As the real estate market in the U.S. slowly continues to regain its footing, many agents are looking at this time as a chance to redefine their market. With so many agents abandoning-or at least significantly cutting back-their marketing systems to save money, others are jumping in to take advantage of the marketing void. In other words, they are taking an offensive approach in order to put themselves in prime position when the market starts to upswing.
In most parts of Canada, on the other hand, the market continues to stay hot and agents are looking for the best way to grow their business. They are looking to expand the reach of their marketing and maximize income opportunities. Whether it be in the U.S. or Canada, a number of agents we are talking to believe that now is the time to make the transition into the ultra high-end market.
Traditionally, luxury real estate is one of the hardest market segments to try and break into. Why? There are a few common reasons. It might be the presence of a dominant agent already ensconced in the community or the fact that everyone already has a peer in the real estate business. It may be because the agents themselves don’t have the patience to work in a generally slower-paced market (less transactions to go around, tougher competition and slower sales process). It could be that they are simply not prepared for the unique challenges a high-end market poses.
In my experience, it’s usually a combination of these reasons that prevents most agents from becoming successful in luxury real estate. There are many things you need to know before you make the quantum leap into the next price range. We’ve put together a list of five factors that will help you decide if a move to luxury real estate is right for you.
#1. Know What You Are Getting Into
Agents often make a blind leap into luxury real estate because they think that’s “where the money is.” Of course, it’s simple math. If you get the same split, it pays to list homes with higher selling prices. In theory, you can make more money by doing fewer transactions. On one hand, that’s true, but if you go into luxury real estate with this mentality, you are probably destined to fail.
Yes, your income per transaction goes up significantly. That’s great, but there is often a new set of challenges introduced when working a high-end market: the competitive stakes are much higher, social circles are much more closed, politics are different, and there are many other factors which I will detail throughout this article. In addition, marketing and servicing costs are generally more when dealing with luxury homes and clients. Both buyers and sellers expect more and demand more and the properties themselves need even more attention (marketing, staging, photography, etc.) to appeal to a more sophisticated crowd.
Carol Barkin of Toronto, Ontario has been a successful Sales Representative for 20 years, but it took her some time to build her business in her high-end markets (both in the city and in a lakefront recreational market about an hour outside Toronto). “For me, the biggest challenge was making that first connection,” she says. “They already have tight social connections and know how to get what they want, so building relationships is a matter of trust. It’s important to relate to clients as a friend and a helpful peer, not just present yourself as a service provider.”
#2. Patience, Patience, Patience
It’s clear that high-end real estate is a different animal than traditional residential markets. It tends to move much slower. Generally, there are fewer homes on the market at any given time and there are fewer buyers out there with the means to purchase such expensive properties. The stakes are higher for everyone involved. So on average, it takes significantly longer to sell one of these homes. In addition, there is a lot of competition out there for a limited number of properties, so it often requires more patience to break into the market and build a strong client base.
This is truly a case where the end usually justifies the means if you have the right understanding and commitment going in. Though listings are harder to come by and it takes longer for them to sell, the large check at the end of the transaction is worthwhile. But not all agents have the stomach to wait longer in between commission checks. Oftentimes, this is the hurdle that stops them in their tracks.
“In my experience in high-end real estate, six months on the market is nothing. On average, it’s more like nine for a listing to sell,” says Robin. “Also, if they are not truly motivated to sell, you will waste a lot of time and money on marketing. In some cases, I will adjust my commission rate so that the marketing costs are covered by the seller. It helps to offset the time it takes to sell. You also shouldn’t go into luxury real estate without money in the bank. It’s a long-term process to build your business and if you are not prepared, it can break you quickly.”
#3. Know It. Live It. Keep It Exclusive.
Another reason that some agents struggle to find their footing in an ultra high-end market is that they cannot relate to the clients or communicate effectively. You’re dealing with a much savvier and usually more demanding crowd who know what they want and are used to getting what they desire. Now, you don’t necessarily have to live in the luxury community you are targeting, but you have to present yourself like you do. The way you dress, your ability to network within their circles, the way you communicate with these sophisticated individuals, the quality of your marketing materials-you have to be able to make a personal connection and develop a strong professional image. If they don’t buy into you as a luxury home expert who’s tapped into their community, they aren’t as likely to do business with you.
Jack Jeffcoat III is an agent who is in the process of transitioning his market focus from high-end golf communities in Central Florida to ultra high-end waterfront properties along Florida’s Space Coast. From his marketing presence to his personal presentation to his servicing strategies, everything he does is to support his image as a luxury real estate specialist. He’s often bold and unwavering in his approach because he never wants to lose credibility.
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