska 36 suite 8, (5. floor)
Warsaw 00-116 Poland
Tel: 48 22 825 39 64 or +48 22 825 39 56
Fax: 48-22-825-3956
www.pref.org.pl
NAR President’s Liaison: Don Pasek
NAR Ambassador Association: Northern Virginia Association of
REALTORS®
Portugal
Mr. José Eduardo Macedo, President
Associação dos Profissionais das Empresas de Mediação Imobiliária de
Portugal
APEMIP
Appendix-44
Rua D. Luís de Norohna, no. 4, 2.˚
1069-165 Lisbon Portugal
Tel: 35-1-21-792-8770
Fax: 35-1-21-795-8815
www.apemi.pt
NAR President’s Liaison: Henry DiGiacomo
NAR Ambassador Association: Massachusetts Association of
REALTORS®
Romania
Ms. Ruxandra Cleciu, President
Romanian Association of Real Estate Agencies
ARAI
Str. Stirbei Voda, Nr. 160, Bl. 22B
et. 3, Ap. 12, Sector 1
Bucharest Romania
Tel: 40-2-1260-2665, 40-7-4436-7820
Fax: 40-2-1260-2665
[email protected], [email protected], [email protected],
www.arai.ro
NAR President’s Liaison: Emil Mongeon
NAR Ambassador Association: Williamson County Association of
REALTORS®
Russia
Mr. Alex Romanenko, President
Russian Guild of REALTORS®
RGR
4th Floor
14/1, Radio Street
Moscow 105005 Russia
Tel: 7-495-261-9680
Fax: 7-495-261-0398
[email protected]
www.rgr.ru
NAR President’s Liaison: Sofia Menahem
Russia
Mr. Igor Artemenkov, President
Russian Society of Appraisers
RSA
Novaya Basmannaya, 21-1,
Appendix-45
Moscow 107078 Russia
Tel: 7-095-267-46-02
Fax: 7-095-267-56-10
[email protected]
www.mrsa.ru
NAR President’s Liaison: Sofia Menahem
Singapore
Dr. Amy Khor, President
Singapore Institute of Surveyors and Valuers
SISV
20 Maxwell Road
10-09B Maxwell House
Singapore 69113 Singapore
Tel: 65-222-3030
Fax: 65-225-2453
[email protected]
www.sisv.org.sg
NAR President’s Liaison: Kelvin Wong
NAR Ambassador Association: Arcadia Association of REALTORS®
Singapore
Mr. Jeffhery Foo, President
Institute of Estate Agents
IEA
480 Lorong 6 Toa Payoh
East Wing #08-02
Singapore 310480 Singapore
Tel: 65-6323-1770
Fax: 65-6323-1773
www.iea.org.sg
NAR President’s Liaison: Kelvin Wong
NAR Ambassador Association: Arcadia Association of REALTORS®
Slovak Republic
Mr. Lubomir Kardos, President
National Association of Real Estate Offices of Slovakia
NARKS
Celakovskeho 11
811 03 Bratislava 1 Slovak Republic
Tel: 421 2 54 41 41 74
Fax: 421-2-54-43-09-89
[email protected]
Appendix-46
www.narks-real.sk
NAR President’s Liaison: Dianne Rath
NAR Ambassador Association: Traverse Area Association of
REALTORS®
South Africa
Dr. Willie Marais, National President
Institute of Estate Agents of South Africa
IEASA
10 Howard Studios
Sheldon Way
PINELANDS 7405 South Africa
Tel: 27-21-531-3180
Fax: 27-21-531-2931
www.ieasa.org.za
NAR President’s Liaison: Nancy Macaluso
Spain
Mr. Jose Antonio Ugarte Arriola, President
Asociacion Empresarial Gestion Inmobiliaria
AEGI
Lopez de Aranda, 35
28027 Madrid Spain
Tel: +34-91-320-8070
[email protected]
www.aegi.org
NAR President’s Liaison: Judy Schomaker
NAR Ambassador Association: Sarasota Association of REALTORS®
Sweden
Mr. Carl-Henrik Ageman, President
Association of Swedish Real Estate Agents
MÄKLARSAMFUNDET (ASREA)
Svärdvägen 15
SE-182 33 Danderyd Sweden
Tel: 46-8-544 96 550
Fax: 46-8-544 96 555
www.maklarsamfundet.se
NAR President’s Liaison: Ingrid Glancy
NAR Ambassador Association: Colorado Association of REALTORS®,
Inc.
Thailand
Appendix-47
Khun Somsak Muneepeerakul, President
Real Estate Broker Association
REBA
C/O Dr. Somsak Muneepeerakul, Forbest Properties Co., Ltd.
387/1 Soi Prasart Court, Suanplu, South Sathorn Rd.
Bangkok 10120 Thailand
Tel: 66-2-287-4568/69/70
Fax: 66-2-287-3854
http://www.reba.or.th/
NAR President’s Liaison: Nita Pichedvanichok
NAR Ambassador Association: Minneapolis Area Association of
REALTORS®
Thailand
Mr. Wisudhi Srisuphan, Chairman
Real Estate Information Center
REIC
Government Housing Bank
63 Rama 9 Rd,
Bangkok 10310, Thailand Thailand
REALTORS®
Thailand
Dr. Pairote Sukjan, Founder
Real Estate Sales & Marketing Association
RESAM
645/21 M. City Plus
Soi Sawadee 4, Sukhumvit 50
Prakaning, Klongtoey, Bangkok 10260 Thailand Thailand
REALTORS®
Ukraine
Mr. Alexander Bondarenko, President
Ukrainian Realtors® Association
URA
PO Box 25
[Physical address: 28A Lesi Ukrainki Blvd., suite 214, 8th porch, Kyiv
01133]
Kyiv 01021 Ukraine
Tel: +38 044 285 98 01
Fax: +38 044 285 98 01
Appendix-48
www.asnu.net
NAR President’s Liaison: Sue Bramhall
NAR Ambassador Association: Realtor® Association of Pioneer Valley
United Kingdom
Mr. Stewart Lilly, President
National Association of Estate Agents
NAEA
Arbon House, 6 Tournament Courtt
Edgehill Drive
Warwick, England CV34 6LG United Kingdom
Tel: 44-1926-496800
Fax: 44-1926-400953
[email protected]
www.naea.co.uk
NAR President’s Liaison: John Mike
