NAR – A Global Network with Powerful Information

It was an honor to be nominated to the Board of Directors of the National Association of Realtors last fall.   And a surprise too.    A pleasant one for sure, but also one that holds serious responsibilities.    So, accepting the role of Director was a decision I considered deeply before agreeing.

Mike Cobb at his first NAR Board Meeting
Mike Cobb at his first NAR Board Meeting

One major reason I said, “Yes,” is that the NAR represents the sale of real estate across the globe.    Real property is the foundation and hallmark of what made, and continues to make America great.  It holds the promise to do the same everywhere given the right conditions.   To be a part of an organization pushing these concepts forward is meaningful and significant.

Historically the ability of the private citizen to own a piece of dirt and call it their own, is revolutionary.   It has only become the “norm” worldwide in the past couple hundred years.   For the Declaration of Independence, Thomas Jefferson rephrased Thomas Locke’s “Life, Liberty and Property” into:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. 

Locke’s “Property” became Jefferson’s “Pursuit of Happiness.”  But to the Founding Fathers, real property ownership was front and center, and the tangible basis in that pursuit of happiness.

Private ownership of property is a relatively new concept, taking root in the 1600’s philosophically, and then in the 1700’s in deed, as vast areas of land were settled and titled to new owners establishing a wide base of private property ownership.     Despite the economic success proven in the great private property experiment, some countries of the world still do not permit private property ownership.    But that is changing.   As recently as 2015, Vietnam opened its markets for private property ownership by foreigners marking a recognition that economic success and property ownership rights are intimately linked.

Yet, having title and the benefits of ownership remain elusive, even in countries that allow private property.   Hernando de Soto, in his fabulous book the “Mystery of Capital,” discusses why so many people are locked out of real property ownership and how this affects economic development adversely.   De Soto describes people who “possess” a home or property, sometimes for generations, building up a home slowly, by investing hundreds, and even a few thousand dollars, year in and year out.   They may “occupy” an investment worth $10,000, $20,000, or even more, but they have no title to the property.   Lack of title prevents real ownership, precludes loans using the property as collateral, and denies the security a title to the property can provide.     In De Soto’s estimates, over $10 Trillion of land is possessed by individuals worldwide, but who have no title.   This capital is locked up.   It is invisible and “useless” in the capitalist system, all for lack of a title.

But let me back up.   My relationship with the NAR all started 11 years ago when Jeff Hornberger, then with the NAR and now the CEO of the Women’s Council of Realtors, was leading a CIPS class to Nicaragua.   CIPS, (Certified International Property Specialist) is a sub-designation for Realtors who wish to grow their business internationally.   I was asked to present my talk “The 15 Questions a We Should Ask When Buying Property Overseas.”

I guess it was a hit because Jeff and I stayed in touch over the years.  In 2015, he recommended me to participate in a Presidential Advisory Group to the President of NAR on global issues.    I spent a week in Chicago, met the Global Division leadership, and saw just how serious this US Association was about growing and doing business on a global scale.

Barb Sukkau Canadian Real Estate Association (CREA) President 2018, Mike Cobb, Janet Branton, VP NAR Global, Pauline Aunger, CREA Past President
Barb Sukkau Canadian Real Estate Association (CREA) President 2018, Mike Cobb, Janet Branton, VP NAR Global, Pauline Aunger, CREA Past President
Mike Cobb, with NAR Board members Ahmed Badat and Clayton Wade
Mike Cobb, with NAR Board members Ahmed Badat and Clayton Wade

Then in the summer of 2016, I was invited to participate in an invitational CIPS course at the NAR Headquarters in Chicago.   Right after I was asked by the Vice President of NAR Global, Janet Branton, if I would serve on the NAR board.    Knowing that the National Association of Realtors was building a stronger global presence year after year, I accepted wanting to become a part of this growth, and knowing that it would be an exciting and worthwhile challenge.

This is a serious role.   The NAR Represents over 1.2M members and a budget of over $400M.    Annual dues alone are $189M.   As a director, we are the board that stewards the largest association in America, making sure that it is relevant to the members, the stated goals, and a specific and growing focus on international business.

