ASIA’S REAL ESTATE MARKETS
A LOOK AT RISING REAL ESTATE PRICES IN
MUMBAI, SHANGHAI AND HO CHI MINH CITY WINTER 2011
EB-5 Visa, a Practical User Guide Asian American Homeownership Update Impact of Loan Modifications on Credit Scores and more...
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WINTER 2011 VOLUME 2, ISSUE 4 ON THE COVER: Mumbai (photo: iStockphoto/nstanev),
Shanghai (photo: iStockphoto/xxz114) and Ho Chi Minh City (photo: iStockphoto/ahnhuynh), three of Asia’s hottest real estate markets
Asia’s Real Estate Markets Leap Ahead
Asian American Trends
The Immigrant Investor EB-5 Program
Real estate prices climb in three of Asia’s hottest cities, but experts caution investors to understand what they are buying By Helen Kaiao Chang
A summary of key statistics that impact Asian American homeownership
A practical guide for real estate professionals By Jared Leung
2010 NAHREP/AREAA Real Estate & Marketing Conference Recap and photos from the national conference and installation gala in Las Vegas
Navigating into the New Year
D E PA R T M E N T S 22
Separating Truth from Rumor By Barrett Burns
Tips for Maintaining Good Credit in 2011
Suggestions to help your clients be proactive as they rebuild or maintain their credit scores By Glenda Gabriel
From the Editor
Ask Dr. AREAA
Overcoming Language Barriers
International Real Estate and Beyond Education is key to serving the growing international home buyer population By Ryan Asao
A message from AREAA Chair Kenneth Li
How Mortgage Modifications Affect Consumer Credit Scores
Due Diligence Before Buying Commercial Real Estate
Addressing potential pitfalls in environmental assessment By Mingyi Kang
Leaping forward in the Year of the Rabbit
Our multi-talented expert answers readersâ€™ questions from around the industry
...and closing business. An update on multicultural real estate marketing By Gary Sanders
Around the Association
Summaries and photos from recent local events, including the AREAA Inland Empire kickoff and installation
“Like” AREAA on
FROM THE EDITOR Leaping Forward 2011 brings us the Year of the Rabbit. The rabbit is thought to bring a period of calm and stability to our environment. After the past four years of turbulence, a little respite from the “housing storm” would certainly be a welcomed change to us all. However, how realistic is it to expect a time of tranquility in 2011? As we closed out 2010, economic and housing indicators painted an uncertain path towards a full housing recovery. While sales of previously owned homes have increased, distressed sales still represent approximately one-third of all real estate transactions. Although economists have called the longest recession the country has experienced since World War II officially over in June 2009, consumers are still feeling uncertain about their economic future. This consumer angst is not surprising with the unemployment rates still hovering near 10% and with continued discussions about a double dip recession. To not only survive but prosper in this market, we need to act like a rabbit. Rabbits are known for their patience and agility. We need to remain patient in this market and not react to every economic data report that is published. However, we need to stay nimble and be creative about what we are doing to achieve our long-term personal and business goals. AREAA members certainly have the benefit of being a part of a dynamic and diverse real estate market that will only grow and strengthen in the years ahead. To maximize this market opportunity however, we need to stay nimble and “think forward”. In order to truly leap ahead of the competition, we need to understand the evolving business strategies, global dynamics and policy environment that are fundamentally reshaping our industry. One area of focus that many times we overlook is the political and regulatory impact to our business. This is a big reason why AREAA and our fellow multicultural trade organizations (NAHREP and NAREB) are once again putting together the industry’s best policy conference focused on giving our members the tools and information they need to distinguish themselves in this market. Lastly, I am excited about this issue of a | r | e magazine and its focus on three dynamic real estate markets in Asia. When
times are tough, people tend to look inwards and become protective. As AREAA members, we understand and embrace the power and potential of the global real estate economy. Thatâ€™s why AREAA and our Chairman Kenneth Li will be spending more time and effort focused on connecting AREAA real estate practitioners to overseas markets.
WINTER 2011 VOLUME 2, ISSUE 4 EDITOR-IN-CHIEF Jim J. Park
There is an old Chinese saying that says one cannot get to the other side of a chasm by taking two steps, rather it requires a giant leap forward. It certainly would be nice to be a rabbit when you need to take that leap.
CREATIVE DIRECTOR Praveen K. Sharma Jim Park Editor-in-Chief a | r | e Magazine
A S S O C I AT E EDITOR Meredith Magee
EDITOR Dan T. Shanyfelt EDITORIAL BOARD Shen-Yi Michelle Chang Ivan Choi John Fukuda
is a publication of the Asian Real Estate Association of America (AREAA), a national nonprofit trade organization dedicated to increasing sustainable homeownership in the Asian American community. For more information visit: http://areaa.org. ÂŠ2011 by the Asian Real Estate Association of America. Reproduction in whole or part without permission is prohibited. Opinions expressed by individual authors are not necessarily the opinions held by AREAA. Direct article submissions and advertising inquiries to: Praveen Sharma | email@example.com Office: Asian Real Estate Association of America 5963 La Place Court, Suite 312 Carlsbad, California 92008 760-918-9162 Phone 760-918-6924 Fax
N A H R E P / A R E A A 2 0 1 0 R E A L E S TAT E AND MARKETING CONFERENCE
he 2010 NAHREP/AREAA Real Estate and Marketing Conference was held October 10-12th at the Bellagio Resort in Las Vegas. The event was attended by a record number of real estate professionals representing the Asian American and Hispanic communities. Keynote speakers included: Barbarba Desoer, President, Bank of American Home Loans; Senate Majority Leader Harry Reid (D-NV); Congressman Xavier Becerra (D-CA); and FHA Commissioner David Stevens. Notable highlights of the event were the presentation of the AREAA Person of the Year Award to Jim Park, the installation of 2011 AREAA Chair Kenneth Li, and recognition of the 2010 AREAA â€œAâ€? List. Photos by Ken Jacques
1. Bank of America Home Loans President Barbara Desoer 2. Betty Sun Wong, Kathy Tsao and Shen-Yi Michelle Chang 3. Kenneth Li, boxing great Fernando Vargas, Alex Chaparro and Carmen Mercado kickoff the conference expo 4. Congressman Xavier Becerra (D-CA) 5. Newly installed board members Dawn Tsien, Shen-Yi Michelle Chang, Ivan Choi, Song Hutchins, Christine Kim, Andrew Lee, John Lee, Cindy Lui, Charlie Suh and Lidia Yun 6. Senator Harry Reid (D-NV) 7. Alex Chaparro, Phil Bracken, Kathy Tsao, Carmen Mercado and John Fukuda 8. Chairman Kenneth Li 9. AREAA Person of the Year Jim Park and family, with Allen Okamoto 10. The 2010 AREAA â€œAâ€? List recipients: Mark Chu, Dan Shanyfelt, David Tran, Christine Kim, Diana Buonincontro, Caron Ling, Phi Nguyen, Kayin Ho and Alex Wang (not pictured: Max Kim, Penny Liu, Rob Mehta) 11. FHA Commissioner David Stevens
NAVIGATING INTO THE NEW YEAR
t is my honor to serve as your Asian Real Estate Association of America (AREAA) chairman of the board for 2011. I am sure it is going to be an exciting year for our residential and commercial members. Our board members, committee chairs and co-chairs, chapter leaders, and staff have been working on their goals and plans to serve our members and enhance more opportunities and benefits to the communities we serve. We added a national default services committee and commercial committee, as well as expanded the scope of the international committee to provide our members with new business networking opportunities. AREAA will host our fall conference in San Francisco on Sept 29-Oct 1 and the host committee has been hard at work to make it our best event yet. The chapter development and membership committees are working hand-in-hand to continue forming new chapters across the nation and attract new members. The policy committee is working on the housing, lending and possible immigration issues that will benefit our communities, especially recommendations for our members to discuss with lawmakers. During the Multicultural Real Estate and Policy Conference, March 3-4 at the Ritz-Carlton in Washington DC, theEDGE, AREAA Young Professionals, has rolled out plans of activities that will help local chapters to recruit more new professionals to our organization. The digital media and technology committee is working on webinars...and on and on. It is amazing to have so many volunteer leaders head these committees. The support and participation of our members will be the key to the success of
the goals and plans that each committee sets. You are welcome to contact your chapter leaders and our national staff with any suggestions, involvement and comments. I would like to thank Jim Park, AREAA president; our staff; our past chairs: Allen Okamoto, John Wong, Emily Fu, Allen Chiang and John Fukuda; as they are always available to help and support me and serve our organization along with our board members. I look forward to working with the entire AREAA team to ensure that we continue to provide our members services to achieve our goals and help our communities. You are always welcome to contact me at KLi@areaa.org with your comments and ideas. Wish you all a prosperous and wonderful new year. Kenneth Li AREAA Chairman
a | r | e is the official publication of the Asian Real Estate Association of America. AREAAâ€™s national leadership includes:
Executive Board of Directors
Board of Directors
Kenneth Li, Chairman Kathy Tsao, Chair-Elect John Fukuda, Immediate Past Chair Allen Okamoto, Founding Chair John Yen Wong, Founding Chair Jim Park, President Shen-Yi Michelle Chang, Treasurer Lidia Yun, Secretary
Allen Chiang Ivan Choi Louis Gonzalez Eva Hom Song Hutchins Paul Imura Christine Kim Mark Kitabayashi John M. Lee
Andrew Lee Cindy Lui Allyson Powers Charlie Suh Dawn Tsien Fred Underwood Maria Valentin Sandy Wood
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©2010 Prudential Financial, Inc. and its related entities. Prudential Real Estate brokerage services are offered through the independently owned and operated franchisees of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, used under license. Equal Housing 1Prudential Real Estate Affiliates, Inc. received the highest numerical score among full service real estate firms for home Opportunity. sellers in the proprietary J.D. Power and Associates 2010 Home Buyer/Seller StudySM. Study based on 3,096 total evaluations measuring five firms and measures opinions of individuals who sold a home between March 2009 and April 2010. Proprietary study results are based on experiences and perceptions of consumers surveyed March-May 2010. Your experiences may vary. Visit jdpower.com. 2Average Sales Price is based on an analysis of transaction sides and sales volume data of the largest independently owned brokers in the U.S. for franchise networks recording at least 25,000 closed transaction sides in 2009, as reported in the 2010 Real Trends 500.
