It’s no secret - Chinese investors are at the top of everyone's "must-get" client list. We've heard ad nauseam how their economy is booming, their high net worth population is burgeoning, and they are investing millions of dollars in the United States economy, including real estate. I won’t bore you the statistics (but if you’re interested, check out NAR’s Profile of International Home Buying Activity – good stuff). In a session at the 2013 REALTORS® Conference & Expo, we got right down to business - how do U.S. agents find Chinese investors, and what should they expect once business is underway?
Some of the learning points:
- One common mistake made by agents seeking the affluent Chinese buyers: focusing solely on first tier cities such as Beijing, Shanghai, and Tianjin. Many second and third tier cities often have as many millionaires as the first tier cities, and they are not as saturated with agents vying for their attention.
- The Chinese love luxury brands - BMW, Porsche, and Audi have all created their own luxury brands just for China. It is very important to the Chinese to be able to show that they have the power and ability to purchase luxury. If you want to stand out in China, position your membership in NAR and CIPS as the luxury brands in real estate.
- Economists that measure consumption estimate that Chinese buying power is three times that of Americans. Their outbound investment was $87 billion - that's a 17% increase of money going out. Within 5 years, they will have invested $500 billion in overseas investment.
- One of the hottest industries in China is film/movies. They invested $5 billion to create a film studio that is much larger than anything in Hollywood, with the goal of creating 200 movies per year.
- By and large, the Chinese believe the United States is the best country in the world in which to invest. They see the value of home ownership. As one Chinese millionaire, Su, has stated, "In China, nothing belongs to you. Like buying a house. You buy it, but it will belong to the country 70 years later."
- The Chinese love to negotiate. Don't be surprised if they make a lowball offer on one of your listings. Unfortunately sometimes during the haggling it will go on so long you can lose the deal...it's their style and it's a process!
- Before heading to China to do business, check their holiday calendar. Their biggest holiday of the year is the Spring Festival (Lunar New Year), and it lasts about a week at the end of January/early February. China National Day is October 1, and again lasts for a week. The first three days of the week are national holidays. Don't expect to conduct business during these times.
How do Chinese buyers find properties overseas?
The answer is a toss up between friends and family that they know in the United States, and immigration companies in China. If they already have friends or family abroad, they are likely to go with their recommendations and move to the same area. If they don't, immigration companies are a logical resources since Chinese emigrants must go there first for their immigration papers. At this point, they are likely still looking for a place to live. Cultivating a strong working relationship with immigration companies can be a great referral resource.
Searching online works a little differently in China than it does in the U.S. and other parts of the world. Listing through Juwai is just a part of the process. Chinese buyers are intent upon finding the best agents, getting a good deal, and knowing you can complete the transaction. They aren't as familiar with our search engines, so they will find a reputable (again - think luxury brand!) real estate company to contact. The older generation of Chinese (which many of the millionaires are) will still look for listings in newspapers and magazines. The younger generation will look on the internet.
Also - agents don't have the level of prestige in China that they do in the United States. Buyers don't see the value of using an agent as much, even when searching in the U.S., because they don't understand the value. In China, they don't negotiate on behalf of their client...the buyer and seller work directly together on the negotiations. Exclusive listings don't exist in China, and neither does buyer representation. Mostly because of the leasing structure that has restricted ownership in the past, but it will change as these laws change. It is important to understand that real estate law is still not completely developed in China. Hong Kong has a sophisticated and intelligent real estate and legal system, but China does not yet.
How to reach Chinese buyers
Advertising is the way to go to reach Chinese buyers. Their social media structure is far different than in the U.S. (no Facebook!), so you'll want to think in terms of more traditional advertising channels. Internet, print, and TV advertising are still the best avenues to reach Chinese buyers. Go Reach China is a group (located in China) that offer support services to help get you in front of the Chinese.
