With more sellers than buyers in the real estate market across the country, listing agents will need to employ more sophisticated approaches to marketing homes. Although the post links here where written specifically for the Durham North Carolina market, the tactics that are described work in any market and are critical in a market with more sellers than buyers.
The five part series addressed the topics described below. I've put all these in a category on DurhamLuxRE I've created for the occasion called "Special Marketing Series." This means that all five plus the introduction and this summary can be accessed from the "Categories" drop down menu on the left margin of the blog. I've also made the outline that follow links to the individual posts that will each open in a separate window (in Internet Explorer) or a separate tab ( in Firefox) if you want to read them in the order they were posted.
Luxury home pricing is paradoxically more difficult but less important in the luxury home market than it is for "commodity" homes with lots of good comps.
We think of the product in terms of bricks and mortar but it is much more than that. Location is important but not under your control. There are lessons from other industries about enhancing the product that can be applied.
Applying a concept from B2B marketing to the marketing of homes. In other words, focusing some of your marketing effort on the buyer agent.
Please feel free you use this material in your own blogs in any way you want or comment at the site. Attribution and a link back if you do would be nice.
When I first got my real estate license I assummed that my many years of marketing experience and the knowledge I had acquired renovating and flipping a couple of condos would be a good basis for my new career.
I was mistaken.
I didn’t fit the profile at all of what the industry considered a potentially successful agent. In fact, I wasn’t very successful. What the industry traditionally looks for are the gregarious type that is willing to network incessantly at the country club, church, kids’ school, etc. Many of the most successful agents religiously maintain contacts with past clients and prospects and love doing it. They are gregarious almost to a fault. A managing broker looked for people who could envision their faces on billboards and bus stop benches and relished being recognized in the supermarket as the local “top producer.”
Agents typically get two types of training.
Initially most of it is associated with obtaining and keeping a license. It is designed to keep them out of trouble and protect the consumer. It focuses on the legal concept of agency and using the appropriate forms.
The other training focus was on drumming up business. It relied on tried and true practices for farming neighborhoods and communicating with past clients and working your “sphere of influence” that included family and friends. Even things like print advertising and open houses which appear to be selling homes are really more useful for promoting the individual.
Which gets to the point.
How come there is so little training on selling homes? The simple answer is that it just wasn’t necessary. In a boom market with more buyers than sellers, everything sells eventually and more sophisticated marketing isn’t necessary. But this isn’t a boom market anymore. Sellers outnumber buyers by a wide margin. Maybe it’s time to consider whether the glad hander on the billboard has any marketing skills. Here are a few questions to ask any agent that you are considering to list your property whether it’s rental property in a declining neighborhood or a multi-million dollar estate.
1. What is your pricing philosophy and how do you determine the appropriate price at which to list a property? Paradoxically, luxury properties are the most difficult to price but the least elastic because they are usually unique.
2. What promotional activities do you propose and who do you target them for? Often overlooked in the promotional plan is the middleman, the buyers agents who can strongly influence what properties they will see and consider.
3. What is your marketing budget? You may be surprised that many agents won’t spend much more on a million dollar home than they will on the average listing that is around $200,000 in our community. Shortsighted? Maybe, but if they know the property could sit on the market for a while or not sell at all, this money comes right out of their lunch money.
4. What is the “unique selling proposition” that you would use to promote this property? This gets at their understanding of both the importance of the product in the real estate marketing mix and also what is promotable. The most promotable feature may have nothing to do with the house at all and more to do with the community.
I vividly remember reviewing a template in the first few weeks of my career for preparing a marketing plan for a prospective listing. It was comprised mostly of things like “place sign in yard,” “place directional signs at key intersections,” “take pictures,” “place in MLS,” “put flyers in info box,” “put lockbox on front door.” I wondered to myself if this was all there was to marketing a home.
What I discovered was that that was all it took…then. But this is now. The best agents still have to be able to establish rapport with potential clients but they are also going to have to demonstrate they can market homes.
I define the luxury market somewhat arbitrarily as anything listing for $700,000 or more.
Amidst all the terrible economic news it might be surprising to learn that the luxury home market in Durham may have held its own during the 3rd quarter of the year…or, at least, it hasn’t gotten any worse. During the quarter, 12 homes listed for over $700,000 sold, compared with 8 in 2007. 6 more are pending. Year-to-date there have been 30 sales, which is one more than during the same period in 2007.
While Durham stayed even, year-to-date sales of luxury homes in adjacent counties slipped. Orange was down 42% (81 sales this year and 139 last year,) Wake was down 14% (352 this year and 410 last year) and Chatham was down 43% (28 this year and 49 last year.)