DR. AREAA O U R M U LT I -TA L E N T E D EXPERT ANSWERS YOUR R E A L E S TAT E Q U E S T I O N S
DearÊ Dr.Ê AREAA, Iʼm representing a seller on their house. I have done everything I can, but the house is just not selling. I suggested that the seller reduce the list price, but they do not want to do that. With spring only three months away, the seller wants to take the
property off the market and put it back on in the spring. What should I do? - Winter Blues (Raritan, NJ) Dear Winter Blues,
Your situation depends on the strength of your particular market. Typically the winter months are slower and many sellers get a jump on the spring surge by listing their homes in February or early March. With interest rates being historically low, serious buyers are looking NOW, and those are the people you want to attract. No one really knows where the market will be in a few months. Taking the house off the market now and putting it back on later is a gamble. There are two reasons why a house does not sell, regardless of the time of year: 1) Marketing, and/or 2) Price. If you’ve truly
done everything possible to make the property attractive and marketed it well, then your only choice is to reduce the price. You’ll need to have that difficult, awkward talk with your seller. Show the seller the most current comparables and provide hard evidence that the list price is just too high. I know you can do it…now go out and sell that house! DearÊ Dr.Ê AREAA,
Should I stage my clientʼs house in this market? Does it really make a difference? - Staging is Superficial (San Diego, CA) Dear Staging is Superficial, In a word, YES! You should stage the house. Putting a home on the market is like going on a proverbial first date. First impressions begin from the moment a potential buyer pulls into the driveway. Staging the home is certainly a very good option in this market and it makes a huge difference when competing with the variety of distressed properties that are most likely empty and/or dilapidated. It is important that your listing has
exterior curb appeal: freshly cut grass, appealing landscaping and some colorful owers. A clean, staged, clutter-free interior helps potential buyers visualize what the house will look like with their own personal touches. Staging can definitely make a difference. Before an open house, give the house a warm and inviting feeling by lighting a neutral scent candle that is not too overpowering. The effort that you put into preparing the home for sale will pay off in the increased number of interested buyers. Dear Dr. AREAA, My client bought a house in 2006 with $100,000 as a down payment. He canĘźt afford to keep
making the monthly payments and the value has declined dramatically. Can he refinance? Will any government programs allow him to get his down payment back, even if the value of the house is less than what he bought it for? Help. - Swimming Underwater (Riverside, CA) Dear Swimming Underwater,
Unfortunately if the value of the home is less than what it was purchased for minus the down payment, then your clientâ€™s down payment is lost and more than likely, your client will not be able to refinance. I know you want to be helpful, but I would simply advise your client to contact his mortgage company at the number listed on his monthly statement. They may have some good options for your client. Or have your client visit www.hopenow.com for additional options. Dear Dr. AREAA, We are a young couple who are first time homebuyers with good credit and modest income. We are afraid of being tricked or pressured into buying a house right now but really want to take advantage of the affordable prices. Should a couple like us be embarrassed about going into a real estate office to ask questions? Can we
interview more than one Realtor? - First Timer (Cupertino, CA) Dear First Timer, Itâ€™s so nice to get a consumer question mixed in with all the real estate practitioner questionsâ€Ś
No need to be embarrassed AT ALL! Just remember whoâ€™s the boss: YOU. Ask as many questions as necessary to make you feel confident about moving forward. In fact, I highly recommend that you speak with several agents until you choose the one with whom you feel the most comfortable. If someone makes you feel uncomfortable, walk away. Remember that YOU call the shots and everyone wants your business. You are making one of the most important and largest financial decisions of your life. Ask your friends, family and co-workers about which Realtor helped them to buy their house. Not only should the Realtor have strong credentials and a lot of glowing references, but they should specialize in your local market area. In your case it would be helpful if the Realtor specializes in first time buyers as well. Make sure you choose someone who is experienced enough to guide you through the process and most importantly, make sure you are comfy with them. Good luck! Dear Dr. AREAA,
I keep running into home buyers with scores on the low end. Just the
other day, I had a buyer whose credit score was 615. Can my client get a home loan? - Credit Challenged (San Francisco, CA) Dear Credit Challenged, Where credit is concerned, FICO score alone does not a mortgage make. A prospective borrower is qualified based on income, reserves (in the form of cash or other fairly liquid assets), amount of credit currently being used and credit FICO scores from the three major bureaus (i.e. Experian, Trans Union, Equifax). Borrowers need to speak with multiple reputable lenders whether itâ€™s one of the large banks or an independent mortgage banker. Lately mortgage brokers have gotten a bad rap, but they can be very helpful too. A banker or broker can give you a definitive answer aer reviewing the borrowerâ€™s entire financial situation. Prequalifying buyers in this manner can save a lot of time and energy and ultimately, lead to a happier buying experience for your client. I hear that AREAA broker and banker members provide really great lending products and services. Dear Dr. AREAA,
What exactly is a HUD Home?
I heard a lot of my fellow AREAA members tried to
become listing brokers with HUD to sell properties.
Did I miss a big business opportunity? Is it too late? - Fresh Off the Boat (Las Vegas, NV) Dear Fresh Off the Boat,
an explanation of the entire process and the necessary certifications. So where HUD Homes are concerned, get out there and make it happen! Talk to your fellow AREAA real estate practitioners and close the homeownership gap for as many Asian Americans as possible!
You have asked some very good questions. It is difficult to answer in a few paragraphs because there is a lot to say about HUD Homes, but Dr. AREAA will give it a shotâ€Ś HUD Homes are REO properties that are administered by HUD (the U.S. Department of Housing and Urban Development). Similar to banks, HUD will ultimately assign these REO properties (aka HUD Homes) to individual listing brokers to list and sell. HUD Homes are competitively priced and many special programs exist for all types of buyers. Due to the number of brokers clamoring for a HUD Homes REO account, it is tough to become a broker with HUD. However, you have an amazing opportunity to bring and represent buyers. Many AREAA local chapters are presenting seminars on the listing and selling of HUD Homes, including
Central California Investment Properties Dan T. Shanyfelt
Broker (License #0186-6121)
ills of th market e you dow got n your qu ? send f o r D r. e s t i o n s AR dr@are EAA to aa.org
DUPLEX - 10.5% CAP* - $89,000
TRIPLEX - 10.4% CAP* - $139,000
Fully rented duplex in Bakersfield, CA. Professionally managed. $12k gross income, 7.4 GRM. 2+1 in front, 1+1 in back. New roof on back unit. Large lot. Long Term Tenants. Possible seller carry.
Fully rented triplex in Bakersfield, CA. Professionally managed. $18,600 gross income, 7.5 GRM. Three 2-bedroom units. New 1-year leases on all units. Low vacancy area.
FOURPLEX - 16.5% PROJECTED* - $112,000
MIXED USE RETAIL + TRIPLEX - 6.8% CAP - $299,000
Fourplex in strong rental market. All units are 2+1. Needs $18k in rehab costs. Projected rents of $575/unit. Professional property and project management available.
1000 ft2 retail space (3 units) on heavy traffic arterial street. Triplex in rear with one 2-bed, and two 1-bed units and covered parking. Fully Rented. Professionally managed. Close to freeway. Adjacent to new construction shopping complex with multiple national anchor tenants.
www.CentralCalCashFlow.com dan@CentralCalCashFlow.com Phone: (661) 679-7698
* All calculations are based on 5% vacancy and 18% expense ratio. Seller to pay 3% cooperating broker commission on successful close.
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TIP S FOR M AINTAINING GOOD CR E DIT IN 2011 BY GLENDA GABRIEL
W I T H T H E H O L I DAY SEASON OVER , YOUR C L I E N T S M AY B E LO O K I N G AT H O W TO PUT THEIR FINANCES BACK IN ORDER. THE S TA R T O F A N E W Y E A R IS THE PERFECT TIME TO R E E VA LUAT E O N E ’ S FINANCIAL GOALS, PA R T I C U L A R LY W H E N IT COMES TO M A N A G I N G C R E D I T.
Bank of America offers easy-to-follow tips for improving and maintaining credit to help customers stick to their financial resolutions all year long, enabling them to work towards sustained homeownership. Together, we can be educators for potential homebuyers who can become long-term customers. The first step in communicating the fundamentals of credit is helping your clients understand what goes into a credit score, also known as a FICO score. Past payment history (typically spanning the previous seven years), the number of credit obligations (credit card balances, mortgage and car payments, etc.), and the amount of credit that is available are all factors in calculating this score. While employment history is not taken into account, a Chapter 13 or Chapter 7 bankruptcy can stay on one’s credit report for 7 or 10 years, respectively. Taking control of and being responsible in these areas will set customers on the path to good credit, which is generally denoted by a FICO score of 700 or above.
By partnering as advisors with the customer’s best interest in mind, we can build trust and our reputation among those we serve. Here are some additional suggestions you can share to help your clients be proactive as they rebuild or maintain their credit scores: ■
Overspend during the holidays? Break the habit now. A study by Metropolitan Life Insurance Company found that nearly half (47%) of Asian Americans believe their personal situation will improve this year.* Make the belief a reality by committing to only charge what you can afford to pay back at the end of each month. If you have missed payments, get current and stay current. It can take time to establish or rebuild credit, but only 30 to 90 days to tarnish a good credit status. Develop a budget. Determine how much you can comfortably and reasonably spend on necessities while leaving room for the
incidental expenses that arise, as well as some planned extras. Review your credit report. You can obtain a free copy of your credit report from each of the three credit agencies—Experian, TransUnion and Equifax—once per year. This overview of your financial history can be viewed by creditors, employers, landlords and insurance companies, so check it thoroughly for errors and report any you find promptly so that your credit score is not affected. Don’t open new credit cards that you don’t need just to increase your available credit. Nearly two in three Asian Americans reported having at least two credit cards, while just 19 percent of Asian Americans reported not having a credit card.** Finding the right balance is key to your credit health. Pay off debt rather than moving it around. If you are new to managing credit—for instance, if you are just entering or graduating from college—don’t open a lot of new accounts too rapidly. Commit to limits on your credit usage.
For more information, you and your clients can visit Bank of America’s website, http://learn.bankofamerica.com/managing-credit/. Other valuable resources include FICO (www.myFICO.com) and the National Foundation for Credit Counseling (www.nfcc.org).
NEIGHBORHOOD LENDING EXECUTIVE, BANK OF AMERICA HOME LOANS As the Neighborhood Lending Executive, Glenda Gabriel is responsible for identifying opportunities to drive homeownership among low-to-moderate income borrowers, minorities, immigrants and underserved communities across the nation.
