Serving the Luxury Market

Illinois REALTOR® Magazine | October 2013

graphic representation of serving the luxury market

Serving the Luxury Market

By Stephanie Sievers

Luxury real estate.

It’s a phrase that conjures up images of gourmet kitchens, carefully tended lawns and sweeping square footage. Some Illinois REALTORS® looking to carve out their niche of the business have found success focusing on the highest-end of their housing markets.

“It’s fun. It’s a great niche to work but it takes a lot of time,” says REALTOR® Claire Leopold, broker-owner of Coldwell Banker Nester Realty in Swansea.

Claire LeopoldBecause the pool of buyers is limited, luxury homes can take longer to sell — think years not months for some properties — and the parties on both sides of the transaction have high expectations about the professional service they expect during the process. Sellers may want you present at every showing and buyers may want owners to throw in customized luxury amenities as part of the deal.

“Your higher-end client is much like your lower-end client, they just have a different set of demands,” said REALTOR® Jim Kinney, vice president of luxury home sales for Baird & Warner in Chicago and 2013 Treasurer of the Illinois Association of REALTORS®.

And what constitutes a luxury property? It can depend on your local market. In Leopold’s Metro East area, a “luxury” listing could be a home selling for $500,000 while the benchmark in the Chicago area would fall closer to $1.5 million to $2 million and up.

Know what your luxury clients want and adjust when it changes 

Beth BurttWhen REALTOR® Beth Burtt, broker-owner of Brush Hill Realty in Hinsdale, first began working with luxury home sellers, privacy and discretion was the key. Many owners didn’t want the property marketed extensively, didn’t want people in the home and didn’t even want many photos taken.

But the power of the Internet in the home-buying process has also shaped the high-end market and now even the wealthiest homeowners have grown more open to how they are willing to market their properties, said Burtt, a 32-year veteran of the industry.

“They’ve gotten more flexible. They realize you have to introduce the property online and have wide exposure and they realize they need to bring it down to the local level with agents seeing their property,” she said. “The Internet has become the starting point for buyers of all price ranges.”

But some clients, particularly celebrities, may still value privacy above all else. Kinney says that when the late Chicago film critic Gene Siskel was selling an apartment, he wanted the listing advertised everywhere. The opposite was true of Oprah Winfrey when she sold a Chicago property.

“You’ve got to figure out, what does the client really want,” he said. “There is an art to keeping a client happy.”

Sell the luxury lifestyle, not just the home

REALTOR® Mari Halliday, a broker with RE/MAX Unlimited in Peoria, made luxury her niche soon after getting started as a REALTOR® nearly nine years ago and says she works hard to pair potential buyers with the luxury lifestyle they are seeking.

For example, “foodies” will want a fabulous gourmet kitchen with commercial-grade appliances. A car enthusiast may want a multiple-car garage with a car lift while a wine connoisseur will be looking for a home with a wine cellar and an avid golfer may want to live in a golf course community.

For other buyers, it’s all about privacy or a great location in sought-after neighborhoods along the Peoria river valley.

Mari Halliday“Right out of the gate, I took a calculated risk and decided I wanted to have this (niche). I worked it hard, believed in myself and it worked,” Halliday said.

She lives in one of the area’s golf course subdivisions and broke into the luxury market by farming that community and building her reputation there. Overall, the Peoria luxury market has been fairly strong. Inventory levels are good, and within the last 12 months, seven homes in the area have sold for more than $1 million, Halliday said.

When it comes to enticing buyers, Leopold said it is important not only to price a property well but also to encourage sellers to throw in some of the home’s luxury items as part of the sale because it helps with value perception.

That can include flat-screen televisions and all the media room hardware that owners had installed, high-end specialty appliances and custom furniture built to fit the home. If it took the owner time and money to add customized, or built-in pieces that are unique to the property and add value, potential buyers will be interested in it too, Leopold said.

“It completes a picture so buyers like what they see,” she said.

Fill the void if the luxury niche isn’t being served

John and Diane DowdREALTORS® and spouses, John and Diane Dowd, brokers with Dickerson & Nieman in Rockford, decided to branch out into luxury after attending a session at the National Association of REALTORS® conference in 2005.

Realizing there was an untapped niche in their market, they earned their certification from the Institute for Luxury Home Marketing. Success in the luxury niche often builds on previous success and referral. Big sales can help build buzz.

“You have to start selling at that level and demonstrating to them that you do because a lot of that market spreads by word of mouth,” John Dowd said.

Other tips for making your mark: “You’d better be on the Internet in spades. You’d better have wonderful virtual tours. You’d better have tremendous literature on each property. Photography has to be top notch. And you have to be able to get it to the marketplace,” he said.

