The Art of the Remote Deal: Tips & Tricks to Ensure Your Transaction Doesn’t Get Derailed
During times of uncertainty in the world, two constants have always been acknowledged. One, the US is one of the safest places in the world to invest money and two, real estate is a stable industry. Thanks to these two components, foreign investment has been entering the United States for years; but even more so due to recent inflation, the COVID-19 Pandemic, and the Russian-Ukraine war, which are causing a great amount of instability in economies throughout the world. The stability of the US market along with the strengthening of the dollar has made investing in real estate (in the US) an attractive prospect. The amount of foreign capital stammering to enter the US has created a unique opportunity for sellers in the country that are looking to get a premium for their assets; however, these types of transactions can pose some potential challenges which one should be aware of to ensure a transaction isn’t derailed prior to closing.
Remote closings – For buyers outside of the US, that are unable or unwilling to travel to the city of purchase, the property closing must take place at the US Consulate’s office in the buyer’s location. It’s recommended that an appointment be made at the consulate's office at least one month prior to the closing date, although specific lead times will vary by country. Notaries will be on staff at the consulate’s office for document certification. Failure to secure an appointment with the consulate’s office is the number one cause for delayed closings.
Wire transfers – Title companies are responsible for large funds trading hands every single day and, as a result, are the number one target for fraud. While most countries will send payments via a wire within a few days, lead times depend on the country of origin, with those most hostile to the US requiring more time. If the buyer is based in an unfriendly country, the seller should anticipate additional delays as the US government vets the organization. Any wire that is delayed for more than five business days should serve as a major red flag to the seller and is a potential scam.
Communication is key – The typical commercial real estate transaction takes approximately 60 – 90 days, but with international remote closings, it can take longer. Ideally, both the buyer and seller understand the need to communicate with all parties in greater detail to ensure the credibility of both parties and keep the deal moving forward with as few delays as possible. Consistent communication provides the seller and buyer a peace of mind that a deal can go forward in the instance that one of the two parties is not in person. Additionally, more time is needed when communicating with parties around the world depending on their time zone.
Expect the unexpected – Buyers and sellers should always anticipate the unexpected and should have a backup plan in case things fall through. For buyers, be aware that with too many delays and not enough communication, the seller may move to someone else.
In a world that has adapted to going virtual for virtually everything, it’s not only more convenient but also potentially more lucrative to open real estate transactions to buyers and sellers located anywhere on the globe. Anticipating potential issues and creating a solid plan of action will mitigate the potential pitfalls and allow investors to reap the benefits of this phenomenon.
By: Mike Spears
Mike Spears, SIOR, CCIM is a Managing Principal at Lee & Associates–Houston. He has established a remarkable career spanning over 22 years with more than $1.5 billion in transactions. He specializes in the greater Houston area, with a focus in industrial property, land, and investment sales.
Lee & Associates - Houston is a fully-integrated, commercial real estate company. Our business-minded brokers specialize in office, industrial and land real estate investments. As the fastest-growing, broker-owned firm in the nation, we are uniquely qualified to support our clients’ needs in the local, national and international markets. To learn more visit www.lee-associates.com/houston.