An idea of the potential audience you will reach in each advertising channel:
Luxury magazines - 30,000 high net worth buyers
Television: 2.2 million viewers.
Internet/web coverage: 1.9 million
Expo booth: 5,000
Keep in mind, expos are very expensive. Television advertising is not nearly as expensive. You will have a smaller total potential audience reach at an expo, but the one-on-one connection can be very rewarding. You will have better luck reaching people in a second tier city at an expo -- they are saturated in the first-tier cities like Shanghai and Beijing. It is a good idea to attend an expo before taking out booth space. Get a feel for the expo - it's not expensive, and many will let you in free. If you like it and it seems good for your business, talk to Go Reach China -- they will help group together multiple real estate companies in one booth and help save you money.
Things You Should Know:
1. Know your property, inside and out, and how it looks on paper. Chinese are looking for ROI in commercial properties - make sure you have these numbers. If they want to buy residential, 50% of them are buying because they want to be near a university and prefer to own instead of rent.
2. When it comes to the country of China, don't bite off more than you can chew. It's huge, it's confusing, can be a maze! Narrow your geographic target area to one place, get a foothold in that market, then build from there.
3. Don't take uneducated risks or throw money away unless it's part of a plan. Make sure your plan is multi-pronged, sustainable, continuous, and affordable. The one-shot approach won't work - working in China requires a continuous presence. Go Reach China and China United can help you build plan.
4. How do you separate the lookers from the buyers? For example, buyers will ask for property tax rates, ask about property management, etc. If they aren't asking specific questions beyond the number of bedrooms and price, they are likely just looking.
5. Make sure your materials or method you are using is presented in Chinese style. It must be in the format and substance that is attractive to Chinese culture or it will be of no use. They like a lot of information - so sometimes it's not as clean or image-heavy as it is in Western culture. It should be bilingual. The example used in class was miamilp88.com.
6. Make sure you use all media available. China is huge - 1.4 billion people. They all find things in different ways, so going back to #3 - have a plan, and make it multi-pronged.
7. Truly high net worth buyers will never let you know who they are and what they are doing. They won't call and say "I found a mansion, I want to buy it." They will use a friend or referral contact, or they will spend time getting to know you and feeling out your business style. They will often buy anonymously.
8. Be available to field questions when leads come in intelligently. A call center won't work - have a professional who is skilled and has extensive knowledge to answer the frequently asked questions of Chinese buyers.
9. Work only with experienced and licensed professionals because Chinese prefer licensed and certified people. In China an agent doesn't have the same level of training as in the United States. Don't be afraid to explain designations and your specialties/expertise, how long you've been in business, and how many international transactions.
10. When a lead comes in, entice the Chinese buyer to come here. It is important to get them to come here and close the property. They won't buy it sight unseen.
11. Have complete knowledge of the colleges, universities, high schools, elementary schools in your area. Again, about half of the Chinese buyers are purchasing a home for their children while they are in school. Also know the job opportunities in the area if they are relocating the whole family.
12. Because of U.S. visa laws, most of them can't stay here for a long period of time. Only those with EB-5 visas can stay here permanently, and it's very popular in China. You'll want to have an expert in visa/immigration law available, but you should be knowledgeable enough to answer their basic questions.
13. Be ready to educate and explain the differences between U.S. and Chinese real estate transactions - for example, exclusive listings, title insurance.
14. Beware of buyers who are asking you to help them transfer funds out of China! There is a law that an individual can only transfer $50,000 out of China, and they will (or ask you to) get creative on finding ways around it. Make sure you decline, and say this is NOT your area of expertise. But when it comes time to complete the transaction, be clear that the source of the funds are good funds -- If you are involved in a transfer that is in violation of the exchange controls of a foreign country, you can be implicated in these violations.
15. Again - don't count solely on web listings. Many older-generation, high net worth Chinese are not searching listing sites for properties. Take a multi-media and multi-pronged approach - this can all be done for less than a plane ticket!