RESOURCES BANK OF AMERICA h t t p : / / l e a r n . b a n k o f a m e r i c a . c o m / m a n a g i ng- credit/ FICO w w w. m y F I C O. c o m N AT I O N A L F O U N DAT I O N F O R C R E D I T C O U N S E L I N G w w w. n f c c . o r g
*Source: Asian Journal, November 15, 2010
**Source: FINRA Investor Education Foundation, "Financial Capability in the United States," December 2009, via CreditCards.com
ASIAN A M E R IC AN T R E N D S FOLLOWING THE PATH
TO HOMEOWNERSHIP THE FOLLOWING ARE HIGHLIGHT EXCERPTS F R O M A R E A Aâ€™ S L A N D M A R K S T U DY C O N D U C T E D WITH THE UCLA ASIAN AMERICAN STUDIES CENTER. A COMPLETE VERSION OF THE S T U D Y I S A V A I L A B L E A T W W W. A R E A A . O R G
HOMEOWNERSHIP In 2005, the homeownership rate of Asian Americans (59%) lagged behind the total population (67%) at the national level. Interestingly in 2008 and 2009, the homeownership rate of Asian Americans (59%) has fallen to the 2005 level after increasing to 60.3% in 2007.
Several Asian American ethnic groups experienced an increase in their homeownership rate between 2008 and 2009: 2008
However, the homeownership rate fell for others between 2008 and 2009: 2008
POPUL ATION GROWTH »
Estimates for 2009 indicate that the Asian American population continues to grow rapidly, increasing to 15 million or 5% of the total U.S. population.
In 2009, the largest Asian American groups were: Chinese (3.8 million), Filipinos (3.2 million) and Asian Indians (2.8 million).
TOTAL U.S. POPULATION
More than half of the Asian American population lived in just four states: California (33%), New York (9%), Texas (6%) and New Jersey (5%).
In 2009, the three metropolitan areas with the largest number of Asian Americans were: › Los Angeles-Long Beach-Santa Ana, CA Metro Area (1.9 million) › New York-Northern New Jersey-Long Island, NY-NJ-PA Metro Area (1.9 million) › San Francisco-Oakland-Fremont, CA Metro Area (1 million)
METROPOLITAN AREAS WHERE THE ASIAN AMERICAN POPULATION GREW MORE THAN 20% BETWEEN 2005 AND 2009
+27% LAS VEGAS-
FORT WORTHARLINGTON, TX
+24% ATLANTA -
SANDY SPRINGSMARIETTA, GA
SAN BERNARDINOONTARIO, CA
SUGAR LANDBAYTOWN, TX
INCOME AND HOUSEHOLD SIZE Across the board, the household size of Asian American homeowners (except for Japanese) is larger than the household size of the total population. Asian American households also have higher median incomes than the total population, but Asians are more likely to have multiple wage earners living in a household and contributing to the overall household incomes. The MSAs with the highest Asian American median household incomes in 2008 are:
The MSAs with the lowest Asian American median household incomes in 2008 are:
Washington-Arlington-Alexandria, DC-VA -MD-WV Metro Area
Sacramento-Arden-Arcade-Roseville, CA Metro Area
San Francisco-Oakland-Fremont, CA Metro Area
Las Vegas-Paradise, NV Metro Area
Chicago-Naperville-Joliet, IL-IN-WI Metro Area
Los Angeles-Long Beach-Santa Ana, CA Metro Area
However, Asian Americans tend to have lower median per capita or individual incomes than the total population. The MSAs with the highest Asian median per capita incomes in 2008 are:
The MSAs with the lowest Asian American median per capital incomes in 2008 are:
Washington-Arlington-Alexandria, DC-VA -MD-WV Metro Area
Sacramento-Arden-Arcade-Roseville, CA Metro Area
San Francisco-Oakland-Fremont, CA Metro Area
Las Vegas-Paradise, NV Metro Area
Chicago-Naperville-Joliet, IL-IN-WI Metro Area
Los Angeles-Long Beach-Santa Ana, CA Metro Area
CITIZENSHIP Asian Americans have a much higher rate of foreign born population than the total U.S. population. Âť
In 2008, the Asian American foreign born population was 60% versus 40% who were native born. The total U.S. foreign born population was 12%; versus 88% who were native born
The difference is particularly striking for states with the highest Asian population.
Source: U.S. Census Bureau, 2008 American Community Survey
L ANGUAGE SPOKEN AT HOME AND ABILITY TO SPEAK ENGLISH A sizeable proportion of Asian American households speak a language other than English at home: » » » »
United States (71% in 2009) California (72% in 2009) New York (79% in 2009) Texas (80% in 2005; 76% in 2009)
Across the board, Asian American households spoke a non-English language in much greater percentages compared with the total population. »
LANGUAGE CHARACTERISTICS 2009 Total Population Language Other Than English
Speak English Less Than “Very Well”
Asian American Language Other Than English
Speak English Less Than “Very Well”
Source: U.S. Census Bureau, 2005, 2009 American Community Survey, Selected Population Profiles, S0201
In 2009, there were five among the thirteen metropolitan areas included in the study, where a significant proportion (at least 35%) of Asian American households had limited English proficiency (LEP). Los Angeles had the largest percentage of LEP Asian households (39%), followed by New York (39%), and Houston (36%).
The three metropolitan areas which had the smallest percentage of LEP Asian households were Las Vegas (29%), Riverside (29%), and Sacramento (31%).
An LEP rate of 25% or more represents a great disparity in language ability between the Asian population and total population.
T H E P R E C E D I N G E X C E R P T S A R E F R O M A R E A A’ S L A N D M A R K S T U DY C O N D U C T E D WITH THE UCLA ASIAN AMERICAN STUDIES C E N T E R . A C O M P L E T E V E R S I O N O F T H E S T U D Y I S A V A I L A B L E A T W W W. A R E A A . O R G .
HOW MORTGAGE MODIFIC ATIONS AFFECT CONSUMER CREDIT SCORES S E PA R AT I N G T R U T H F R O M R U M O R BY BARRETT BURNS
n recent testimony before the Congressional Oversight Panel, Phyllis Caldwell, head of the Treasury Department's homeownership preservation office, told legislators that the primary reason the housing crisis continues is “due to borrowers (with) standard mortgages becoming unemployed or under-employed.”
As tough economic times continue for many, both the U.S. government and mortgage lenders offer various programs aimed at helping homeowners better manage their mortgage debt and meet monthly mortgage payments, ultimately hoping to stem foreclosures and keep families in their homes. These programs include forbearance and refinance programs, the Making Home Affordable Program, as well as Fannie Mae and Freddie Mac streamlined loan modification programs, among others, including servicers’ loss-prevention programs. The overall intent of almost every program is to lower the homeowner’s monthly payment so that it is more affordable and sustainable. This can be accomplished in a number of ways – reducing interest rates, forgiving principal, recapitalization, term extension or a combination of these methods. According to a recent Home Affordable Modification Program report, about 1.4 million modifications have been started under the plan since spring 2009 and while more than 50 percent have been cancelled, many other homeowners have benefitted from the program. Additionally, a recent
Treasury Department monthly scorecard shows about 483,000 borrowers have received permanent loan modifications and are still making payments through the Making Home Affordable Program as of October 2010. While not a panacea for all borrowers, loan modifications can help some homeowners from falling into foreclosure and prevent serious damage to their credit score. Where possible, consumers and lenders should actively seek out loan modifications before a severe delinquency appears on a credit file. Late payments always have a far greater impact on a credit score than a loan modification. But many sources, including politicians and personal finance experts, often cite how much damage a loan modification will do to a credit score, so it’s difficult for most consumers to know what to believe. Consumers, lenders and regulators alike are wondering how mortgage-related actions such as modifications, short sales, foreclosures or bankruptcies impact consumers’ credit profiles and, especially, their credit scores. The answers may lie in a recent study that examined the initial impact to a consumer’s credit score and the results, in some cases, refute some recent media reports. HOW THE STUDY WAS CONSTRUCTED Given the relative newness of some of the loan restructuring programs, long-term consumer performance in response to these modifications remains to be seen. However, the initial impact to a consumer’s
credit score (based on the VantageScore credit score range of 501-990) can be effectively modeled by analyzing restructured mortgage scenarios on consumers’ credit profiles. To calculate this impact, four representative samples of homeowners were extracted from a national database and their consumer credit profiles changed to reflect a given mortgage restructuring program or event.1 Consumer Profiles All mortgage scenarios are evaluated on four consumer behavioral profiles: 1. Population One: Consumers with clean credit files (presently current and no delinquency that has ever been greater than 30 days on any trade in the past). 2. Population Two: Consumers with first mortgage in clean status, other delinquencies are present. 3. Population Three: Consumers are delinquent on the first mortgage, no other delinquencies are present. 4. Population Four: Consumers with delinquencies on the first mortgage and a delinquency on at least one other account. Approximately 100,000 consumers were randomly selected for each population according to the above criteria. For every mortgage scenario, the following was conducted: The average credit score was calculated for each population before any changes were made, which was noted as the starting score in the results table (appears later). Relevant account fields in the credit file were edited to reflect the scenario designs, and the credit score was recalculated after the changes were made.
Personally identifiable information was removed from the consumer data prior to the data being furnished to VantageScore Solutions. VantageScore Solutions does not have nor maintain consumer credit files with personally identifiable information.
The resulting scores were compared to the starting score and the differences between the starting score and the new score were reported. Scenario Design The study examined the impact to credit scores from forbearance and mortgage modification programs on consumers’ credit scores, along with three other events homeowners potentially face if unable to make timely mortgage payments: short sale, foreclosure, or bankruptcy. Forbearance Programs Under forbearance programs, generally, the borrower is permitted to make either substantially reduced monthly payments or postpone making monthly payments altogether during the forbearance period. There are typically three types of forbearance programs: interest only, reduced payment, and deferred payment. Therefore, three scenarios were created that reflect these three forbearance types. For the purposes of this study, the interest-only scenario was evaluated by reducing the monthly payment amount to 25 percent of the original monthly payment amount. The reduced payment scenario was structured as 50 percent of the original monthly payment. No payment was made under a deferral program. Loan Modification Programs Despite diverse eligibility requirements,
mortgage modification programs generally drive toward one of two results:
and where the original loan was closed and a new loan was created with the new terms.
Principal Forgiveness. Lenders agree to forgive part of the original principal, thus alleviating consumers’ debt burden by reducing the balance and resulting in a lower monthly payment. To reflect a principal forgiveness in the study, the current balance was reduced by 10 percent from the original current balance and the resulting monthly payment and term length were adjusted. For purposes of the study, forgiven principal was not recorded as a partial charge-off by the lender, rather, it was recorded as a derogatory event and the score impact was similar to that of a short sale or foreclosure.
Analysis of historic mortgage loan size and monthly payment profile show that the 10-percent principal forgiveness and the 10-percent recapitalization scenarios aligned with consumers whose mortgage payments have not been made for six months. Therefore, the 10-percent scenario is a reasonable assessment of today’s environment.