And international is HUGE.    Look at these global business statistics.   Over $235 Billion of US real estate was sold to non-nationals in the past year.   According to Lawrence Yun, Chief Economist for the National Association of Realtors, between April 2015 and April 2016, over $102 Billion Dollars of sales of residential real estate were made to non-US nationals.    The balance of the sales, $133 Billion, were purchases of commercial properties.

chartchartSource:   2016 Profile of International Activity in U.S. Residential Real Estate.
National Association of REALTORS® Research DivisionJune 2016

In the residential sector, over 25% of this dollar amount was property sold to Chinese nationals, but interestingly, just 5 countries represented 45% of the total properties sold to international buyers.   Canadians were the second largest segment of buyers, followed by Indians, Brits, and Mexicans in that order.

While it is difficult to know exactly how many of these properties were sold by US Nationals, we can presume that the overwhelming majority of the sales proceeds stayed in the US contributing significantly to US GDP. Danielle Hale, of the NAR Research Division, notes that 19% of the US GDP is real estate related, coming from sales, services, and the construction of new homes and commercial space.

The impact of this direct foreign investment is felt throughout North America several ways.    One of them is certainly is the direct injection of hard currency into the country and economy when a property is sold.     Sellers presumably either spend those dollars on a new home, or they save them and invest them.   In all cases, unless they end up in cash under a mattress, these dollars flow back into the US Economy and continue to create new wealth.

Alex Nowrasteh, from the CATO Institute, shows that the 40 million immigrants in the US added $3.7 Trillion to US housing wealth in 2012.    A growing population boosts supply, increases housing demand, rents, and housing prices.  As the chart below shows, without immigration, the US Population will level off in 2030 and remain flat preventing the growth of the US economy, growth that has created new wealth in the US for centuries.

 CATO:  UP Population Growth Flattens Without Immigration of NAR
CATO:  UP Population Growth Flattens Without Immigration of NAR
ECI’s Cobb, Nowrasteh of CATO, and Lawrence Yun of NAR
ECI’s Cobb, Nowrasteh of CATO, and Lawrence Yun of NAR

Many of these foreign buyers are also making significant investments in the US to obtain a residency visa, typically through the EB-5 visa program.   The EB-5 program requires an investment of at least $1M and the creation of 10 jobs in the United States.  This is not just good for America, it’s great for Americans.    While the current political meme is anti-immigration, these investor immigrants do a great service to America.  Those people responding to the beacon of economic freedom have always made this country great and they will continue to do so when given the opportunity.

The other major Global focus for the Realtor community and NAR is outbound sales.   Right now, 613,000 US retirees live full time outside the United States.   Over 5,000,000 US and Canadians are Expats living outside North America today.   Outbound international business is a much harder aspect to measure, but some survey data of large samplings does prove out the market.     In the NAR survey referenced above, 14% of Realtors know clients who have purchased a property overseas.   A breakdown of the data is shown in the graphs below.

chartSource:   2016 Profile of International Activity in U.S. Residential Real Estate. 
National Association of REALTORS® Research DivisionJune 2016

Additionally, the Zogby Company surveyed over 103,000 US citizens and found that 11.4%, equal to 26 million Americans, have seriously considered owning property overseas.   An RCLCO study shows that “25% of affluent households earning in excess of $800K per year, expressed a desire to purchase a new, additional, or different vacation home in the next five years…”  This is highly encouraging since they not only have the desire, they have the means too also.

The outbound sector of the international business for Realtors is there, but much harder to see.  Tapping into it is not as easy or as obvious as a client calling and asking to buy a property in their hometown neighborhood.    However, the importance to a Realtors local clients looking to own property overseas is perhaps even more critical.    Here’s why.

People buying property in a foreign culture, don’t know what they don’t know.   The systems, standards and norms are different.   What buyers assume to be true and relevant, may or may not be true.   “Escrow” is a great example.   North American clients assume a deposit will be placed in escrow and may not even ask.   However, in many countries, escrow does not exist.  Deposit funds are simply deposited in a general account.