Declining inventory but not from sales
During the 3rd quarter 27 luxury homes were newly listed or relisted in Durham. In spite of this, inventory, or the number of homes in this category, declined from 86 to 77. If you do the math this means that 24 previously listed homes were withdrawn or the listings expired without being sold. In a less than robust market, you might expect that owners with no great urgency to sell might withdraw them and wait for conditions to improve before relisting.
Where are they?
Of the 77 listings, 20 are in Hope Valley (including Surrey Green), 16 are in Treyburn, 9 are in Croasdaile, 6 are in the Oaks, 4 are in Trinity Park/Hillandale/Watts Hospital, 4 in Maida Vale, 2 in Meadowmont, and 1 each are in Southpoint Manor, Duke Forest and Forest Hills. 13 are not in a subdivision or neighborhood. To see details on any of these properties, you can use the BestHomePro search tools on the Lux Neighborhoods page or DurhamLuxRE.com. I’ve set up searches there for each of the key luxury neighborhoods in Durham. You can use these links to search anonomously any time you want but, please be my guest and register at the search site and follow developments in any neighborhood you like by saving a search and turning on the notifications feature. It’s a good way to track developments in a market as they happen and it will not generate spam from me or anyone else.
Of the homes sold or under contract, 4 are in Croasdaile, 2 each in Treyburn, the Oaks, Maida Vale, and Hope Valley, and 1 each in Forest Hills, Duke Forest, Southpoint Manor, and Meadowmont. The final one not in a subdivision is on Glenn Road.
Price cutting seems to be the primary marketing strategy
Of the 77 luxury listings currently on the market, 39% or 30 have had price reductions ranging from $10,000 to almost half a million. Of the 18 homes that sold or went under contract during the quarter, 11 had price reductions ranging from $25,000 to $400,000.
An alternative to price cutting…raise buyer agent compensation.
Trenton Road Contemporary - $1,199,000
It is my contention that one of the ways to make a listing competitive without necessarily reducing the price is to offer an attractive commission to the buyer’s agent. This gives the buyer agent with a qualified buyer in tow extra incentive to show the listing. (There is more about this strategy in the Luxury Marketing Report. Get it here or from the link in the sidebar on the left.) In Durham we are actually beginning to see the use of this strategy some. Of the 77 luxury homes on the market, 39 offer the buyer agent 2.5% of the sales price. 5 offer less than that with the lowest 1.9%. 30 offer 3% which used to be the standard. Two offer 3.5% and 2 more offer 4.0%. Two of them are new homes in Southpointe Manor. One is a unique contemporary and one is offered by a commercial broker for its development potential. The contemporary is offered by Anne Carpenter of Howard Perry and Walston for $1,199,000 and is pictured above. For more information about it click here.
This is something to try as an alternative to lowering the price of a listing and can actually net the seller more. Some sellers are uncomfortable with this because they already feel like agents make too much money on these high end properties. Some listing agents are reluctant to try it because it can mean that the buyer agent will make more on the transaction than they will. Personally, I have no such reservations. If it gets my client’s property sold, any compensation is better than no compensation.
More information All this information is drawn from data available to any REALTOR with access to the Triangle Multiple Listing Service and does not include transactions that did not involve a REALTOR. If you have questions about any of it please don’t hesitate to call me at 919-819-6666 or email me a jay@jayzenner.com. More information about the DUrham luxury home market can be found at my blog, DurhamLuxRE.com.
I usually wait until the end of the quarter to take a look at the quarter’s activity in the Durham luxury home market but it’s been an interesting summer in some ways. The summer is usually not particularly active but since July 1, six homes in the $700,000 or more category have closed and another 8 are pending.
Inventory is down slightly to 79 active listings. What is interesting is that 21 of those homes have been on the market less than 60 days. The inventory is down from 86 homes at the end of the quarter. If this doesn’t add up for you it is because there have been a number of homes that have been withdrawn from the market during the period or the listings expired. This suggests to me that if the market was a little more vibrant than the inventory would be much higher. Many sellers will not (or can not) cut their prices and will stay put until the market improves. Only three of the 14 closed or pending homes are new homes, which suggests some improvement in the resale market. Let’s hope this trend continues.
At the end of the quarter, I’ll compare Durham’s statistics with our neighbors to the east and west. Learn more about Durham's luxury home market at DurhamLuxRE.com where you will find profiles of Durham's luxury neighborhoods with map searches centered on the neighborhoods.
For many years the contrast between the vibrancy of the luxury home markets in Durham and those in Chapel Hill has been stark. Chapel Hill has boomed and Durham typically has two and a half years worth of inventory on the market. The joke was that the best thing that could happen to the Durham luxury home market would be to be to get Chapel Hill to annex Durham and give everyone in Durham a Chapel Hill address. Ha ha. I never thought that was funny but a blog post on BullCityRising got me thinking about how the distance between the two communities is shrinking in a lot of ways.