Recapitalization. Fees and/or past due amounts can be recapitalized, resulting in an increase in the principal after refinance or loan modifications. As a component of the recapitalization, the loan terms are often extended and or interest rates are reduced, thereby lowering the monthly payment. Under recapitalization in the study, the original loan amount was increased by 10 percent to reflect the recapitalizations of fees and past due amount. Both scenarios were modeled under two configurations; where the new loan details overwrote the existing account so that the original age of the loan was maintained,
Short Sale, Foreclosure and Bankruptcy In some cases, consumers face extreme financial situations (job loss or severe income reduction) and simply cannot afford to continue paying their mortgage. This can lead to short sale, foreclosure (including all variations, such as deed-inlieu of foreclosure), or bankruptcy and these events have significant impact on consumers’ credit scores. This study also considered these events and their implications to a credit score. The results in the table below are best viewed with an understanding of three aspects of the credit score formula: 1. ‘Utilization’ and ‘Available Credit’ are variables in the algorithm. Given the same outstanding balance, a higher credit limit results in lower utilization, which indicates the consumer has greater access to credit. Generally speaking, lower utilization and higher available credit combine to positively
impact a consumer’s score. 2. The credit score will reward consumers who have maintained an active account in good standing for a long period of time. 3. A positive impact also occurs when the greater proportion of outstanding debt in a consumer file is a large, stable debt, such as a real estate loan. Finally, as the study’s results are reviewed, it’s important to remember that the final design of any mortgage restructuring, including whether or not the lender reports a partial charge-off (c/o), is a function of the negotiation between the lender and the consumer.
Since delinquent populations already have negative reporting in their credit profile, adding an additional delinquent event was not as serious as changing from a clean profile to a delinquent profile. For example, as reflected in the table, the short sale scenario reduced the credit score of the “all clean” population by 130 to 120 points but only 25 to 15 points for the population who have delinquency on all accounts (first mortgage delinquent, other accounts delinquent).
STUDY RESULTS - IN DETAIL
CONSUMER SCORE REHABILITATION
As seen in Table 1, the first two forbearance cases had no impact on scores since the consumer still had an open/active mortgage loan and was still paying on time (just with reduced monthly payment amount). In the third forbearance case, where no payment was made during the forbearance period, the account was considered “paused” and therefore excluded from open account calculations that would normally be used in generating a score, lowering the score by 30 to 40 points.
A final analysis was run to demonstrate a score rehabilitation process after implementation of one of the mortgage restructuring events (such as loan modification). The intent of this analysis was to provide a general guideline for the time required for a consumer to restore their score to a reasonable credit tier after having become
For loan modifications that involved principal forgiveness, the partial forgiveness of principal reduced the consumer’s overall utilization level, helping the score. This remained true as long as the existing loan remains intact and was not replaced with a new loan, preserving the “age” of the account. Whereas, the creation of a new account reduced the average age of accounts on file and have a negative impact on a consumer’s credit score. In the case of loan modifications that resulted in recapitalization, the scores were slightly higher due to a higher credit amount on open real estate accounts. If a new account was created, this positive effect was partially offset by the loss of the existing account age and similar observations were seen for recapitalization as with forgiveness of subordinated loans. Derogatory events (short sale, all forms of foreclosure, and bankruptcy), had a much more serious impact to credit scores. A consumer credit score was reduced by as much as 115 to 140 points for short sale and foreclosures. In the case of foreclosures, a driving factor was whether or not payments had been made even as foreclosure was initiated. Bankruptcy had the most severe impact by far. The study determined that a consumer can experience a drop of as much as 365 points when all accounts are included in a bankruptcy filing. The study showed derogatory events had less impact to credit scores for consumers
already experiencing delinquent accounts on their files than to credit scores for consumers with all clean accounts (Population One).
significantly delinquent. Three scenarios were evaluated: 1. A loan modification agreement (reduced monthly mortgage payment) that provides enough monthly cash remaining on-hand to enable the consumer to pay all debts on time and to continue paying all debts on time for an extended timeframe; 2. A loan modification agreement (reduced monthly mortgage payment) whereby the consumer is able to pay only the mortgage on a timely basis and continue paying the mortgage debt on time for an extended timeframe but where the consumer remains delinquent with other debts; and 3. The consumer files bankruptcy. The consumers’ credit scores were calculated at three-, six-, 12- and 24-month intervals after the event.
If the consumer is able to bring all debts current after the loan modification and maintain current status for approximately nine months, their credit score can rise to over 700. Post-loan modification, if the consumer brought only their mortgage debt current and maintained that status but other debts remained delinquent, the credit score could rise to 660, or near-prime quality, after 24 months. Finally, a derogatory event such as bankruptcy significantly reduced the consumers’ score (the green line in the graph at left). Raising the score is extremely challenging until the public record identifying the bankruptcy filing is removed from the credit file. This currently is a minimum of seven years for Chapter 12 and Chapter 13 bankruptcy, and 10 years for Chapter 7. CONCLUSION As consumer behavior reflected greater default levels, the credit scores dropped significantly. The difference between a consumer with no delinquencies and a consumer with delinquency and defaults on all primary accounts (mortgage, auto and credit card) represented an average drop of 243 points. Comparing the impact of mortgage delinquency to all other delinquencies showed the importance of maintaining the mortgage in current status. Consumers with delinquency on accounts other than mortgage had an average score of 830, but consumers with their mortgage
in delinquent status yet maintained current status on their auto and credit card accounts had an average score of 722. The negative impact to credit scores increased as programs reflected more severe restructuring. Loan modification programs had relatively small impact on consumers’ credit scores, whereas derogatory events such as short sale, foreclosure, and bankruptcy had much more significant negative impact. The recent economic downturn and credit market crisis continue to put immense pressures on American consumers and the mortgage industry, but now we have a clearer picture of how mortgage modifications will affect credit scores. As the saying goes, “time heals all wounds,” and the passage of time, combined with good consumer payment behavior, will help consumers restore their credit to good standing. For the near future, however, rising unemployment, continuing decline in property values and tighter credit requirements will likely result in increasing numbers of seriously delinquent mortgages and foreclosure actions.
KEY INSIGHTS FROM THE S TUDY ::
Consumers and lenders should proactively seek out loan modifications before the consumer experiences severe delinquency in their credit file. Late payments have a far greater impact on a credit score than loan modifications.
Certain loan modifications can positively impact the score based on the recapitalization structure of the loan and whether the loan retains its original open date.
Bankruptcy filing has the greatest negative impact on a consumer score and will continue to affect the consumer score for a minimum of seven years due to the presence of a public record on the consumer file.
In order to rehabilitate the consumerʼs score as quickly as possible, the consumer and lender working toward mor tgage restructuring should allow sufficient cash availability to remain with the consumer so that all other delinquent debts can be paid to current status.
Fortunately, when consumers and lenders are armed with enough information, they are better equipped to make decisions that will have the least negative impact on a credit score. Barrett Burns is president and chief executive officer of VantageScore Solutions LLC.
I M M IGR ANT INVESTOR E B -5 P RO G R A M
A PR AC TI C A L G U I D E
F O R R E A L E S TATE P RO F E SS I O N A L S
BY JARED LEUNG
ased on statistics provided by the U.S. Citizenship and Immigration Services (USCIS), over 1,200 families immigrated to the U.S. through the “EB-5” program in 2009, and that number is anticipated to increase substantially in 2010. The majority of these investor immigrants are from China, South Korea, and other Asian countries. For real estate professionals who work regularly with Asian clients, these investor immigrants present great opportunities for business and client development.
WHAT EXACTLY IS THE EB-5 PROGRAM? The Immigration and Nationality Act “INA” authorizes the issuance of 10,000 immigrant visas ("green cards") per year for immigrant investors who can create jobs in the U.S. It gets the “EB-5” designation because the section of the law that creates this category is
found in section 203(b)(5) of the INA. In this article, we will generally refer to it as the EB-5 program. The EB-5 program has two key requirements: capital investment and job creation. The requisite amount of investment is $1,000,000. The investment is most common in the form of cash, but inventory, equipment, and other tangible items are permitted as well. In investment areas designated as “Targeted Employment Areas”, or “TEAs”, the requisite investment amount is reduced to $500,000. A TEA generally refers to an area that has 150% of the average national unemployment rate, or a rural area with less than 20,000 people. For job creation, the requisite number of full time jobs to be created per investor is ten.
FOUR KEY STEPS OF THE EB-5 PROGRAM STEP 1 – Submit the I-526 petition to
USCIS. The investor uses the I-526 petition to demonstrate to USCIS’ satisfaction that they
have a valid proposal for job creation and have taken concrete steps in transferring the funds to the U.S. for investment. The investor must also prove the legal source of their money as well.
STEP 2 – After the I-526 is approved, the
investor either goes through the “I-485 Adjustment of Status” process if they are already in the U.S. in a valid nonimmigrant status, or through the “U.S. Consular Processing” if they live outside of the U.S.
STEP 3 – Receipt of “conditional” permanent residence for two years, following the approval of the I-485 application or a successful immigrant interview at a U.S. consulate. STEP 4 – Within and before 90 days of the expiration date of the investor’s conditional permanent residence, they must submit an application to remove the condition of their permanent residence by submitting Form I-829 to USCIS. The purpose of the I-829 application is to demonstrate to USCIS that the full amount of the investment has been made, and that ten new jobs have been created according to the plan presented in the I-526 petition. The approval of the I-829 petition is the key to the immigrant investor. If the I-829 petition is approved, the immigrant investor will receive their “permanent” permanent residence in the U.S. and is then free to determine whether to maintain the investment that has formed the basis for the EB-5 application. On the other hand, if the
E B - 5 P RO G R A M K E Y R E Q U I R E M E NT S C A P I TA L I N V E S TM E N T
JOB C R E AT I O N
$1, 0 0 0, 0 0 0
10 F U L L TIME JOBS
$50 0,0 0 0 in “ TE A s”
I-829 application is denied, the investor loses their status in the U.S. and is subject to removal or deportation.
TRADITIONAL INVESTMENT AND REGIONAL CENTERS For the EB-5 program, an immigrant investor may start any active business, such as a restaurant or a motel, investing the requisite amount of money and creating ten jobs. This is often referred to as “traditional investment” in EB-5. The advantage of the traditional investment is that the immigrant investor retains control of the business and is able to make adjustment of the business based on economic changes. For entrepreneurs who are looking for opportunities to start a business in the U.S. and obtain permanent residence at the same time, the traditional investment presents an excellent opportunity. A Regional Center (RC) generally refers to a business unit that spreads across one or more contiguous counties. An RC can engage in all kinds of businesses: a shopping center, a resort, or a fund. It is usually organized by private sectors that want to attract foreign investment to start projects in the U.S. However, most RCs are supported by the local government because of their potential to create jobs in the region. RC designation must first be approved by USCIS. Organizers of RCs submit petitions to USCIS to demonstrate how the RC will benefit the local economy and create new employment both directly and indirectly. Direct job creation in an RC refers to jobs that the RC will create and put on the RC’s payroll. Indirect job creation by an RC includes employment induced by the RC. A complete list of approved RCs is available online at http://www.uscis.gov/eb-5centers. The most significant advantage of the RC is that both direct and indirect job creation will count. For example, an RC may create only 10 direct jobs. However, due to the economic impact and business activities that the RC will stimulate in the local economy, 100
KEEP THESE IN MIND TOO 1 . S O U R C E OF FUNDS
USCIS is extremely strict in requiring investors to demonstrate the legal source of the capital invested. Every dollar must be accounted for. However, the investor does not need to account for their entire net worth to USCIS. Only the origin of the amount invested ($500,000 or $1,000,000) must be clearly documented.