NAR Ambassador Association: REALTORS® Association of the Palm
Beaches, Inc.
Uruguay
Mr. Roberto Pedragosa, President
Camara Inmobiliaria Uruguaya
CIU
Rincon 454 Piso 3 Esc. 321
Edificio Bolsa de Comercio
Montevideo C.P. 11000 Uruguay
Tel: +598-2-915-4919
Fax: +598-2-915-4921
[email protected]
www.ciu.org.uy
NAR President’s Liaison: Gustavo Lumer
Venezuela
Mr. Luis Emilio Vegas Bianchi, President
Camara Inmobiliaria de Venezuela
CIV
Edificio I.A.S.A., Piso 5, Oficina 502
Plaza la Castellana, Av. Principal Urb., La Castellana
Caracas 1060 Venezuela
Tel: 58-212-267-3256
Fax: 58-212-261-7321
www.cim.org.ve
NAR President’s Liaison: Francisco Angulo
Appendix-49
Fort Lauderdale
Vietnam
Mr. Trihn Huy Thuc, Chairman
Vietnam Real Estate Association
VREA
c/o Ministry of Construction, Housing Bureau
37 Le Dai Hanh
Hanoi Vietnam
Tel: 84-4-976-0853
Fax: 84-4-821-5208
[email protected]
NAR President’s Liaison: Chuck Vota
NAR Ambassador Association: Oregon Association of REALTORS®
South America
Mr. Wilder Ananikian, President
Mercosur Real Estate Federation (Confederacion Inmobiliaria
Mercosur y Chile)
CIMECH
Edificio Bolsa de Comercio
Rincon 454 Esc. 321/CP 11.300
Montevideo Uruguay
Tel: 598-2-915-4919
www.cimechweb.org
NAR President’s Liaison: David Segrest
ALLIED ORGANIZATIONS
International Consortium of Real Estate Associations (ICREA)
Chicago, IL 60611-4087 USA
Tel. 1-312-329-8327
Fax 1-312-329-8358
E-mail: [email protected]
Internet: www.worldproperties.com
Co-Chair: Russ Booth (USA)
Co-Chair: Timo Smit (Netherlands)
CEO: Thijs Stoffer
International Real Property Foundation (IRPF)
Chicago, IL 60611 USA
Tel. 1-800-875-8583 or 1-312-329-8252
Appendix-50
Fax 1-312-329-8227
Internet: www.irpf.org
Chairman & CEO: Norman D. Flynn, CIPS
Managing Director: Sylvia Luchini
FIABCI Secretariat
23 Ave. Bosquet
75007 Paris, FRANCE
Tel. +33-1-4550-4549
Fax +33-1-4550-4200
Internet: www.fiabci.com
World President: Luis Correa
Secretary General: Bruno Crosby
FIABCI-USA
2000 N. 15th Street, Suite 101
Arlington, VA 22201 USA
Tel. 1-703-524-4279
Fax 1-703-991-6256
Internet: www.fiabci-usa.com
President: Dagmar Sands
Secretary General: Susan Newman
Appendix-51
Appendix-52
Glossary
B
Balance of payments
A system of recording all of a country’s economic transactions with the rest of the
world for a particular period of time.
C
Capital flow
The movement of money, people, skills and innovations across national boundaries
in exchange for other goods or services.
Capital good
A good that creates other capital (i.e., equipment, factories, etc.).
Capitalization rate (cap rate)
A ratio that represents the future income of an income-producing property. It is
determined by dividing the net operating income by the purchase price.
Civil law
A code of law in which the government writes statutes that apply to rights,
responsibilities and duties.
Common law
A code of law in which rights, responsibilities and duties are determined by the
courts on a case by case basis.
Consensus
An opinion or position decided upon by a group as a whole.
Counter trade
The process of buying goods or services with other goods.
Currency
A medium of exchange that holds value in a particular nation or market and can be
exchanged for goods or services.
Copyright 2007 National Association of REALTORS®
Glossary-1
D
Debt coverage ratio (DCR)
Ratio of net operating income (NOI) to annual debt service. It is determined by
dividing NOI by annual debt service (or mortgage payment).
Deficit Reduction Act of 1984 (DEFRA)
A USA tax law that mandates that a buyer is responsible for withholding and
transmitting 10% of the amount of a sale to the government.
E
Environmental Protection Agency (EPA)
A USA government agency established to protect the nation's environment from
pollution.
Escrow
Money, securities or property held by a third party until the conditions of a
contract are met.
Ethnocentric
A belief in the superiority of one's own ethnic group.
European Union
A union formed among 25 European countries to promote cooperation by
removing trade barriers and creating a single economic market.
Exchange rate
The value of one currency in terms of another, or the amount that must be paid in
one currency in order to obtain an amount in another currency.
F
Feng-shui
An ancient Chinese belief system based on creating harmony between humans and
the environment to enhance well-being.
FIABCI (International Real Estate Federation)
A member organization developed to encourage communication within the
international real estate community for increased business and improved financial
success.
Glossary-2
Fiduciary
A description of a property or other asset that is held in trust.
Foreign Investment and Real Property Tax Act (FIRPTA)
