Canadians with US Properties – Great Time to Sell
Many US real estate agents don’t realize how much revenue Canadians bring into the US market every year. For example, in the state of Florida alone, Canadians bring in $6.5 billion in revenue every year. Wowza!
With inventory being insanely low in most states, Canadian who own properties in the US are a great source of leads for new listings. There are several reasons why Canadians should consider selling their US property right now.
US/Canada land border closing – The land border between our countries has been closed since mid-March and it is anticipated that it will stay that way until the end of this year (or longer). Canadian snowbirds (retirees with properties in the southern states) typically head south in November and spend the winter in the sunny south. This year, they won’t be able to do that. During the hot summer months, many snowbirds may not be thinking about selling their US properties, but once Fall arrives, their thoughts will turn to heading south. Having the conversation with them now about selling gives them time to process the idea.
Snowbirds are a high-risk population re: COVID – As you know, seniors, especially those with underlying health issues, are at greater risk of having a more severe reaction if they get COVID. For this reason alone, many snowbirds won’t be wintering south this year.
Health insurance – Canadians can currently purchase out-of-country health insurance for everything BUT COVID. Seniors can’t afford to travel to the US and risk getting COVID. If they catch they virus they will be restricted from flying while they are sick, and if they end up needing treatment in a US hospital, the costs would be financially devasting.
Great equity increases in the past 10 years – After the great recession of 2008, we started to see increases in US property values. For example, according to Redfin, the median house price in South Florida increased approx. 160% from the beginning of 2010 to the end of 2019. We had a short pause in the market this Spring due to COVID, but now the market has taken off again. More important than knowing macro numbers, you should intimately know the micro numbers for your community. Before you pick up the phone to call a Canadian property owner, research when they originally purchased their property and be able to clearly communicate how much their equity has increased since then.
Great exchange rate increases – Many agents forget that US/CAD exchange rates have a major impact on net proceeds from selling a house. To give you an idea, in 2010, the US dollar was trading at 1.03 CAD. That means a $100,000 house would cost $103,000 CAD. Right now, the US dollar is trading around 1.33 CAD. That means, without taking any equity increase into account, that same $100,000 house would net $133,000 CAD. That is a 30% increase in value just from the exchange rate. Add in the equity increase and Canadians couldn’t have a better time to sell.
When you contact Canadians who own properties in the US and you are trying to convince them that NOW is the right time to sell, you must be able to clearly articulate these five powerful selling points. If not, your conversion rate on your calls will plummet.
If you do convince them that the time is NOW, there are a few other considerations that you must plan for:
- Selling from a distance – The sellers must feel confident that you can market, sell and close their property without them being there. Remember, Canadians are very restricted in being able to travel to the US right now. You must have a plan in place for them to:
a) safely deliver the keys to you
b) do a virtual walkthrough to view the property with them
c) do a virtual listing presentation and explain pricing
d) digitally sign all required documents
e) close the transaction virtually
f) wire the funds to a Canadian bank account
g) cancel utilities and return equipment (e.g. TV and internet)
h) arrange a moving company to pack and ship everything - FIRPTA tax withholding – Many Canadians do not realize that the IRS requires a hold of 15% of the sale proceeds under the Foreign Investment of Real Property Tax Act to ensure the tax liability on the sale is covered. Make sure you advise your Canadian sellers to ask their accountant to apply to the IRS for a Withholding Certificate. Once the certificate is issued, it allows the title company to release the funds to the seller rather sending the funds to the IRS. The scope of FIRPTA is too complicated to cover in this post, but you should understand the tax implications when Canadians sell US properties.
How do you find contact details for Canadians who currently own properties in the US? Many real estate brokerages use a service like IMAPP or Realist which combines information from your local MLS and property tax rolls to search for property owners with Canadian addresses. Speak with your manager about which service is available in your area. I recommend sending the Canadian property owner a registered letter outlining the benefits of selling right now, and follow it up with a phone call a week later.
Chris Leader
President
Leader’s Edge Training