Luxury Real Estate

Courtesy of Frederick Peters, President of Warburg Realty

Last week I wrote about how sellers and their agents need to behave to effectively manage the sale of their properties. So this week I want to turn to buyers. The market has changed so profoundly in the past year that buyer expectations have often had a hard time keeping up. So here are buyer advisories for the end of the first quarter 2011:

· You are probably not in charge any more. Unless you are buying a postwar studio or one bedroom, or shopping in Harlem or Midtown East or in a new condo which still has lots of units for sale, sellers have firmed up their prices and buyers are paying them. So you cannot think like it is 2010 and the seller will be grateful to have your offer. In fact, much of the time, the seller already has several offers and is holding out for more. This leads inexorable to the next point…

· You cannot offer 25%, or 20%, or probably even 15%, below the asking price any more. Those days are gone. Many of the prewar properties are selling at asking or over it. My agents tell me that most first offers are coming in at an average of 5% to 7% below asking prices. Though we are once again seeing the buyer who has lost several properties already bidding the asking price on the first day.

· Have your financial picture in order. As the market heats up, the strength and clarity of your financial picture can obtain the property for you even if yours is not the highest offer. And every seller loves a deal without a financing contingency.

· Be flexible about the things which are not important to you. If it doesn’t really matter when the closing takes place, or whether they leave the built ins, use your flexibility in those areas to try to achieve your other goals.

· Try to get your ego out of the way. Negotiating is complicated, and one reason is that both sides are often trying not only to achieve their goals, but also to be the winner. No one is the winner if the deal does not get made over an insignificant amount of money, or the drapes, or the sconces. Buyers and sellers can get stuck on fundamentally irrelevant issues because they want to win. So if you feel that angry “I’m not going to back down” feeling, it is probably a good idea to take a step back and give it 24 hours. Then think about whether your goal is controlling the negotiation or succeeding at it. It is often not worth winning the battle if you lose the war.

· Figure out what a property is worth to you and don’t second guess yourself too much. If it trades way beyond your price, let it go. There will be another. However if this happens to you several times you may need to consider whether your price point is realistic. Your broker can best advise you on this topic. And remember, it is often worth stretching a little for what you really want, especially since prices are going up.

Finally, it’s probably a good idea to act now if you are considering a purchase. I predicted that this would be a year with minimal price appreciation but I was wrong. Good property is definitely getting more expensive, and with little inventory on the market and no increase in new listings on the horizon, finding what you want can take a little while. So start now, and if you find what you want in your price range, buy it! Chances are it will cost more in six months.

You can read more on www.warburgrealty.com/blog.

Courtesy of Frederick Peters, President of Warburg Realty

Pricing is never easy. To price correctly brokers (and sellers) need to have both a sense of where the market is today and where it might be in a few weeks. We need to take into account the uniqueness of the product, the likely demand relative to other properties and segments of the market, and the depth of competing supply. We need to realistically assess the condition of the property and what its strengths and weaknesses are. And then we need to settle on a number which is ambitious but not prohibitive, which will induce people to stretch but not to walk away. Never an easy task for either seller or broker!

According to what I see, buyers still control the marketplace for smaller, more generic inventory. Since there are still many studio, one bedroom, and small two bedroom apartments available in postwar buildings all over town, buyers can and do leverage one against another in order to get the best deal. After all, if you don’t care much whether you buy Unit A, Unit B, or Unit C, you will make your decision based on where you can make the most attractive deal. Sellers have to price with this in mind: for their units to sell, they have to not only look attractive but also give the biggest bang for the buck.

However, in the hottest neighborhoods, like the Upper West Side and the West Village, Brooklyn Heights and Park Slope, in the prewar apartment marketplace, and in the market for 6 to 10 room units, control has shifted back to the seller. Where demand outstrips supply almost every property receives numerous bids, because there is so much pent up demand. Pricing in this environment is particularly tricky. As brokers, we do not want to make the Freakonomics mistake and price the property low to make sure it sells quickly. On the other hand we do not want to encourage unrealistic expectations in the seller, since even in the hot market prevailing in many parts of town, a really overpriced property will sit and lose its luster. My brokers report to me that they see huge traffic the first week a listing is available, moderate traffic the second week, but by week three or week four the traffic has slowed to a trickle. So any seller will most likely receive his highest price during the first couple of weeks, when buyers who have been waiting for a place like this to appear compete against each other. Once the first rush is over, the property which didn’t sell will most likely sit for a while.