One luxury marketing extra the Dowds find helpful is hosting wine and cheese soirees for select local agents rather than the customary broker open house. It adds to the high-end perception of the property and clients appreciate this kind of effort, he said.

Like the rest of housing, the luxury market has been affected by the economy. In Rockford, prices are lower than they had been before the economic downturn and new construction of luxury properties has slowed, lowering available high-end property overall, Diane Dowd said.

Reverse recovery even in luxury

Jim KinneyKinney said one trend he’s seen is that the traditional top- down market recovery hasn’t happened this time.

“The top market gets confidence first and gets energized and it trickles down. The reverse is the case now. This has been all about the foreclosures, short sales and the distressed market. The activity has come from the bottom and it has slowly come to the top,” he said.

Earlier this year in the Chicago market, homes at the lower end of the luxury tier (around $1 million) saw a 40 percent increase in sales while those listed for $1.5 million and up saw closer to a 14 percent increase, Kinney said.

“What it is showing is that the true luxury end of the market has not had the full recovery that other markets have seen. It’s getting there but the upper end of the market is waiting for more people to get out of their homes in the middle market so they can trade up,” he said.

But Kinney and other REALTORS® say they are optimistic and there does seem to be renewed confidence in the luxury market recovery.

Many REALTORS® say financing has been less of an issue for luxury buyers than the rest of the housing market. High-end buyers expect to have a large down payment and there are jumbo mortgage loans and other options available for high-end buyers with strong qualifications.

One financing trend that Kinney has seen, however, is that self-employed luxury buyers who in the past may not have pulled out a “salary” from their business, must now do so to better document an income for mortgage underwriting requirements.

Finally, know your luxury market and be ready for the opportunities 

Some agents may be intimidated about breaking into the luxury niche but one of the keys to success is becoming an expert in the local luxury market, Kinney said. Study your market and get in to see the properties firsthand so that you can speak knowledgeably about the comps in the area. Luxury buyers and sellers want to have a comfort level that you know the marketplace, Kinney said.

You never know when that background knowledge will pay off but when it does you will be ready. Burtt studied her market inside and out and would talk about it with two high-end builders as they watched their children’s softball games. Eventually she was the agent they contacted when they wanted to do business.

“Know you market better than anyone and try every avenue to promote yourself,” she said.

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October 2013

October 2013 cover

Niche Issues: Finding your piece of the market

Ultimate Luxury Homes

Illinois has its share of jaw-dropping luxury homes. Here is a snapshot of some of the highest-end properties that sold in the Chicagoland area in the last year:

  • $15 million
    Penthouse condo on Michigan Avenue in Chicago.  Amenities: 16-foot ceilings, 360-degree panoramic views, a library and private terrace.
  • $12.7 million
    Lakefront home in Winnetka. Amenities: Seven fireplaces, pool with cabana, wine cellar, media room, sunroom and four-car garage.
  • $12.3 million
    Lakefront villa in Winnetka. Amenities: Elevator, six-car garage, exercise room, six bedrooms.
  • $6.5 million
    Penthouse condo in Chicago. Amenities: Two terraces and multiple balconies, two fireplaces and a steam shower.
  • $6.2 million
    Historic brick home in Chicago’s Gold Coast neighborhood. Amenities: Paneled library, six bedrooms, landscaped terrace and six fireplaces.

Source: Midwest Real Estate Data (MRED)

Tips for Working the Luxury Market

Become an expert on your local luxury market. Don’t just read about a home’s details on the MLS, attend broker open houses so you can see the floor plan and features in person. Luxury clients want to know that you are familiar and knowledgeable about the market.

Breaking into the luxury niche can take time and can build on past success. If you successfully list a higher-end property your reputation and track record as a “luxury” agent will grow. Lay the groundwork so that you are ready when the opportunity arises.

Know that luxury clients will expect a higher level of personal service from you, including higher-end marketing efforts, i.e. hiring a professional photographer for listing photos, glossy brochures or more elaborate broker open houses.

Don’t just sell the property, sell the lifestyle that goes with it, whether it is a golf course community, horse property or home amenities that fit a buyer’s hobbies.

Financing may be less of an issue for luxury buyers but make sure they are pre-approved.

Don’t focus on the luxury niche to the detriment of your broader market. In many Illinois markets, luxury homes are only a fraction of the overall market. You may want to make luxury just one of the niches you target.

Consider earning a luxury market certification from the Institute for Luxury Home Marketing, Luxury Home Council or others.

Lights, Camera, Action

In some U.S. luxury markets, real estate agents and their sellers are upping the ante when it comes to marketing their high-end properties by producing mini-movies complete with actors, directors and plot lines. The Wall Street Journal reported on the trend in August, saying the expense of these “ultimate listing videos,” can range from a few thousand dollars to $1 million or more. (source: WSJ)