10 Essentials Buyers & Sellers Need To Know Today
By Camilla McLaughlin
When viewed from the mid-decade vantage point, the landscape of luxury real estate looks quite different than only a few years ago, and many buyers, sellers and even some agents are still trying to figure out the lay of the land.
Recently, George Harvey, a real estate broker in Telluride, Colorado, ran into an acquaintance who asked, “Gee, that old dilapidated house on Main Street, what do they want for that?” Harvey’s response, “Well, that sold a year and a half ago and it’s being remodeled now,” was similar to others he’s frequently had to make this year.
Perhaps nothing better illustrates the disconnect between consumer perceptions and the reality of real estate today than this scenario, only one of a number being played out in markets across the country. The essential elements of the deal, the buying process, may be the same, but almost everything else related to luxury real estate has changed.
“It’s a high stress, time-pressed world and real estate, especially in the high end, is at the center of all that. We’ve literally gone from a time just a few years ago when we couldn’t give things away to a highly competitive market where response time, access and communication are key to a successful transaction today,” explains Stephanie Anton, executive vice president for Luxury Portfolio International.
Whether you are a seller trying to net your best — and perhaps record-setting — price, or a buyer looking to capture a prized residence, the art of the deal has never been more challenging. To mine the best strategies, we’ve tapped a number of top industry experts.
Get the post-recession mindset.
“The recession was so long that some haven’t quite figured out that it’s over,” says Harvey. Sales haven’t reached the fever pitch of Denver, but the recovery has been full-on in mountain resorts such as Telluride and Park City, which were late comers to the party. Telluride’s April stats show the second highest sales volume and largest dollar volume in six years. It hasn’t quite tipped into a sellers’ market yet, but buyers need to understand the deals of only a year or two ago are long gone.
“In most markets, there are a lot of competitors for good properties and throwing out lowball offers is not a workable game plan. Find a property you like, have your brokers provide you with as much information as possible, and negotiate aggressively on your behalf to secure the lowest price. A ridiculously low offering price takes the skill of your agent out of the equation,” shares Bob Hurwitz, president of Hurwitz James Company.
Time is of the essence.
Time, or the lack of it, has become an overriding value for affluent consumers worldwide and this new luxury value influences everything from how quickly deals are done to the design of residences. “People want to save time. Everything is about faster, more efficient,” says Anne Riley, a broker with Alain Pinel Realtors, who believes time has a greater value today than money. “High-net-worth individuals are busy people. Time is an essential factor in their day-to-day living. They love conveniences, quality services and goods,” explains Carol Ann Hewitt, owner of Oxford Realty International in Orlando.
Getting on your game.
When demand heats up a market, everything speeds up, which means buyers have to be on their game from the start. Being pre-qualified just doesn’t cut it today. “Buyers really need to be prepared when they start the buying process. It’s crucial to have your financial situation known and secured. If you are a cash buyer, make sure you can show documentation at contract execution that you have liquid or available cash,” says Masha Halpern, a broker with Keller Williams Luxury Homes International in Chapel Hill, North Carolina. “Sometimes having your financing done and very short due diligence and closing periods can really sway a homeowner to select your offer over another.”
One thing Ann Miller, brand manager for The Re/Max Collection, hears from both agents and lenders is that buyers need to come fully prepared to close, even prior to going on an appointment, which means that all their documentation is in and if necessary, they could go and sign on that dotted line and close a loan that day.
Affluent consumers are savvy buyers.
“The big box is going away,” says Casey Margenau, owner of Casey Margenau Fine Homes and Estates in Virginia. It’s not just about square footage anymore. Instead, most affluent buyers expect a residence to be a catalyst for lifestyle, and they have a good vision of what that entails. “The seller should understand that these clients, certainly on the luxury end, are very knowledgeable. Very well versed,” says Marisela Cotilla, a broker with Douglas Elliman Real Estate in Boca Raton, Florida, who often finds “buyers come with their designers, their architects in tow.”
Rather than comparing homes in one location, affluent buyers, especially looking for second or third homes, often will compare different cities. Growing quickly too are cadres of those who can opt to work and live pretty much anywhere.
Your agent is critical. Choose wisely.
Fifteen years ago, the buzz in the industry was that agents would be casualties of the digital revolution. Jump ahead to 2015. “The purchaser is empowered like no other time in history. There is a lot of
information and the reality is that information is trying to persuade you to buy something,” says Margenau. Just getting the information is one thing, but deciphering the nuances of the market is still a little bit more complicated.
“What consumers have is information, but what they don’t have is knowledge,” says Riley. “They can look at the charts, but they don’t know how to value that price on that property.”
Today, determining value is only a small part of the agent’s role. “The difference between your agent having the skills, experience and acumen is quantifiably measurable both in the loss or gain of millions of dollars or the lack of a sale at all,” advises Hurwitz.
The industry has seen a flood of newbies and many aggressively prowl online and off for luxury clients. You really need to know about an agent’s experience in the marketplace, how many homes they have sold in various price brackets, how they are cross-marketing and where their buyers are coming from. “You need to be sure you are getting the right information. Getting a general overview is not enough. You’ve got to dial it down because this is an exquisite and unique property and you want to be sure it’s being marketed to the right people because the stakes are high,” says Miller.
