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The Chinese Are Coming, Part XVII. This Time's It's Real Estate And No, There Is No Visa With That.

By Dan Harris and Steve Dickinson

All Roads Lead to China recently did a post entitled, "Real Estate Assets Lure Chinese Investors," on how a group of Chinese investors is going to the United States to purchase distressed homes. Yes, but mostly no. The article on which All Roads bases his post comes from the Shanghai Daily and it goes a long way towards confirming what I already thought. Those Chinese coming over here to look for houses know not what they are doing. The article, entitled, "Domestic investors to shop for cheap US houses," sets forth the ill conceived plans:

The 10-day trip from January 15 will cover San Francisco, Los Angeles and Las Vegas, Shanghai Morning Post reported today. Led by Soufun.com, one of China's biggest online second-hand home sellers, the group will mainly focus on disposed houses after mortgage defaults. The average home price was between US$40,000 and US$100,000, the report said. US real estate agencies will show them nearly 20 houses in three days, according to the newspaper. The itinerary showed agencies in the three cities will serve them on January 16, 18 and 22. Each member of the group needed to pay 14,900 yuan (US$2,166), excluding airfare, for the trip. The group now has 32 applicants, half of whom were industry insiders. The others were parents of students studying in the US, the report said.

I say ill conceived because my firm has gotten numerous phone calls and emails from Chinese lawyers and investors in the last couple months and, with only one exception, none of them were truly prepared to purchase real estate in the United States. Almost all of them are under the fairly common misconception that purchasing real estate in the United States gets you a long term visa. It does NOT. Many of them were under the misconception that they could buy four bedroom houses for less than $100,000, while others quoted $150,000. Those numbers are completely out of line. There are no buildable lots in Seattle for less than $150,000, much less lots for that price with four bedroom homes on them. And Seattle is cheap compared to Los Angeles and San Francisco. Home prices have plunged in Las Vegas, but a client of mine who went there planning to buy a slew of houses recently reported back to me that it still costs at least $250,000 for a fairly nice house even there. I cannot even imagine what a $40,000 house in San Francisco is like, assuming there is such a house. What are these Chinese buyers thinking? Are they being misled? What fascinates me about the practice of international law is that no culture is immune from engaging in countless invalid assumptions when doing business outside their own sphere. This blog is mostly about Americans and Europeans seeking to do business in China and, as such, a fair amount of it is devoted to highlighting real and potential mistakes. These Chinese buyers show that mistakes go both ways. But we all knew that, already, right? Chinese investors will no doubt eventually learn what it will take to purchase real estate and American real estate companies know that. One of the growth areas for foreign investment in China (and even more so in Russia, it seems) is American real estate companies setting up offices in China to market US properties.

Full post as published by China Law Blog on December 08, 2008 (boomark / email).