ADDRESSING EXCHANGE RATES FOR FOREIGN BUYERS/SELLERS
When the opportunity arises to represent an international clientele, a factor that is not always considered in the transaction is the cost of exchanging their native currency to USD, or vice versa. When money is sent from one country to another, the funds have to be converted to the native currency somewhere along the way. In most instances, the banks involved in the money transfer will convert the currency at a retail exchange rate, creating a very unfavorable variable (i.e. significant additional cost) in the overall transaction.
When dealing with a foreign buyer or seller, you should always ask your closing agent if they have the ability to leverage their commercial banking relationship to negotiate wholesale (rather than retail) pricing with their foreign exchange trading desk. Our own experiences suggest that this service can be of tremendous value to our international clients and the agents representing them.
A recent example would be a transaction handled by our office involving an international buyer. As is the custom of any closing agent who is experienced in handling transactions involving foreign parties, we advised our client to ask for the exchange rate from his bank so that he could make an informed decision on how he wanted his settlement funds transferred over. The rate he received from his bank was 1.6814 to convert our USD to GPB. When we approached our lender to assist our client in comparing rates, they were able to deliver a rate of 1.5565 (please note these rates change daily). Although the numbers do not seem very far off, the savings to our client based on that transaction was approximately $40,000 USD.
If you have a foreign buyer or seller, please recommend that they engage a qualified real estate attorney who has experience in representing international clients. This example is just one of many reasons why it is important for closing agents to be intimately familiar with the nuances of representing international clients.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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