2 . T R A N S F ERRING FUNDS TO T H E U. S.
Many countries have currency control. While USCIS does not typically request proof that the money invested was transmitted to the U.S. legally (though they will want to know how it was accomplished), the logistic issues of transferring money or assets to the U.S. should be discussed early on.
3. BE AWARE OF CLAIMS OF QUICK EXIT AND GUARANTEE
Investors should be aware that the law prohibits any guarantee of a return on the investment capital. The investment must be “at risk” in order to qualify for EB-5 investment. The previously described timeline illustrates that the investment capital will be committed for quite a few years. Investors should understand that the EB-5 program requires a substantial commitment of time and resources. Investors should be aware that they could lose all of the investment and still not receive their “green card”.
4 . FA M I LY MEMBERS
The spouse of the investor can immigrate with the investor, along with unmarried sons and daughters under 21 years old.
indirect jobs may be created. Therefore, a total of 110 jobs will be created, which will potentially allow 11 immigrant investors to obtain permanent residency through their investment in the RC. An important attribute of the RC is that the investor does not have day-to-day management responsibilities. Most RCs are formed as limited partnerships in which the investors will have authority only to make and vote on major corporate decisions. The day-to-day management responsibilities fall in the hands of the general partner, who may be the organizer of the RC. As long as the partnership is set up properly under the U.S. Uniform Partnership Act, the limited involvement of the foreign investors is sufficient for EB-5 purposes. There is no requirement that the immigrant investors live in the RC area. They can live anywhere in the U.S. On the other hand, a major disadvantage of investing in an RC is that the investors will not have direct control of the operations of the business. Their hope of obtaining U.S. permanent residency hinges on the success of the RC, in which they have little control. However, the vast majority of EB-5 investment immigrants are going through the program through an RC.
HOW CAN I HELP MY REAL ESTATE CLIENTS? If your clients are buying properties in the U.S. for personal use or investment and they are not interested in immigrating to the U.S., they are probably not going to be interested in the EB-5 program. However, you may wish to review the “Maintaining Sufficient Ties” sidebar. Of course, this is not to say that your client would not be interested in buying a place for their stay in the U.S., especially in today’s buyer’s markets in many parts of the U.S. After all, they would still need a place to stay. Because of the requirement of job creation, buying a house alone, regardless of the costs of the house, would not qualify an investor for a “green card”. However, certain real estate-related investment opportunities that lead to job creation may be suitable for an investor for the EB-5 program, such
MAINTAINING SUFFICIENT TIES The U.S. law presumes everyone is an intending immigrant, unless they can prove otherwise. In other words, a person must prove that they will leave the U.S. after the intended period of short stay and that there are strong social, economic, or family ties in their home country that will compel their return. Therefore, if a visitor buys a house in the U.S., he or she must continue to demonstrate that they have a “home” outside of the U.S. to which they intend to return. For some, it is an easy proposition because they continue to have jobs and primary residence outside of the U.S. In Arizona, for example, there is a sizeable Canadian population. The Canadians often own properties in Arizona and stay there in winter months. They travel back and forth. They do not work in the U.S. and most of them are retired. Even though they come to the U.S. for months
at a time, they still qualify as “visitors” because they do not work in the U.S. and they have a home in Canada that they will return to when the weather is warm again. They are perfect visitors under the law. As a real estate professional, you can help them look for a house in the US, without worrying about how it may affect their immigration status.
as restaurants, motels, hotels, office buildings, mixed use buildings, etc. If your clients are interested in commercial properties, you can point out the potential of attaining U.S. permanent residence through investment.
We strive hard to fully understand our client’s goals. While permanent residence in the U.S. (“green card”) is attractive to many people, it may not be the best fit for your client’s immigration goals. Also, your clients may not be aware of the full range of nonimmigrant and immigrant visa options available to them. They may want to get their “green cards” without really knowing what it means to them financially and time wise. Some of them want to open a company in the U.S. and think that one has to have a “green card” to open a company. When they realize there is a visa for individuals from certain countries to start a
As previously mentioned, if your client invests in an RC, they may live anywhere in the U.S. and are not limited to where the regional center is located. In other words, if your client wants to live in San Francisco, there is no problem at all, and you can help your client find a residence in San Francisco, even though they may be investing in an RC in Florida for EB-5 purposes.
However, for Asian clients, this may present some additional challenges. The law for the visitor visa is the same for Canadians and Asians. However, it is less common for Asian visitors to have properties in the U.S. If your client decides to own a vacation property in the U.S., they must continue to demonstrate strong ties back in their home country to avoid the allegation that they are “intending immigrants”.
business in the U.S., they opt for that, rather than the EB-5 program. In addition, we clearly communicate to our clients that there are many fine areas of the law pertaining to the EB-5 program that are not fully settled. For example, the time the ten jobs must be created is not clearly defined. While the law does not appear to put a time limit on when the jobs must be created, the current USCIS’ interpretation requires the ten jobs be created within 2 ½ years after the I-526 petition has been approved. Consider another example where an investor intended to create ten jobs in a certain area, but due to changes in the business, has created only eight jobs in the intended area and two jobs in another area. One may imagine that because the goal of the EB-5 program is to create ten jobs, it should not matter what these jobs are. However, USCIS has denied cases under similar facts, which needless to say, has created havoc for investors and their families. The point is that while the basic premises of the EB-5 program are fairly straight forward, the actual application and interpretation of the law is less clear. Therefore, EB-5 investors face two main risks in participating in the EB-5 program: investment risk and immigration risk. Any investment has risks. The same holds true for EB-5 investors too. If the investment does not work out, the EB-5 investors will lose the money in connection with the investment. Needless to say, if the investment fails before the EB-5 investor receives their permanent residence in the U.S., the EB-5 investor will most likely fail to qualify for a “green card” as well. However, it is possible that even if the investment projects are panning out, the immigration risks continue to affect the EB-5 investor due to CIS interpretation and changes in EB-5 law. However, having said that, the EB-5 program is well received by many, especially Asian investors. Real estate professionals are in a great position to sell EB-5 investors houses, whether or not they go through the traditional or regional center investment tracks.
JARED C. LEUNG M r. L e u n g p r a c t i c e s i n t h e a r e a of immigration law at the law firm of Fennemore Craig in Phoenix, Arizona. He has extensive experience in business immigration matters, such as immigrant and non-immigrant petition processing at USCIS, v i s a a p p l i c a t i o n s a t U. S . e m b a s sies and consulates, and PERM applications with the Department o f L a b o r. M r. L e u n g h a s a l s o worked closely with individual clients, investors, and those with family immigration needs.
I A B M U M
Y T I C I H H C N I O H M
I A H G N A SH
THE REAL ESTATE MARKET IS LOOKING UP IN ASIA. In Mumbai, India, in 2010, one billionaire built a 27-floor skyscraper – as his private residence. In Shanghai, China, property prices have grown 900% in seven years ending 2010. And in Ho Chi Minh City, Vietnam, a 2-bedroom luxury condo now goes for US$500,000. Asia's real estate markets "are strong enough to grow into the high expectations (that) current pricing trends imply," said C.Y. Leung, Asia Pacific Chairman of the Urban Land Institute. The economic growth in China and India is fueling real estate prices throughout Asia. And as the U.S. economy falters, more money is flowing into Asia, according to a report, Emerging Trends in Real Estate Asia Pacific 2011, published by the Urban Land Institute and PriceWaterHouseCoopers. Asian real estate markets are also booming due to an emerging middle class, limited property supply, and growing demand, said experts affiliated with the Asian Real Estate Association of America. The top investment city in China is Shanghai, Mumbai in India, and Ho Chi Minh City in Vietnam, according to the Trends report. “Shanghai has long been a traditional entry point to the mainland market (in China)”, it said. But Mumbai and Ho Chi Minh City are the “newest emerging markets…They present plenty of risk, but also a chance to get in on the ground floor.” For American real estate agents and investors, Asia offers a new opportunity for cross-cultural business growth. But understanding the markets and risks are critical for success, experts say.
MUMBAI Formerly called Bombay, the Indian city of Mumbai is experiencing explosive growth.
The entire country was expected to hit nearly 10% economic growth in 2010, according to the International Monetary Fund. As the country’s financial center, with a population of 20 million, Mumbai is reaping the benefits. The city is already one of the world’s top billionaire cities, with 20 billionaires calling Mumbai ‘home’, according to Forbes. The country’s ultra-wealthy and middle-classes are also growing rapidly, pushing demand for housing. “Demographics drive the market,” said Rob Mehta, broker with Coldwell
Banker in Minneapolis, MN and president of International Properties Group, which conducts business in India. “The local market is appreciating with this new-found prosperity.” Within the city, the hottest areas are in the financial district and along the peninsula. Views of the Arabian Sea, luxury housing and excellent transit and railway systems make this a desirable area to live, said Mehta. The most expensive areas are Colaba, in the heart of the financial center; Narimam Point, which overlooks the sea; and Malabar Hill on the other side of the peninsula. “Anything within the water and city, anything that puts
you on the peninsula,” said Mehta, “just skyrockets.” The super-rich are driving prices skyward in Mumbai. In November 2010, Mukesh Ambani, an industrialist billionaire, completed a 27-story skyscraper in the heart of the city – for his family of five to live. In 2007, a non-resident Indian bought a 4-bedroom flat overlooking the Arabian Sea for a record US$8.62 million. Mumbai’s suburban market is also growing, radiating outwards from the city center. This comprises two types of residential housing: houses and luxury condos. Houses within seven miles of the city typically run US$1 million or greater. “Unless you’re a millionaire, you won’t be
able to buy a house anymore,” said Mehta. “Houses farther out tend to be run-down, with outdated amenities.” Condos are more affordable, convenient and have ‘Westernized’ amenities. Prices typically range from US$150,000 to US$200,000 for a one-bedroom condo; US$300,000 to US$400,000 for a 2-3 bedroom, 1,8002,500 sq. ft. condo; and US$500,000 to US$700,000 for a 3-4 bedroom, 1600 sq. ft. to 2,000 sq. ft. luxury condo, close to shopping. The market may experience temporary pullbacks due to the West’s recession, but the long-term curve is favorable. “Short-term trends might cause a hiccup,” said Mehta, “But not like anything we’ve seen in the U.S.”
