Ten Questions for Developers

Helping developers sell a master plan community in another country can be an appealing niche for global agents. Before entering into a co-marketing agreement, or promoting a development to your client base, use the following 10 questions to make sure you’re partnering with the right people and aligning your business with solid real estate projects.

1. What’s the business plan?

Don’t make the mistake of assuming that all master plan communities are guided by a business plan that spells out each build-out stage of the project and related pricing schedules. If the developer says they have one, request a copy and read it carefully. You want evidence that they’ve addressed all essential infrastructure, amenities and services—and that hard funds are in place to complete all aspects of the plan. Ask about the draw schedule, where and how escrow/deposits are held, and how they will be used.

2. What is your track record?

Past performance is one important indicator of a developer’s skill, experience and trustworthiness. Research other projects they’ve executed to get a better understanding of their approach, their financial strength and their reputation (with owners and amongst real estate professionals). Is this a team that will strengthen your own reputation?

“I do try to see a development first-hand,” says Carla Rayman, CIPS, Coldwell Banker Residential Real Estate in Sarasota, FL. “If it’s pre-construction, I want to see the site, what’s around it, and get locals’ scoop on the project. Before setting out, I’ll research the developer online to see what past buyers have said and make sure they haven’t received negative press.”

Mike Cobb, Chairman and CEO of ECI Development, which operates in Belize, Nicaragua, Costa Rica and Panama points out that “agents need to understand that in many countries developers operate under few if any zoning laws, and no agencies to hold them accountable for what they’ve promised. You’ve worked hard to establish trust with your clients. Don’t ruin your reputation by promoting the wrong projects.”

3. Will buyers hold clear 
and protected title to their property?

The laws governing private property ownership vary greatly from one country to another. Mexico, for example, prohibits direct ownership by foreign nationals in Restricted Zones, which include coastal areas. “To get around this and protect foreign buyers, developers must make sure the title
is clear and can be held in a Mexican bank trust,” explains Jay West, CIPS, e-PRO®, RSPS, owner/broker of Windermere Los Cabos and managing broker of Windermere Real Estate, Seattle, WA. “This is the first obstacle a developer needs to overcome before I’ll consider getting involved in any co-marketing activities.”

Cobb agrees. “If buyers can’t get title insurance, agents should walk away from the project. There are no legitimate reasons buyers should not be able to get protection from a major company like First American or Stewart. This is a black and white issue.”

4. Who is your target buyer and how does your project address their preferences?

Most developers are pretty savvy, but some aren’t. Find out how thoroughly they’ve researched and designed their floor plans, features and amenities to accommodate buyers’ preferences. Depending on the stage of the project, they may even welcome your insights about what it takes to sell inventory to a particular type of buyer.

For example, if a developer in Mexico wants to attract buyers from the U.S. and Canada, they should offer an open floor plan for common living areas, including kitchens that provide a view of the beach. On the other hand, if their target buyers are affluent Mexicans, it’s better to isolate the kitchen in the back of the floor plan, adjacent to a small bedroom for a live-in maid.

Bottom line, be sure that the builder is creating a “product” that’s genuinely appealing to your potential buyers.

5. How will properties be priced?

In addition to confirming that the developer’s inventory is on target, make sure the pricing structure is realistic. “A developer may love the idea of selling to the luxury segment, but if all the amenities aren’t in place, including a beautiful beachfront and golf course, for example, they won’t get any return on that pricing scheme,” explains West.

Also, when evaluating the pricing structure, factor in property taxes and HOA fees. This will help you give buyers a more complete picture of the cost of living in an offshore community relative to developments “back home.”

6. What is the marketing plan and budget?

Professional promotional efforts are an essential component of selling any development. “I’ll want to know how the developer is currently marketing the project, what marketing support they’ll provide, and how often I’ll receive updates,” says Rayman. Marketing support for agents may take the form of sales presentations, flyers, brochures, email templates, etc.

“Developers need to be very disciplined and proactive in their marketing efforts, tracking results and repeating anything that works,” explains West. “In a co- marketing arrangement, my personal preference is to work at a lower commission rate, but have a wonderful relationship with the developer—ideally, the developer provides the marketing budget, but I direct all the spending.”

7. Who else is providing sales support?

Some builders hire their own in-house sales team. Others rely heavily on the local brokerage community to bring in potential buyers. Either way, find out who else will be involved in the sales effort and how their compensation compares to what is offered in your co-marketing agreement.

Cobb says that reputable developers cultivate and then enjoy long-term relationships with real estate agents because they understand that agents are the established distribution channel for real estate. The relationships that agents have with their clients, and more importantly, the counsel they can provide to ensure a client ultimately owns the home or condo they want creates a win-win-win scenario for everyone involved.

8. What are the terms of your co-marketing agreement?

What is expected of both parties? What is your commission rate? When are commissions paid and how? Will fees be taken out of your commission for taxes owed to that country, or for international delivery? It’s always a good idea to seek legal review before entering any agreement, but this is even more important for cross- border arrangements where additional laws can come into play.

9. Can you accommodate my local license laws?

First, of course, you need to know what they are. Some states in the U.S. don’t allow agents to market an international project unless the developer submits an application, which must then be reviewed and approved by the licensing authorities. Talk to your broker and their legal department to get more details on what is permissible. (See the article on additional legal considerations concerning international brokerage and related real estate laws.)

10. Do you offer financing?

This can be a key advantage for buyers since there aren’t many traditional lending options. Additionally, if a developer is offering financing, it indicates financial stability and a build-out plan that doesn’t rely on sales flow.

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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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