Lender for Canadians buying US properties explains how, and why, US originators should capture this market
With the Canadian border shut down, visits from our neighbors to the north have slowed to a trickle. With that shutdown there has been a pause in one of the largest foreign-buyer markets in American real estate: Canadians buying winter homes in the sunbelt. These ‘Snowbirds’ represent the second largest foreign market for US real estate, buying a whopping $9.5 billion worth of US property in 2019, according to the National Association of Realtors (NAR). Now, as vaccines hit the market and winter arrives in the great white north, there’s a chance for brokers and originators to capture some of that market when the border reopens and those Canadians flee south.
To get a picture of that market, MPA spoke with Alain Forget (pictured), the head of sales & business development for RBC Bank US, a national residential lender that exclusively serves Canadians living in and buying property in the US. He highlighted some of the key strategies for reaching the Canadian market and explained why he thinks that this pandemic has created huge pent up demand north of the border for US real estate, especially in the sunbelt.
“We’re still in the peak of COVID-19 and we know the border will remain closed until at least the beginning of 2021, however I think Canadians are starting to see a light at the end of the tunnel,” Forget said. “There is a winter in Canada coming soon and a lot of Canadians had delayed plans to move on US properties in September and October, but now we’re seeing more of them looking to rent or buy in the Sunbelt states. Obviously a lot of them are on the sidelines, but we expect that in 2021, with vaccines, things will be a bit more normal and with that in mind a lot of Canadians are now looking to us to be pre-approved.”
Forget, who stressed that RBC US is not a wholesale lender, offered a few tips for American mortgage professionals who want to capture some of the pent-up Canadian market. He emphasized that any American originator needs to be aware of the cultural differences between Canadians and Americans, beyond just talking about hockey or ordering fries with cheese curds and gravy. They need to understand the difference in mortgage processes, as well. Canadian mortgages can take as little as a week to go from application to closing, so Canadian buyers might need a bit more handholding through the slower American process. Canadians wouldn’t be familiar with all the rules, regulations, practices and technology used in the US housing market and mortgage professionals need to be aware of that.
The extra work, Forget said, is worth it. In the past decade Canadians purchased around $130 billion in US properties, representing about 400,000 actual properties. They’re an especially important foreign market in those sunbelt states of Florida, Arizona, Texas and California. In many cases they’re looking for new builds in these states that offer better access to recreation. Forget believes the Canadian market is a great way for US originators to deepen their relationship with builders. Most of these buyers, too, are retiring boomers looking to escape the harshness of winter. For the moment, that demographic is only growing in Canada as those boomers retire en masse.
He emphasized, too, that Canadian purchases often cycle with a stronger Canadian dollar. Right now, the loonie is at around $0.77 against the greenback, the highest it’s been since 2018. While economic uncertainty may not keep the stronger Canadian dollar stable, this does present an additional opportunity to capture a Canadian market when the border opens again.
“Either for asset diversification or pure leisure or lifestyle it’s very compelling for Canadians to own the property in the US,” said Forget. “This is why I think that at some point in 2021, when things get back to normal, there’s going to be another wave of Canadian buyers. It’s important for brokers and originators to be ready and understand them as a unique niche.”