This “Paris of the East” is China’s most cosmopolitan city, with a huge shipping port, romantic riverfront, and a blend of historical European and Chinese architecture. The city’s population of nearly 20 million has been riding China’s economic train of an average annual 9.6 percent growth rate, according to tradingeconomics.com.
The real estate market has boomed in the last decade. The greatest demand is for luxury high-rise apartments, which cater to the city’s growing middle and upper classes, said Vincent Wong, founder of Shanghai-based Sunshine Real Estate Agency, which markets in the U.S. Many of these high-rises are zoned with mixed use. For
example, a building might have retail shops on the ground level, offices on the second and third floors, and residential units from the fourth floor and higher. Supermarkets, schools and transportation are all within a few blocks, which appeals to buyers. “Chinese love the convenience,” said Wong. “They don’t want to be too far from necessities.” Prices have gone crazy. For example, condo prices near the People’s Square increased almost 900% in seven years – from RMB$8,000/sq. meter (or about US$112/sq. ft.) in 2003 to RMB$70,000/sq. m. (or about US$982/sq. ft.) in late 2010, according to Wong. In Pudong, prices more than quadrupled in seven years.
SHANGHAI Condos that sold for RMB$10,000/sq. m. (or about US$150/sq. ft.) in 2003 sold for RMB$45,000/sq. m. (or about US$670/sq. ft.) in 2010. These condos are typically 1,200 to 2,800 sq. ft. The government intervenes regularly to cool the real estate market. Various laws in recent years include higher taxes for real estate investors who sell within two years of purchase or limiting the number of properties an individual can own to four. Such laws have resulted in stop-and-go activity in the market, said Wong, but he believes the overall market trend is up. “In China, they all want bricks and mortar,” he said. “That’s the reason why they just love to own their own property. The demand is still there.”
Foreigners are also investing in Shanghai real estate – during years when the government policy allows it. But investors need to follow the rules, particularly if borrowing from local banks, which are subject to government regulations. “They are worried about people speculating on their currency,” said Wong. The hottest areas in Shanghai are in the central business district (CBD) and Pudong, a financial area, said Wong. Suburbs near the river are also popular – Jingan, Luwan and Huang Pu districts are all commanding top dollar. Xujiahui, a new district featuring shopping arcades and new technology, is also popular, particularly among overseas Chinese investors, he said.
HO CHI MINH CITY Once known as Saigon, Ho Chi Minh City is marked by broad boulevards flanked by huge leafy trees.
The city is home to the national palace and scores of banks, trade offices, hotels, cathedrals, cafes, and artisan centers. Like Mumbai and Shanghai, this southern Vietnamese city is its country’s financial and cultural hub. With a growing middle class, it is also a place that attracts Vietnamese bureaucrats, tycoons and celebrities - from the northern capital city of Hanoi to the surrounding southern provinces. Many overseas Vietnamese also return here. The city’s population is about 7.25 million inhabitants.
The country’s economy expanded by about 7% in 2010, largely due to corporations moving their manufacturing plants from China to lower-cost Vietnam. Overseas Vietnamese have also lifted the local economy, sending back approximately US$7 billion a year. This is according to statistics cited by Vinh Nguyen, owner/broker at Westgate Realty Group, based in Washington, D.C., who frequently travels to Vietnam.
condos to house these new workers. On the high-end, a two-bedroom, 1,500 sq. ft. condo now goes for US$400,000 to US$500,000, said Nguyen.
Traditionally, Vietnamese lived in multi-generational homes, paying cash and gold for houses. With the emerging middle class, many couples are now able to afford to buy their own homes. In the last decade, developers raced to build
But the city is now suffering a glut of condos on the market, said Nguyen. He likens it to Miami, FL., saying it will take another one to two years for the market to absorb the excess units. Many developers of
The greatest demand is in the downtown area, known as Districts 1 and 3, said Nguyen. District 7, located in the city’s south, is also popular, because of its modern infrastructure, architecture and amenities. Many of the high rises are mixed-use commercial and residential buildings.
existing buildings are stuck, he said. “You see a lot of half-empty buildings.” Foreigners are still not allowed to invest in Vietnam. But if citizens elect a progressive political party to office in early 2011, policies could change to allow foreign buyers, said Nguyen.
TEN TIPS FOR BUYING REAL ESTATE IN ASIA #1 #2 #3 #4
Travel to the city You need to see, hear, touch, taste, smell and drive the city so you know what you are talking about. Understand the market Know which areas are best for you, what types of properties are available and general prices. The more you know, the better decisions you will make as an agent or investor. Work with local agents You need partners who understand the finer points of the local market, systems and laws to make the best purchase. Work with co-brokers If you have U.S. clients who want to invest in Asia, work with a local co-broker and split commissions.
Beware of scammers Work with partners who have an excellent track record, reputation and credibility. Even relatives can take your money. In one Asian country where U.S. citizens cannot own property, one U.S. investor bought a house under his resident brother’s name, but his brother kept the whole thing for himself later. Beware of different laws and systems Asian countries do not have the same kind of multiple listing services, title insurance, legal transparency or consumer protection as in the U.S. If you do not register correctly or invest with a developer who goes belly up, consider your money charity to the local economy.
#7 #8 #9 #10
Beware of corruption Many countries require “grease money” to get things done. You may need to pay more or expect long waits. Watch for market bubbles Asian governments often change policies to cool the market or restrict foreign investors. Know when to buy. Have plenty of cash Many Asian banks only lend up to 70 percent. Global banks, such as Citibank and HSBC, will check your U.S. assets. Know your end goal Is your goal to have a second home? A rental property? Or to buy and sell? Condos are easier to rent out and maintain than a house.
HELEN KAIAO CHANG is a business journalist based in San Diego, Calif. She may be reached at www.helenchangwriter.com
I N T E R N AT I O N A L R E A L E S TAT E AND
B E Y O N D
BY RYA N A S AO As a proud member of theEDGE, AREAA Young Professionals, I am always focused on the changing real estate market and identifying future business opportunities. Having spoken to some influential members of AREAA about the importance of international buyers in the U.S. market, there is a consensus that the global market will play an important role in the future of real estate here in the United States. The first step to leveraging this growing market segment is education. A CIPS designation from the National Association of Realtors provides a great foundation. There are two required core classes: Global Real Estate: Local Markets and Global Real Estate: Transaction Tools. In addition to successfully completing these two courses, candidates are required to complete three elective courses. These elective courses include: Europe & International Real Estate, Asia/Pacific & International Real Estate, The Americas & International Real Estate, The Middle East and Africa & International Real Estate, and At Home with Diversity. The training takes one week to complete and CIPS candidates must pass a multiple-choice examination that is given at the end of each course.
According to REALTOR.org, after completing these five CIPS courses, candidates must submit a designation application demonstrating experience in international real estate. This application requires earning 100 points in elective credits. Elective credits can be earned by: speaking other languages, possessing additional NAR designations, attending international conferences and education sessions, and international transactions in which candidates will be asked to answer specific questions regarding each transaction. Transactions must involve other cultures or countries and can include sales in the local market. After receiving this extensive training and education on international real estate, candidates should be prepared to serve the international market. CIPS applications can be submitted throughout the year, however, they are due by October 1 in order for the candidate to be recognized and pinned at the annual REALTORS速 Conference & Expo in November. AREAA and NAR offer invaluable networks and resources and are a great way to jumpstart your international real estate career. For more information about
Int ernational buyers represent ed 7% of consumers purc hasing residential proper ty in 2009. obtaining your CIPS designation please go to: http://www.realtor.org/global/cips/earn_cips_realtor. A CIPS designation should prepare you to practice international real estate. Now, I would like to introduce a great resource that I utilize in my personal business. At NARâ€™s Global Business and Alliances Committee in New Orleans, http://burns.daniels.du.edu was highlighted. This website is the University of Denver's Global Real Estate Project. It provides information such as real estate trends, cultural data, and business data for countries all over the world. Another resource used to view international listings is www.worldproperties.com. This is the official website of the International Consortium of Real Estate Associations which can be utilized to search for international properties. International buyers represented 7% of consumers purchasing residential property in 2009. The top four most desirable states for international buyers are:
Florida California Arizona Texas Florida and California have been the top two most desirable locations for the past three years. What attracts these buyers to property in the United States? There are several factors: location and value of the United States, undervalued real estate opportunities and the promise of profit. Most international buyers look for the closest proximity to their own country.
are also attracted to the relative weakness of the U.S. dollar and many international buyers have the perception that it is more affordable to buy in the United States. Lastly, international buyers find American real estate desirable because of the profit they could potentially realize. Moving forward, it is important to recognize the significance of international buyers to our economy and real estate market. The number of international buyers increased 6% in 2010. Canadians are the largest group of international buyers followed by Mexicans. Like any other area of expertise in real estate, it is imperative to know the local market and the market segment served. Research foreign currencies that have gained the most value against the U.S. dollar. International buyers are an important component to the home buying population and represent one of the next waves of home owners. Earning your CIPS designation will help leverage this exciting segment while providing the necessary foundation to competently serve this international community. International buyers are out there and in need of an experienced American real estate professional to help them make a great investment in the United States.
*Information and facts are obtained from NAR Media Center and International Local Council Forum. All data and information are not verified.
In general, Asian buyers are most attracted to the West Coast, Mexican buyers are most attracted to the Southwest, etc. Another consideration is the convenience and availability of transportation to the United States. Currently, international buyers
DUE DILIGENCE BEFORE BUYING COMMERCIAL REAL ES TATE BY MINGYI KANG
n this global economy, real estate professionals increasingly serve a more diverse client base. This is especially true when it comes to Asian real estate professionals who often have overseas clients wanting to invest in real estate in the United States. Before anyone purchases commercial real estate, they need to be aware of the federal, state, and local laws and regulations as well as possible title issues affecting the real estate. A prudent commercial real estate buyer will need to have skillful brokers and attorneys who can assist the investor to navigate their way out of potential pitfalls in the numerous potential legal issues. This article will address one area of potential pitfalls: environmental assessment.