The post is about an article in Bon Appetit magazine covering how “Durham-CH has become one of the country’s foodiest small towns.” Unnoticed by me until recently, Durham is now the lead city in the Metropolitian Statistical Area (MSA) that includes Durham, Orange and Chatham counties. I made a quick stab at trying to research when this divorce from Raleigh and Wake County took place but couldn’t come up with anything. However, I doubt that it is cause as much as effect of what you see when you look at where development is taking place.
Much of my attention has been focused on the revitalization of Downtown Durham and the positive impact that it is finally having on Durham’s image. But the fact of the matter is that a lot of the most active development is going on between Durham and Chapel Hill. The short trip east on highway 54 or I-40 from Chapel Hill takes you to Southpoint, with some of the best shopping in the region and much commercial development. A great deal of development is also occurring on the 15-501 corridor between the South Square area and Chapel Hill. The road improvements on this stretch will only stimulate more interaction between the communities.
Two of the region’s really nice upscale communities, The Oaks and Meadowmont, actually straddle the county line, albeit with Chapel Hill addresses by virtue of being in the 27517 zip code. There is actually more activity in the Chatham County luxury home market than in Durham proper, although they are both in the same SMA led by Durham. Less visable but also important is the residential development along and off Erwin Road and around the Koristan Division of Duke Forest.
What does this mean for the luxury home market in Durham? I can see the day when most people moving here for the region’s high tech industries and research universities will be less aware of the historic distinctions between the communities. But that day is not here yet. Today the owner of upscale property in Durham still faces uncertain prospects and a lot of competition if they desire to sell. There is still a need for exceptional marketing to stimulate sales in Durham’s several really fine neighborhoods. It still amazes me that most of the current efforts in this area still focus on the “bricks and sticks” when this is the least likely thing to turn the tide. Durham still suffers from an image that is out of touch and out of date. Real estate agents need to be in the forefront of selling the community and its numerous amenities to agents in other areas of the region and to buyers around the world. The Bon Appetit article highlights just one of these…our foodie community. For more details on how to make this happen see the report on the Durham luxury home market that launched this blog site.
For more information, including neighborhood profiles, market statistics on Durham's luxury home markets and Durham amenities go to DurhamLuxRe.com
The lead editorial today in the Durham Herald-Sun is headlined “Durham’s message is getting around.” It sites a poll that seems to confirm that the residents of Wake and Orange counties increasingly have a favorable view of Durham. It cites the efforts of the Convention and Visitors Bureau, The Chamber of Commerce and Downtown Durham, Inc. for doing a better job of telling Durham’s story. One can agree with everything the editorial states but still have mixed feelings about it’s appearance at this point in the game. Why now? The editorial writers didn’t just notice the dramatic developments or the impact they would have on our neighbors to the east and west. Of more concern, however, is why more Realtors, especially in the luxury market segment where homes need wide exposure, aren’t actively promoting Durham and her neighborhoods more aggressively around the Triangle. The copy I see on “e-flyers” and on Realtor.com is still focused on the bricks and mortar and ignores half the experience of owning a home in the Durham Community. Amenities like the DBAP sell the community. Many people risked their reputations and political careers to push the DBAP and now the Performing Arts Center. It could be that we’ve been defensive for so long that we’ve forgotten how to be proud of our community. How often do we encounter phrases in copy like “prominent Durham address” or “in the heart of historic Hope Valley.” This is not false pride. This is not spin. This is not hype. This is the duty we owe to our clients to show their homes in the best possible light. The Durham Luxury Home Report for 2008, discusses in more detail specifically how to use the Durham’s growing list of amenities to promote luxury home sales. This is available in a pdf format and does not require that you register or provide any information. Additional information and links to Durham information is available at DurhamLuxRE.com.