A USA tax on gains from properties purchased from foreign nationals in the USA.
Foreign national
A foreign citizen who is present in another country.
G
Gold standard
A monetary system in which units of currency are convertible into fixed amounts
of gold. An economy’s stability can be measured by the amount of gold in banks.
Gross domestic product (GDP)
The value of all goods and services produced in a country during a given period.
This includes production by foreign-owned facilities within the country, but does
not include that of domestic companies abroad.
Gross national product (GNP)
The value of all goods and services produced by a country’s firms, regardless of
location. This does not include production of foreign-owned companies within a
country.
I
Inflation
An increase in the pricing environment due to a rise in the volume and availability
of money and credit and a reduction in the availability of goods.
Internal Revenue Service (IRS)
A government entity that regulates and enforces tax laws in the USA.
Glossary-3
International Monetary Fund (IMF)
An agency that regulates trade barriers and stabilizes currencies in order to provide
a controlled environment for international capital flow. The IMF also provides
loans and financial support for countries in crisis.
Investor’s visa
A United States immigration law that offers citizenship to foreign investors.
Iron Curtain
A reference to the restrictive forms of trade and government enforced by former
Communist rule in Eastern Europe.
J
Judeo-Christian traditions
Attitudes and activities based on the values of the Jewish and Christian religions.
L
Limitada
A clause of limited ownership and liability.
Linear notion of time
A rigid standard of time to which measures and sequences are defined and
deadlines are adhered.
Liquidity
The ability to convert assets or investments into cash without significant loss.
Loan to value (LTV)
The amount of money borrowed as compared to the total value of a property. It is
determined by dividing the amount of the loan by the property value.
M
MIPIM (The International Property Market)
An international property conference where the real estate community meets to
gather information and initiate projects. It is held once a year in Cannes, France.
Glossary-4
N
Non-linear notion of time
A fluid perception of time in which measures and sequences are not necessarily
defined. Time is viewed as a constantly changing entity.
Non-resident alien
A foreign citizen who is granted entry, but is not a resident of the USA.
North American Free Trade Agreement (NAFTA)
A pact that prohibits tariffs and unites Canada, Mexico and the USA in one of the
world’s largest free-trade zones.
P
Passive income
Income from rental activity or other business in which the investor does not
actively participate.
R
Real Estate Investment Trust (REIT)
A company that manages a portfolio of real estate to make profits for shareholders.
It is generally not required to pay corporate income tax if it distributes 95% of its
income to shareholders each year.
Real Estate Mortgage Investment Conduit (REMIC)
A corporation, partnership or trust that acts as a pass-through vehicle for multiclass mortgage-backed securities. REMICs have more flexibility than standard
mortgage issuers and, therefore, may represent a range of risk levels.
Resident alien
A foreign citizen who is granted temporary residency in the USA.
S
Securitization
The process of financing a pool of similar, but unrelated, financial assets (usually
loans or other debt instruments) by issuing security interests that represent claims
against the cash flow and other economic benefits generated by the assets.
Glossary-5
Specialization
The process that takes place when a country chooses to focus only the export of
particular products and services for the sake of efficiency. It also occurs when a
real estate professional focuses his or her practice on a particular type or area of
property.
Spheres of influence
A variety of groups in which an individual participates and maintains power,
prestige or efficacy.
T
Technical and Miscellaneous Revenue Act of 1988 (TAMRA)
A USA tax law created to equalize tax treatment of USA branches of foreign
corporations and foreign corporations' USA subsidiaries.
Title
A legal right to ownership.
Trade balance
The net difference between the value of imports and the value of exports in a
country for a particular period of time.
V
Valuation
The act of assessing the value or price of a property or investment.
W
World Bank
An international organization that finances commercial and infrastructure projects,
particularly in developing nations. World Bank loans must be supported by the
government.
Glossary-6
Resources
Internet Resources
Culture