So as a seller where does this leave you? First, team up with a smart experienced broker. Second, assess your property to determine if it is in a buyer’s market or a seller’s market. If the former, price is likely to be your only weapon, so use it. Today, the only way to move a commodity-type apartment quickly is to undersell relative to the competition. If the latter, you need a price which shoots high but doesn’t put you in competition with bigger, better units. Second, do your homework to honestly figure out the comparables for your property, and don’t wear your rose colored glasses about size or condition. Third, assess any special advantages or drawbacks your home has and adjust the price appropriately (good brokers can ballpark the value of BOTH the advantages and the drawbacks.) And finally, remember that everyone sometimes makes mistakes. If experience proves your pricing strategy wrong, change it! The goal is to be accurate, not to be right.

You can read more on www.warburgrealty.com/blog.

Courtesy of Scott Cutter of 2CostaRica Real Estate

The past 12 months in the real estate world here in Costa Rica has been quite a interesting time for professionals, buyers and sellers in the marketplace.

Perhaps the most challenging task that we have faced as real estate professionals has been the job of re-educating sellers as to the market conditions, values and expectations that they can expect if they would like to sell their property within a reasonable amount of time.

In a market void of an MLS, comprehensive comparable stats on true sales values, volumes, etc., there is a constant battle to keep sellers realistic about values while battling the proverbial: "But 'so-and-so' has his property down the road listed at $2,000,000 and our house is much nicer".

As a father of two, I have now come to fully realize how blind we can all be in our self analysis and that of our own properties, and have learned to deal with this point with our sellers with great care, but that is the subject of an entirely different article and story...

Back to values... In addition to the lack of comprehensive hard data other than our years of experience to share with clients, another obstacle is the fact that most buyers in Costa Rica, especially in the coastal areas, paid cash for their properties and in a country with such low property tax and holding costs, many sellers are content to wait for better times in which to sell.

This is a critical point for Foreign investors to understand. The market adjustments which you see in the USA which tend to move the market up and down in unison as since the VAST majority of real estate there is purchased through leveraged financing, changes in interest, values, absorption, etc. can drive the market in either direction and virtually everything for sale follows that trend.

Here in Costa Rica, you will find a house listed at $1,500,000 right next to one that is every bit as nice, listed at $700,000 and it can be confusing to anyone without the experience to understand the fundamental differences in the market place. The reality is that despite the economic times we find ourselves in, there is a great deal of new movement and sales taking place in the market.

Careful about getting too excited sellers... as this movement is virtually ALL due to the fact that despite the low holding costs, more and more sellers are coming to terms that an imminent boom like the one we enjoyed for nearly a decade is not returning any time soon and adjusting prices to invite buyers to the table.

All economists talk about the huge pool of money on the sidelines right now, with investors just not sure where to go with their funds. Costa Rica remains a fantastic lifestyle and investment destination and buyers are here, looking and snatching up well priced opportunities in virtually every part of the country.

While 4 years ago, we spent all of our time educating Buyers about how even though it seemed expensive to purchase here in relation to the infrastructure, etc. that it was worth it as this was the future destination of much of the world. Now, my team, and my bet is most Realtors who are true professionals, spend most of their time working with Sellers to create realistic expectations of pricing and sales timelines.

For those that "we will sell if we get our price" those timelines can mean years.

We are also helping Sellers realize that taking a much lower price than what they hoped in this market, also has some advantages. The largest of which is that Sellers who move properties now get liquidity to become Buyers in what is arguably the most favorable buyers market around the globe in the past two decades.

Whatever losses or reduced profit margins are absorbed now can normally be regained by becoming a buyer and is something more and more sellers should and are considering.

For Costa Rica real estate buyers... There has never been a better time to be sourcing deals in Costa Rica.