While most overseas real estate investors may not realize the importance of environmental investigations, as a real estate owner, there are significant risks if environmental investigations are not performed properly before purchasing real estate. For example, “all appropriate inquiries” are essential prior to the acquisition of any real estate (except single family dwellings). There is a recent lawsuit that resulted from an inadequate environmental due diligence investigation which demonstrates the concerns.1 AN EXAMPLE OF WHY A QUALITY PHASE I ESA IS ESSENTIAL TO THE ENVIRONMENTAL DUE DILIGENCE PROCESS A School District Buys Property In 1998, a public school district in Orange County, Florida, agreed to purchase 34 acres in a 1,000-acre master planned community in Orlando for use as a middle school. A representative of the school district told the local newspaper that before schools are built the school district “…hires engineering companies to check out the site for potential hazards or
The information reported herein is taken from a newspaper article entitled Orange County School District Sues Engineers for Approving School Site on Former Bombing Range, written by Rich McKay and published in the Orlando Sentinel on July 15, 2009. We have no knowledge of the facts outside of those reported in the newspaper.
contamination, such as leaking underground fuel tanks or former landfills.” In this instance (according to the school district’s Complaint filed in the Orange County Circuit Court), it hired an engineering firm to do a “land study” in the fall of 1998 prior to acquiring the property. The Complaint also alleges that in February 1999 the school district hired a ...the USACE has found more different engineering than 400 bombs and rockets firm to perform an and removed more than 14 environmental site tons of bomb debris from assessment. Accordthe school property and ing to the Complaint, nearby neighborhoods... neither of the engineering firms found any environmental issues with the property. Believing that the site had no environmental problems based on those engineering reports, the school district completed the purchase of the property in March 2000 and soon thereafter began construction of a middle school. The school opened in August 2001. Problems Are Discovered In 2007, the U.S. Army Corps of Engineers (“USACE”) announced that it would investigate the school site because (a) it had been part of a World War II-era bombing range, and (b) live bombs had recently been found on ranch land behind the school. As a result of that investigation which began in July 2007, the USACE has found more than 400 bombs and rockets and removed more than 14 tons of bomb debris from the school property and nearby neighborhoods, at a cost of more than $10,000,000. That the school site and surrounding properties were formerly a bombing range was not a surprise to the USACE, because in 1997, a 150-page report was completed by the USACE detailing the types of bombs dropped on the property. That fact was surprising to the school district, however, because the Complaint alleges that it was never given a copy of the USACE report or advised of the prior use of
the property as a bombing range by either of the engineering consultants. Furthermore, there is evidence that at least one of the firms had a copy of the USACE report in its possession when it performed the work for the school district. In July 2009, the school district filed suit against both of the engineering firms alleging breach of contract, breach of fiduciary duty, and professional negligence. What Went Wrong? Based on the limited facts, it is hard to know exactly what went wrong with this particular environmental investigation. Environmental due diligence standards have changed in the past 10 years. Perhaps a competent Phase I could have been completed in 1999 that would ...simply by being in the not have identified chain of title the current or the prior uses of the property as a previous owner of the property bombing range, can be required to pay for the although unlikely. cleanup of contamination even But the bigger if the owner did not contribute problem was to the contamination. probably the client’s desire to save money coupled with a failure to understand the potential ramifications of an incomplete environmental investigation. Many real estate investors want to spend as little money as possible on the due diligence, so they never consider hiring an environmental attorney (or a real estate attorney) to review the environmental due diligence performed and its compliance with current environmental regulations. Environmental Regulations Federal Superfund statutes, also known as CERCLA, provide that the owner of contaminated property is strictly liable for the costs of cleanup of the contamination on the property. This means that simply by being in the chain of title the current or previous owner of the property can be required to
pay for the cleanup of contamination even if the owner did not contribute to the contamination. Under CERCLA the liability for the cost of cleanup is not only strict, it is also joint and several. This means that the owner of the contaminated property can be forced by the United States Environmental Protection Agency (“EPA”) to pay for the entire cost of the cleanup even though some other person or entity can be proven to be responsible for the contamination. While the property owner has a right of contribution from the person who actually caused the contamination under CERCLA, the right may be limited to contribution only after the owner has already paid for the cleanup. This will likely lead to the property owner entering lengthy and expensive litigation to resurrect their costs. Prior to 2002, there were only three defenses available to the owner of contaminated property that would allow the owner to avoid liability under CERCLA. The defenses were: (1) Act of God (2) Act of war (3) Innocent owner The first two defenses are rarely available. To prove themselves an innocent owner, the owners of the property had to show, among other things, that they had completed “all appropriate inquiries” prior to the purchase of the property and that there was no reason to suspect the contamination prior to purchase. “All appropriate inquiries” were completed by having a Phase I Environmental Site Assessment prepared by a knowledgeable environmental consultant. In 2002 Congress adopted amendments to CERCLA which created two new defenses to CERCLA liability for the property owner.
Now "bona fide prospective purchasers" and "contiguous property owners" have possible defenses as well as the "innocent landowners", if they meet the requirements set out in the statute. The "bona fide prospective purchaser” provisions apply to property acquired after January 11, 2002, and cover hazardous substances (not including petroleum and petroleum products) identified on a site prior to acquisition. The "contiguous property owner" defense applies when hazardous substances migrate onto one's property and the property owner had no reason to know of any source of such off-site contamination prior to purchase. The "innocent landowner" defense is available when hazardous substances are found on a property after purchase and the purchaser had no knowledge of or reason to know of on-site contamination and performed "all appropriate inquiries", prior to purchase. "Innocent landowners" fall into three types of categories: (1) Those who acquire property without knowledge of the contamination (2) Those who are governments acquiring through escheat, other involuntary transfers or eminent domain (3) Inheritors of contaminated property The key to establishing any of the described defenses is the completion of “all appropriate inquiries” prior to purchase. When Congress adopted the amendments to CERCLA in 2002, it directed EPA to come up with standards for completing “all appropriate inquiries”. Congress provided that until EPA adopted rules for completing “all appropriate inquiries”, the ASTM International standards could be relied upon by those purchasing property. EPA then spent nearly three years working with stakeholders and environmental professionals to come up with standards
that could be universally applied and finally adopted new rules for completing “all appropriate inquiries”. Those rules became effective November 1, 2006. Everyone planning to purchase real estate for any purpose other than single-family occupancy should have a Phase I Environmental Site Assessment completed by an environmental professional and reviewed by an environmental attorney prior to closing to assure the defenses to CERCLA liability will be available to that buyer in the event contamination is found at the property.
MINGYI KANG is a commercial real estate attorney with Gust Rosenfeld PLC. Gust Rosenfeld PLC has a team of experienced real estate and environmental attorneys working on real estate transactions including: retail shopping centers, office buildings, mixed use developments, and school districts or municipalities. For more information, please contact Mingyi Kang at (602) 257-7456 or email at firstname.lastname@example.org.
OVERCOMING L ANGUAGE BARRIERS
he results of the 2010 Census* are just now being publicized and the data reinforces the multi-dimensional scale of the USAʼs 308 million citizens. Since 2000, the population grew by 9.7% and the fastest rates of growth were in the South and West. The Census Bureau also recently released the 2009 version of its American Community Survey**, revealing that 12% of the population between 2005-09 was foreign-born, 20% spoke a language other than English at home, and about 3% spoke an Asian language at home.
Of the Top-10 non-English languages, a quick review of the mix of languages spoken illustrates the breadth of languages heard in neighborhoods from California to New York: -
Spanish is spoken by 73% Chinese 3.8% Vietnamese 2.7% Hindi 1.8% Korean 1.5% Miao and Hmong 1.1%
As the diversity of the country’s population continues to grow, what’s the impact for the professionals in the real estate industry? Challenges and opportunities! The Challenges - successfully connecting with citizens who are not fluent in English, but are interested in purchasing a home. (It’s not just acknowledging languages, but embracing cultural differences.) Plus, there is the continued influx of real estate investors from dozens of other countries, also presenting linguistic and cultural differences that need to be addressed. The Opportunities – for those in the real estate industry who devote the time and attention to mitigating the communications barriers, new sales will be generated. * US Census – http://2010.census.gov ** American Community Survey – http://factfinder.census.gov
...AND CLOSING BUSINESS B Y
G A R Y
S A N D E R S
T H E L A N G UAG E FAC TO R
In recent issues of a | r | e , we have highlighted several of the best examples of how real estate professionals embrace the challenges and take proactive efforts to connect with buyers in their local markets from home and abroad. As a result, recurring results are generated often from the buyer/seller or a member of their family. While laws, regulations and case law now broadly reinforce the rights of non-English speaking citizens, the best practices are those demonstrated by Realtors taking care of clients, doing the right thing.
Seminars are hosted in Taiwan for real estate agents and Cornerstone clients who are interested in properties in Southern California. Conducted with lender partners (HSBC, China Trust and East/West Bank), the seminars focus on the purchasing process while addressing misunderstandings about US culture and business practices. Concepts common in America such as “escrow”, “title insurance” and “liens” are perplexing – they do not exist in the Chinese language, nor in the Taiwanese real estate market, and require explanation. Further, even the ways in which a purchaser shows proper identification at a closing are different in Taiwan than in the US.
Assisting all-cash buyers from Hong Kong and China in navigating the administrative requirements in California which are much different than their home countries.
Here are a few of their stories: SOUTHERN CALIFORNIA – CORNERSTONE REAL ESTATE INTERNATIONAL After being raised in Taiwan and immigrating to Southern California, Alisha Chen entered the real estate industry in 2002. Her business has flourished over the past eight years – a client base was first established drawing from Los Angeles and Orange Counties often working with first generation immigrants looking for their first home to purchase. The business has now expanded to include clients from Taiwan, Hong Kong, mainland China and Korea searching for properties in Southern California. Operating from two offices in California (Irvine and Chino), and one in Taiwan, Chen and her staff support clients in 11 languages. How did her business grow so dramatically over the past few years? »
Attentiveness to the US clients’ needs to understand the home buying process, in their language. If a new client doesn’t speak one of the languages her staff covers, she’ll hire an interpreter.
