Legal Considerations

Before embarking on your first cross-border transaction with a developer, it’s important to investigate property rights, license laws, and related legal considerations for the country in question. Real estate laws vary greatly from one nation to another. To protect your clients’ interest, and your own, never assume that the laws governing international property transactions mirror those in your home market.

“Owning real estate in another country is entirely doable, but an ounce of prevention is worth a pound of cure,” advises Jeanne Jackson-Heim, Executive Director of the Idaho Real Estate Commission and Past-President of ARELLO. “Know what questions to ask and where to go for reliable answers.”

Questions to ask:

  • Can foreigners own property? How is title held?
  • Do I need a license to conduct brokerage in this country?
  • Beyond brokerage regulation, are there other laws governing real estate transactions, commission rates, etc.?
  • Do my current obligations to domestic clients/customers change in any way if I represent them in a foreign transaction?
  • What if my clients are interested in buying property from a developer that I represent? Do my duties/responsibilities change?
  • How will I get paid? (By the developer? The buyer?)
  • What recourse do I have in the event of a dispute?

Where to get answers:

Sorting out the answers to these and other questions requires digging beyond your local real estate laws and regulations. Your best cross-border sources include:

1. Start with the official real estate authorities.

Over 60 countries have associations serving their real estate community; and NAR has cooperating agreements with 80 associations in those countries. To find the best contacts for each nation, go to nar.realtor/global/ global-alliances to access a directory of Cooperating Associations, as well as President’s Liaisons and Ambassador Associations that work in partnership with these groups.

2. Find knowledgeable real estate attorneys.

It’s always essential to have reliable legal advice, especially when entering new markets. Expand your contacts to include international experts.

3. Network with experienced agents.

Rely on the CIPS Network to build trusted relationships with other real estate professionals who already have local market experience or can recommend local experts.

“Ultimately, relationships are the linchpin upon which successful global transactions are built, regardless of whether you’re working with a developer of a master plan community or in any other segment of the international property market,” says Jackson-Heim.

Compensation Considerations

By and large, buyers in the U.S. are not accustomed to paying their agent’s commission (and may not understand that listing agreements typically cover the buyer agent’s compensation). This arrangement is not common in other markets.

Unless you’re confident your services are covered by a co-marketing contract, this is one case where it might be advisable to ask your buyers to sign an agreement that addresses compensation. They may be more amenable to this arrangement if you explain that representing buyers in transactions abroad requires very specialized knowledge and is quite different from local transactions.

Stay Abreast of Changes

Even though the list of countries currently governed by real estate license laws is relatively short, a growing number of nations recognize the critical role real estate regulation can play in raising consumers’ comfort and encouraging economic development.

As a result, the legal terrain for real estate professionals can change quickly. For example, Singapore formed its first real estate commission less than five years ago and now imposes harsh penalties for unlicensed brokerage. To avoid potential pitfalls, stay on top of any new laws impacting your activities in international markets.

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About Global Perspectives

Global Perspectives in Real Estate is a resource for global professionals, aimed at helping them globalize their local markets. Produced bi-monthly, this newsletter serves as a how-to guide and is full of useful and actionable tips. A free subscription is given to all Certified International Property Specialists (CIPS) designees.

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