For Costa Rica real estate sellers... Either arm yourself with patience or, we must collectively work towards recognizing that the discerning buyers who actually have money to spend, are not paying the premiums of the pre-crisis days in today's market. Those who can come to terms with this are selling, those who aren't.. are now and most likely will be waiting for quite some time.

By Scott Rudolph

Sometimes it is just a simple message that sparks a wildfire.

Watch the video. Share the video. Catch the message. Make it happen. http://www.youtube.com/watch?v=hOrKLs0QJkA

For sellers, I want to say: birds find new nests and so shall you. Your trusted real estate professional is key to helping you find another home which you’re bound to grow to love as much as what your leaving.


Editor’s Note:
Scott Rudolph is the Director of Business Development for LuxuryRealEstate.com. He works with a variety of luxury-focused companies to expand the LuxuryRealEstate.com influence. The video in this blog entry was made by RealEstateZebra. After watching this humorous video, I feel like holding up a piece of paper that simply says, “Amen.” Changing market conditions demand flexibility and sometimes drastic measures like reducing the price on your home. For better or worse, it’s a buyer’s market right now.

By Robert Lockard

I would like to share a confusation with you. What’s a confusation? It’s a mixture of confusion and conversation. I’m all for preserving the English language and avoiding the addition of new and pointless slang terms. But, at the same time, I enjoy having a little bit of fun with ideas and rules because of my playful nature. I would like to share some of my thoughts in an open, possibly random, way. So, without further ado, let’s begin our confusation.

According to a CNN article entitled “Majority not buying homes, poll shows,” an Associated Press-AOL Money & Finance poll found that 60 percent of their respondents have no plans to buy a home in the next two years. However, the same poll also found that “59 percent think now is a good time to buy.” So let’s get this straight. Sixty percent of the people in this poll said they won’t buy a home in the next two years, even though nearly the same number of people thought that right now is a good time to buy.

That seems odd to me.

I generally don’t give much credence to surveys because I understand all about the standard deviation, margin of error and, of course, the fact that one out of every 20 surveys is completely wrong. Plus, with the advent of cell phones and Do Not Call lists, surveys reach a smaller and smaller group of people and leave out many key groups. Because of all this I try not to take surveys too seriously.

Having said that, this survey does shed some light on an interesting, if confusing, situation. People realize that there are great deals to be had in the current market with prices easing in some markets, but they are either unable or unwilling to take advantage of these deals. Why? Perhaps it is because current homeowners would have to sell their homes to buy another primary residence at a great price.

This might not be especially applicable to buyers and sellers in the luxury market, but it might affect people trading up into the higher echelons of luxury properties. Unless they’ve owned their home since 2001 or earlier, many homeowners face the problem of having to sell their homes for less than they would like.

Now that is a conundrum.

I’ve had my say. Feel free to share your thoughts with me on this. What can we do to let people know when the benefits outweigh the costs of buying a new home?


Editor’s Note:
Robert Lockard is the Public Relations & Media Specialist with LuxuryRealEstate.com. I am Robert. I create all of LuxuryRealEstate.com’s newsletters, write the editorials in LuxuryRealEstate.com Magazine and much more. I appreciate your comments and insights into this topic.

By John Brian Losh

Meghan Barry and I just did a 5-day sweep through Central Florida, visiting several of our prominent members on both the Gulf Coast and the Atlantic Coast. The prevailing feeling is that prices have stabilized and there are, at this time, homes in all categories to be purchased. If you or any of your customers have ever even thought of owning a home in Florida, the time to visit and purchase is now. I believe that the next selling season will bring increased prices and less inventory. I cannot emphasize enough that the time to view and purchase real estate in Florida is now. We are in a very unique time in history where we have low prices, low interest rate and diverse inventory. The perfect opportunity. Visit the Florida Regional Section (www.luxuryrealestate.com/florida) to view property.

Editor’s Note:
John Brian Losh is the CEO/Publisher of LuxuryRealEstate.com and the President, CEO and Broker of Ewing & Clark, Inc. in Seattle. He tirelessly trots the globe meeting with members of LuxuryRealEstate.com and getting the scoop on industry trends. Great stuff.