“There are so many requirements and laws and regulations that differ from city to city and it all needs to be handled expertly,” shares Riley, who advises consumers, both buyers and sellers, to look at the company as much as an individual agent. “If you have a good company, you have attorneys who make sure those agents are being educated and qualified. People need to be more investigative.”
Is cash still king?
Whether or not to pay cash is still a portfolio play for the affluent. Cash dominates, but financing is coming back. “Everything is not all about cash sales now,” says Miller. Additionally, some financial institutions are allowing their private clients to borrow against collections. “It’s not just the wine collection. It’s the art collection. It’s the jewelry or the yacht. I can’t say it’s the norm but it’s now being a much more accepted form
of borrowing. Some see this as a similar but different avenue than borrowing against money saved for retirement,” explains Miller.
Not just the boomers.
More than boomers populate the luxury market today, as the average age of the super-rich continues to decline. Some of the best examples of the trend toward younger buyers can be seen in new developments in Florida. Targeted toward families, they are larger and include a range of amenities and services, so families are even opting to leave the nanny at home. At The Mansions at Acqualina, a sold-out oceanfront residential development in Sunny Isles Beach, Florida, 16 percent of its buyers were 35 years old and younger, with an average age of 45. Also well received by younger buyers is a sister development currently underway, which has an even greater focus on children’s amenities, including an ice skating rink.
Hurwitz says two of his largest recent sales were to online game designers/owners and he routinely works with buyers, often from Silicon Valley, who are under 40 years of age. In Florida, many second-home buyers are often younger affluents with children. Another trending demographic are second or third marriages, where spouses span generations. Both are dedicated to spending this time with their children and the family.
Time to get real with value.
“A hot market doesn’t suddenly drastically lower the IQ of wealthy buyers,” quips Bob Hurwitz, president of Hurwitz James Company. “Sellers of quality luxury homes are in a strong position now, but that can be a double-edged sword unless greed can be tempered with common sense. Although some ultra-affluent buyers who are not super discriminatory in terms of valuation will occasionally alight and create a stir, most people with money will not stupidly overpay. A hot market does provide a stage for achieving record-setting sales if all aspects of marketing and negotiation are handled with savvy and professionalism.”
“Sellers need to be realistic, and let’s be honest, in luxury they need to try as best they can to keep the emotion out of their sale. Some do this very well. Others need to get real with value,” says Ann Miller, brand manager for The Re/Max Collection.
Often, Masha Halpern, a broker with Keller Williams Luxury Homes International in Chapel Hill, North Carolina, will show prospective clients homes that would compete with theirs, even taking a premarketing tour to help clients gain perspective on the market.
Technology continues to be a change agent.
“Technology is now at the forefront of every transaction, from the search and the dominant reliance on the Internet, to communication — agents are constantly telling me about how they’ve practically had entire deals done via text message — to an almost paperless transaction. Buyers and sellers have changed along with this, with higher expectations regarding online marketing, instant communication and immediate access,” observes Anton.
This fast-paced world also spills over to marketing, raising the bar on required expertise and also on costs to properly expose an upscale property. Traditional avenues, especially print, are still very relevant say experts, and savvy agents implement a mix of tools including elaborate film-quality video and aerial photography.
“It’s more expensive today to market and advertise a home than it was 10 years ago or even five years ago. It’s more expensive to do it and to do it right. You’ve got to get the image out right because people are doing so much more work in their living room than going out and driving around and taking a look at houses,” says Margenau, noting that marketing can be a positive or a negative. “Someone could look at the property and if it’s not done well they could discount it even if it might be the right property for them.”
Globalization of luxury.
Few real estate trends have received as much press as the surge in foreign buyers in the U.S. Recent data shows international buyers spent over $100 billion in U.S. properties in the last year, with Florida, California and Texas the top three destinations. Although global interest is focused on select cities, international demand is expanding to more locations. “It’s been happening in pockets, but we are just starting to see it inside of the country,” says Anton, noting, “It’s a movement, and it’s happening, but it’s not the end of local buyers.” Miami ranks third among U.S. cities favored by international buyers. Michael Goldstein, president of sales for The Mansions, says about 60 percent of its buyers hail from North America. There is a strong South American presence, as well as buyers from Russia and Israel.
The attraction extends beyond properties and locations. Instead, it’s about privacy and security and, according to Riley, where you want to take your money and your wealth.
National developers and local builders have responded to what international buyers want by creating luxury, amenity-rich communities, with a guarded entrance to guarantee privacy, and quality-driven homes with household conveniences and high-end quality interior finishes, says Hewitt of her market, which is a top international destination.
Globally, “real estate is starting to process more similarly than differently,” says Anton. “No matter a person’s origin, the
affluent consumer today cares about very similar things. Whether it’s their overarching concerns for their family and business to the way they see and invest in the world. They travel to the same places, invest in similar opportunities/markets, et cetera. And they’re spending their money similarly as well. All of this is simply evidence that their confidence is back, in a big way.”