We’ve pointed out in previous posts on this blog that there are special risks associated with commercial real estate transactions involving foreign investors. Both lenders and sellers must find ways to manage these risks in order to make these transactions viable. As we noted last time, one of the risks with Chinese investors is that country’s strict policies on releasing funds for foreign investment.
These policies have resulted in a more and more Chinese investors financing their transactions rather than paying cash as had previously been the norm. Because large lenders are wary of foreign buyers, in part due to the difficulties they present with respect to federal regulations on identification and verification of clients, small lenders have stepped in to fill the gap.
Lenders that have stepped into the fill the financing void for Chinese investors do have to deal with the increased risk these transactions present. Some of the eligibility requirements these lenders are imposing to manage these risks include: possession of a green card; employment and income documentation; proof of local funds; possession of an account holding at least six months worth of mortgage payments; a substantial down payment; and higher interest rates.
Also for sellers, there needs to be contractual protections in place to ensure they are not at an undue risk of loss in the event the transaction falls through or is delayed. Working with an experienced attorney who is knowledgeable about real estate transactions and who is committed to zealously representing clients’ interests helps ensure sellers are protected in negotiating purchase agreements for transactions involving foreign buyers.