Looking ahead, Chen is confident her business will expand – through more interactions with investors from Hong Kong and Korea. Plus, plans are being made to open an office in mainland China. NORTHERN CALIFORNIA – PRUDENTIAL CALIFORNIA REALTY After selling real estate for four years in Hong Kong and the past 20 years in the San Francisco, CA suburb of Walnut Creek, Ellen Osmundson could write the book on achieving real estate sales success in a multi-cultural environment. In fact, she’s done just that - authoring a “how to” book for homebuyers purchasing their first home…in Chinese (available for AREAA members). [Continued on page 46]
Walnut Creek is located in Contra Costa County, one of the most ethnically diverse counties in America – where 130 languages are spoken. Osmundson and her staff support clients in six languages but their assistance goes further. Recognizing the Realtor has a pivotal role in helping a homebuyer (especially one who isn’t fluent in English), Osmundson and her team are zealous about taking extra time and attention to ensure their clients understand each of the stages and documents in the home buying process. Generating satisfied clients for two decades is noteworthy, but Osmundson’s most significant achievements are helping to promote and overcome cultural differences in her community and the local real estate market: »
For three years while her son was in elementary school, Osmundson designed and managed a 10-week long after school program for her son’s schoolmates, “Fun with Chinese Culture”. The program became a magnet for the kids, plus several parents, many of whom were raised in China. As her son progressed to middle school, the program expanded to include more cultures and other parents now manage what Osmundson envisioned – an environment where cultural stereotypes are erased through education. Osmundson also moved on…she’s now a board member of the Walnut Creek Educational Foundation. In the past year, as Chairman of the Contra Costa Association of Realtors’ Diversity Committee, Osmundson was instrumental in launching a series of diversity awareness events including fair housing workshops to educate Realtors and affiliates on the importance of complying with Fair Housing Law. Sponsors were recruited – i.e. lenders (including Bank of America, Chase, Wells Fargo, US Bank and Avenir Mortgage Planners), home inspection companies, home staging companies, Property I.D. Natural Hazard Disclosures and Reports, and AAA. The attendees consistently have found the events useful - not just learning about mortgages, but gaining the knowledge to serve the increasingly diversified clientele in the market. More workshops are planned for 2011.
Advocacy initiatives dealing with minority homeownership – community outreach, local & national Asian housing legal issues and foreign investment support programs. AREAA has enjoyed strong support from members of NAHREP and NAREB.
Looking ahead, AREAA’s DFW chapter has proposed a joint study to be conducted with the MetroTex Board’s Diversity Committee. The study will first draw on input from Realtors and separately, AREAA members on experiences dealing with Asian clients and Asian agents. Key issues and solutions will be identified and discussed in detail by selected groups. The findings will be presented at an upcoming conference and a final report will be delivered to a joint meeting of both organizations. SUMMARY The expanding cultural mix of America’s population will continue to offer opportunities to those who embrace clients’ cultural differences and develop them into ongoing sources of business in the US and abroad. As the individuals behind these stories will attest, clients will respond enthusiastically if extra attention is given to overcoming language and cultural differences. Further, as these stories illustrate, you have allies as you interact with buyers from abroad or in your hometown – other AREAA members and leaders, the local Board of Realtors and the lenders. Contact these contributors for more details about their ongoing stories…
AREAA DALLAS/FT WORTH & THE METROTEX ASSOCIATION OF REALTORS
AREAA Dallas / Ft. Worth DFW@AREAAA.org 972-369-0600
In the past few years, a large influx of Asian immigrants and first time homebuyers have surfaced in the DFW area and the 16,000 members of the MetroTex Association of Realtors were in a reactive mode. Homebuyers were interested in shopping for a home, but the culture clash with real estate buying traditions in Northern Texas was substantial. For instance, negotiating tactics were different than American buyers’ behaviors and in many cases, Realtors (and lenders) failed to respond in a manner to make the client feel at ease. Deals never closed, solutions were needed, fast.
Alisha Chen Cornerstone Real Estate International Inc. 949-981-8520 Irvine, CA Alisha.email@example.com www.alishachenhomes.com or www.CS-REI.com
In February 2010, the DFW chapter of AREAA and the MetroTex Association of Realtors launched a series of events designed for members to assist new immigrants and first generation homebuyers. According to Matt Soltis of the local AREAA chapter, the goal of the activities was to improve the professional development of Realtors and the programs have involved the following: »
Monthly “Home Ownership” seminars involving presentations by lenders, title companies and service providers. Future meetings will include presentations by local homebuilders. Bank of America, Wells Fargo Bank and First American Title have supported these events from the start.
Extra training for two subgroups of Realtors – the Commercial Real Estate and Young Professionals Groups.
Ellen Osmundson Prudential California Realty 925-939-7460 Walnut Creek, CA Ellen@EllenOsmundson.com www.EllenOsmundson.com Gary Sanders The Language Factor 925-376-3681
AROUND THE Effectively Serving the Asian Pacific American Housing Market in DC
Leung Honored as Visionary
On November 10th, John Wong, AREAA Founding Chair and CEO, trained 65 real estate professionals on AREAA’s signature education product, Effectively Serving the Asian Pacific American (APA) Housing Market, at the conference facilities at Woo Lae Oak Restaurant in Tyson’s Corner, Virginia. AREAA DC Metro’s co-sponsors, Freddie Mac and Matt Martin Real Estate Management, also provided subject matter presentations on REO business opportunities and answered questions around the necessary skill set to become an approved Home Steps or HUD listing broker in the Washington, DC market. According to 2008 Metropolitan Statistical Areas (MSA) data, “The Washington DC Metro MSA has the 7th largest Asian population in the United States”, said John Wong. However, the lecture bore out that to retain and grow Asian American homeownership opportunities across our nation’s top 10 markets, significant cultural and policy issues such as cultural aversion to assuming debt, unwillingness to share personal financial information, language barriers which impact their ability to take advantage of existing modification and refinance assistance programs, and lack of understanding about the importance of credit history and credit scoring will need to be addressed. The seminar also helped local real estate professionals better understand the impact of cultural similarities and differences on real estate decision making within the Chinese, Vietnamese, and Filipino American communities. Examples of “shared” Asian American values included: family-oriented, value conscious, strong work ethic, close knit living arrangements, and respect for elders. Isabelle Williams and Ruth Henriquez, Washington, DC Metro NAREB and NAHREP board members, raised the point that “many of these shared values also exist in the Hispanic and African American communities across the country.” The event closed with recommendations on varied marketing mediums and strategies in partnership with banks, Realtors, non-profit housing counseling agencies, and government agencies to reach APA consumers. Scott Willis Chair, AREAA DC Metro Chapter
The CCIM Institute has awarded Pius K. Leung, CCIM, its Susan J. Groeneveld CCIM Visionary Award in recognition of his role as a leader and innovator in the commercial real estate industry. Leung, co-chair of AREAA’s commercial committee and chief administrative officer and managing director, Americas, of ARGUS Software, received the award at the CCIM Institute's annual business meetings in Orlando, Florida. According to Susan J. Groeneveld, CCIM, executive vice president emeritus of the CCIM Institute, Leung has demonstrated an ability to provide leadership and vision that promotes the CCIM Institute's strategic plan as well as a strong community within the organization. "Pius is a man of great character and has consistently been recognized as a leader, innovator, and creator of projects that support and enhance the CCIM Institute," said Groeneveld. "He has established a proven track record in working collaboratively with CCIM members, staff, and others in building domestic and international partnerships with the institute and other groups, and has asserted a strong sense of civic duty outside the organization." Leung served as president of the CCIM Institute in 2005 and was instrumental in establishing the institute's three Asian chapters and building the organization's global status. He is a CCIM senior instructor and a faculty emeritus member of the Institute of Real Estate Management (IREM). He currently holds the title of visiting professor at the University of International Business and Economics in Beijing, China. Leung also holds the Certified Property Manager designation from IREM and the MRICS designation from the Royal Institution of Chartered Surveyors. He has taught real estate in several countries including the Czech Republic, Poland, Russia, Mexico, Korea, Japan and China. The Houston Association of Realtors named Leung its Realtor of the Year in 2002.
(L to R) AREAA National Board members Fred Underwood and Michelle Chang, Congresswoman Judy Chu (D-CA) and AREAA Vice Chair Kathy Tsao at a Chinese real estate event in California. 48
A S S O C I AT I O N AREAA Inland Empire Kickoff October 2010 brought the inception of the AREAA Inland Empire chapter. With stride and passion Founding Chapter President, Lina Chu, chose to embark on the formation of this new chapter for Southern Californiaâ€™s Inland Empire. On December 1, 2010 she, along with a dynamic cast of Board members, was installed at the Rancho Cucamonga Victoria Gardens Community Center. The chapter received blessings from 2010 AREAA Chair John Fukuda, 2011 AREAA Chair Kenneth Li, various national and regional AREAA leaders, Fannie Mae, HUD, Wells Fargo, and an endless list of well-wishers. The chapterâ€™s mission is dedicated to helping members of the diverse Asian communities across the Inland Empire achieve homeownership. A roadmap for 2011 has been laid out and wheels are in motion to begin educating many real estate professionals in advancing their credentials and business outreach in 2011. The highlight of the event was the honor of having Wells Fargo as the first Corporate Sponsor to support the chapter in its mission. AREAA Inland Empire looks forward to alliances with all the small and large institutions in developing strong relationships and to further its mission. Beena Kotecha Khakhria Secretary, AREAA Inland Empire Photography by Hien Quoc
AROUND THE A S S O C I AT I O N AREAA Southern California Tri-County Inaugural Gala AREAA gained another chapter with the induction of the new Southern California Tri-County Chapter at an inaugural gala hosted at the South Hills Country Club in West Covina on December 17th. The new chapter, based at the apex of Los Angeles, Orange and San Bernardino counties, will be led by founding president Shinglian Chu, broker and owner of Shinglian Associates and former first vice president of AREAA Greater Los Angeles. About 100 Realtors, brokers, lenders and other real estate and bank professionals attended the inaugural gala, including Walnut City councilman and former mayor Joaquin Lim and AREAA national board member and New Vista Asset Management default sales executive, Ivan Choi. Choi served as the eventâ€™s keynote speaker, relating to attendees his view on the mortgage and real estate crisis. Also at the event, Chu unveiled her new executive board, which includes Grace Chow, VP; Gene Tsair, Secretary; Jane Sun, Treasurer; as well as the Board of Directors. Along with the new chapterâ€™s inauguration, attendees celebrated the holidays with dinner followed by dancing and giveaways sponsored by Tri-Counties Association of Realtors, Bank of the West, Wells Fargo Bank, Central Escrow, Good News Escrow, Academy Mortgage and Shinglian Associates. Photography by Simon Chu
ADVERTISERS 6th Annual Asian American Real Estate Convention & Gala
AREAA Education Foundation
Inside Back Cover
Bank of America
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First American Title Insurance Company, Strategic Markets Division www.firstam.com
The HOPE Awards
LSI - A Lender Processing Services Company http://www.LSI-LPS.com/
Multicultural Real Estate & Policy Conference http://areaa.org/convention
Prudential Real Estate
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CREATING FUTURE LEADERS TODAY Become a part of the first class of the
AREAA Foundation Executive Leadership Program Applications available February 18, 2011 at:
www.areaafoundation.org Successful applicants will participate in a week-long Executive Leadership training at UC Berkeley and participate in the CEO Shadow/Mentor Program. The group will also work together on a national initiative to support sustainable homeownership within the Asian American community.
MULTICULTURAL REAL ESTATE AND POLICY CONFERENCE www.areaa.org
RITZ-CARLTON WASHINGTON, DC
REGISTER ONLINE TODAY:
Published on Jan 20, 2011