Business culture guides: http://www.executiveplanet.com/

International business etiquette and manners:
http://www.cyborlink.com/besite/Default.asp
Demographic Information

U.S. Census Bureau: www.census.gov

U.S. Census Bureau, “State and County QuickFacts:”
http://quickfacts.census.gov/qfd/

U.S. Department of Housing and Urban Development:
www.hud.gov

Selig Center for Economic Growth, Terry College of Business,
The University of Georgia:
www.selig.uga.edu/forecast/GBEC/GBEC043Q.pdf
Discrimination

Urban Institute: www.urban.org. Enter topics in search box.

Freddie Mac:
www.freddiemac.com/homebuyers/bank/pred_lending.html
Fair Housing

Office of Fair Housing and Equal Opportunity (FHEO):
http://www.hud.gov/offices/fheo/index.cfm

National Fair Housing Advocate Online: www.fairhousing.com

Home Mortgage Disclosure Act Data: www.rtk.net

The Fair Housing Lending Guide Page:
www.ffhsj.com/fairlend/fair.htm

Alpha-One Fair Housing Accessibility Information:
www.alpha-one.org
Resources-1

Community Connections: www.comcon.org

Empowerment Zone/Enterprise Community Programs:
www.ezec.gov

Fair Housing Institute: www.mindspring.com/~fairhous/
Regional/National Information

Search for online Chambers of Commerce:
http://online-chamber.com/USA.html
Real Estate Resources
Association of Foreign Investors in Real Estate (AFIRE):
www.afire.org

Cushman and Wakefield:
www.cushmanwakefield.com/globhome.html
Select geographic area to research.

Denver University Global Real Estate Project:
www.burns.dcb.du.edu/index_flash.html

National Association of REALTORS®:
www.realtor.org
www.realtor.com
www.realtor.org/diversity

Asian American Real Estate Association (AAREA) http://areaa.org/

Fannie Mae Foundation: 1.202.274.8000 or
www.fanniemaefoundation.org

National Association of Hispanic Real Estate Professionals
(NAHREP): http://www.nahrep.org/

National Association of Real Estate Brokers
(NAREB):http://www.nareb.com/

International Consortium of Real Estate Associations (ICREA)
www.WorldProperties.com

Ernst and Young’s:
http://www.ey.com/global/content.nsf/International/Home
Select a country/region to research.
Resources-2
Translation Services

Alta Vista Language Translator: www.altavista.com

Click on “Translate” on the home page.
Books

Axtell, Roger E., editor. Gestures. The Do's and Taboos of
Body Language Around the World. Wiley; Revised edition:
1997.

Axtell, Roger E., Tami Briggs, Margaret Corcoran, Mary Beth
Lamb. Do's and Taboos Around the World for Women in
Business. John Wiley and Sons, 1997.

Brislin, Richard. Understanding Cultures Influence on
Behavior. Wadsworth Publishing; 2nd edition: 1999.

Comstock, Diana. Diversity and Development: Critical
Contexts that Shape Our Lives and Relationships. Wadsworth
Publishing: 2004

Dresser, Norine. Multicultural Manners: New Rules of
Etiquette for a Changing Society. John Wiley & Sons: 1996.

Esty, Katherine, Richard Griffin, Marci Schorr Hersch.
Workplace Diversity/A Manager's Guide to Solving Problems
and Turning Diversity into a Competitive Advantage. Adams
Media Corporation; 1st edition: 1995.

Foster, Dean. Global Etiquette Guide to Africa and the Middle
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Resources-3

Stockdale, Margaret, Faye J. Crosby. The Psychology and
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Resources-4
Trade & Culture Magazine (7127 Harford Road, Baltimore,
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