This is exactly where Realtors have a role to play.   Realtors have the ability to help their clients in North America make better decisions buying property globally through stronger due diligence.  Clients must know what questions to ask in a buyer beware situation.  The Realtor community can provide much needed information to the transaction and earn a fee for that service.

Realtors working in the outbound space can highlight to clients the “15 Massive Mistakes People Make When Buying Property Overseas and the 3 Simple Steps to Avoid Them” found in a Consumer Resource Guide available here. Realtors can demonstrate to clients that they understand the significant legal and cultural differences and will alert clients to pitfalls that may await them.    Importantly, Realtors can send informative materials, due diligence documents, and country research papers to serve clients who may have limited access to professional information and can offer buyer’s agent services.

If you are a Realtor and have plans to attend the NAR national meeting and convention in Chicago Nov 3-6, be sure to visit the International Hall in the exhibit area.   More than 60 different country representatives are expected to be there.  You’ll be able to meet and establish relationships with fellow realtors globally.   These connections are the basis of the referral network you can build to serve clients in your home town looking to move overseas.   You can see for yourself the extent to which the leadership of NAR commits to a global reach.

NAR 2017 President Bill Brown, Mike Cobb, Janet Branton, NAR VP Global
NAR 2017 President Bill Brown, Mike Cobb, Janet Branton, NAR VP Global
NAR 2018 President Elizabeth Mendenhal, Mike Cobb, AREAA Chair Vicky Silvano
NAR 2018 President Elizabeth Mendenhal, Mike Cobb, AREAA Chair Vicky Silvano

If you have a hankering to travel a little further, join me in Thailand this summer, August 16-22 where I will be speaking at the International Realtor Conference.    This event brings together realtors from around the world to focus specifically on the international space.     Having spoken in Manila a couple years ago, and attended the many events, dinners and receptions, I can assure you of the highest levels of contact, networking with top real estate professionals, along with culinary delights hard to imagine.

 Exotic Chocolate Dessert with Edible Gold
Exotic Chocolate Dessert with Edible Gold
Mike Cobb and Fidel Ramos,Former President of the Philippines
Mike Cobb and Fidel Ramos,Former President of the Philippines

The great American experiment began as a dream of possibility, where common men could own property, build a home, start a business, and create long term value that established stability and worth.     The National Association of Realtors is the foundational advocacy group for these rights and private property ownership in its pure economic form.   Sure, philosophically the Heritage Foundation, CATO and others argue at an ethereal level for these rights.  But day in, day out, it’s the men and women in the trenches helping clients to buy and sell properties that protect, preserve and promote this basic right in its most profound form.

Napoleon Hill once said, “Action is the true measure of intelligence.”   At the heart of the National Association of Realtors are 1.2 million members taking action every day to perpetuate, in fact, these rights, preserving them in action, and in deed (pun intended) for the good of the individual and America as a whole.   But even more, the NAR is engaged worldwide to promote the adoption of modern titling systems to unlock the capital and entrepreneurial potential of that latent capital that De Soto talks about.

Consumer Resource Guide

The NAR represents our rights as people to be property owners, the foundation of all we hold dear as a nation, and the hope of billions around the world to be lifted out of poverty through the benefits of property ownership combined with human initiative.   The NAR and its members preserve the economic freedom and perpetuate commercial activity which has produced a bountiful abundance for us to enjoy today and long into the future.

It is for these reasons that I am proud to serve on the board of the NAR.   This service reaches to the core and the deepest, most meaningful level of our economic wellbeing.   Helping the NAR expand its global reach to deliver the benefits of private property ownership to many nations where the positive effects are yet to be felt, where abundance still lags, this is why I said yes.   As Bob Buford talks about in is poignant work, “Halftime,” significance is the pinnacle of service.   Working alongside the 1.2M members every day, enhancing the reality of property ownership globally, is powerfully significant and intensely rewarding.    I am grateful I was given the opportunity to serve.