From the Durham Luxury Real Estate blog....As we pass Memorial Day, the Summer solstice and Independence Day, the dog days of summer are upon us. We’ve also had more consecutive days with rain than many of us can remember. But even if drought fears have receded a bit, sales of luxury homes in Durham have been sparse and July and August are not typically strong months even in the best of times. Last year in the second quarter 15 homes in the $700,000+ category where sold in Durham. This year it was 7 and the dollar volume was down 49% from $14.7M to $7.5M. Since there were 11 sales in the first quarter, the year-to-date comparisons are not so dramatic; 21 sales in 2007 compared with 18 this year and dollar volumn down just 18.8%. Both Orange and Wake Counties saw significant drops in the sales of luxury homes in the same pattern. There are two differences, however, between Durham and the other two markets. The first is that Durham listings in this luxury category represent only 8.4% of the homes while it has over 17% of the total listings in the three counties. Second, it had only 4% of the sales in this category in the second quarter. With 86 homes on the market there is enough inventory to satisfy the demand for more than the next two and a half years. These statistics shouldn’t surprise anyone in the real estate community that has been following the luxury market in Durham for the last several years. What does surprise me is that there doesn’t seem to be any change in the marketing practices employed by the listing agents that are active in this segment in Durham. Durham is undergoing a revival led by events downtown many of which have been mentioned in posts on this site. The quality of the luxury housing stock as well as convenience to shopping, entertainment and the major employment centers, in most cases is as good or better than anything in Wake or Orange counties. The difference is that Durham is dealing with an out-of-date image that holds back sales. Sooner or later that image will catch up with the facts on the ground and the market will improve. Listing agents that market the entire experience of living in Durham and not just the bricks and mortar of their listings will be the first to benefit and help move the whole market forward. From a marketing perspective the long term solution is to do a better job of promoting Durham and its unique and growing list of assets. The Newcomer’s Guide to Buying Luxury Real Estate in Durham available through the link in the sidebar is my attempt to provide one arrow in the quiver necessary for this effort. It may be a little too personal to plagiarize verbatim but I hope every agent who lists in this market creates something similar or an improvement upon it and distributes it widely. However, market share and long term strategies to promote Durham’s renaissance are irrelevant to the family with a home currently on the market. There are strategies that are not widely applied today that break with tradition as well as employ new technology to better position and promote a listing. The other report available on the sidebar, The Durham Luxury Home Report 2008, describes some of the details about how to do this. Both reports are offered with no obligation.
Seth Godin is an author, marketing guru and blogger who’s posts are often short and sometimes cryptic but always interesting. This is a short post from June 20th that has relevance in the Durham luxury home market today.
Your sales force and your customers may scream that you need to lower your price.
It’s not true.
You need to increase your value.
If people don’t want to pay, it’s because you’re not delivering enough value for the money you’re charging.
You’re not selling a commodity unless you want to.
How does this advice apply to real estate, especially luxury real estate? As the CEO of a small business with one purpose…to sell your home…in a slow market it is quite conceivable that your marketing director/listing agent and potential customers would put pressure on you to lower the price. T
he irony is that often you don’t have to add value as Godin suggests, all you have to do is point it out. Levittown, PA was the original “commodity” suburb, with row after row of similar houses…six models actually…built after World War II. Aerial View of Levittown, PA about 1959 from WikepediaLuxury homes are the antithesis of commodity homes. Yet so much copy written about luxury homes focuses on commodity features such as size and rooms and not the experience of living in the home or the community.
Size and quality in the shelter component of a luxury home are a given. The added value comes from the less tangible things. To get the best price the marketing materials need to illustrate these things. This may take some practice. Few real estate agents working today have ever had the experience of working in this kind of real estate market where the buyer is king and more sophisticated marketing is needed to make a listing stand out and command a premium price.
The appeals are as different as the homes. The emphasis can be on entertaining, privacy, security, architectural distinction, social connections, history or even pure hedonism. It’s selling the sizzle not the steak, the au gratin not the potato. Does your listing agent talk about the thrill of victory or just give the score.
One section of the Newcomers Guide to Buying Luxury Homes in Durham posted on DurhamLuxRE.com specifically addresses some of the technical issues that can vary from state to state. The most important of these is the concept of agency. Until a few years ago, all real estate agents in North Carolina technically represented the seller in a transaction, even when that agent was engaged by the buyer. The real estate commission decided that buyers deserved equal representation and formally established “buyer agency” with its own set of practices and requirements. All licensed agents are licensed to represent either buyers or sellers and under certain circumstances they can represent both in the same transaction. When an agent or broker (all licensed agents in North Carolina are now brokers) signs a listing agreement with a seller, or a buyer agent agreement with a buyer, they assume some important obligations to protect their clients’ interests. When interviewing buyer agents it is important to be careful about what information you share with them about your motivations or financial situation until you actually sign an agreement. An agent may show you homes without a buyer agent agreement in place, however, at that point the agent is technically representing the sellers and should use any information they have learned from you to get the best deal for the seller, not you. This troubles some buyers who do not want to commit to a buyers agent that they may have just met. However, most buyer agents will work with a client with a short term agreement or readily release a buyer from an agreement if some conflict develops. Per the Commission regulations, one of the first things any agent you talk to in a “meaningful” way should do is explain these agency rules. This is not only a NCREC regulation, it makes sense and protects the buyer’s interests.
One of the first things I like to do with a new buyer client after discussing agency is review a flow diagram I put together that illustrates all the steps and different professionals that are typically involved in the home buying process. This only takes a few minutes but it makes subsequent communications much better and minimizes surprises in the process.
A friend and reader of the Durham Luxury Real Estate blog forwarded an article to me about branding in real estate. The analysis was primarily intended for large national developers but it made some points worth considering in our effort to improve the marketing of luxury properties in Durham.
This blog has taken the point of view that one of the reasons, if not the primary reason, that the luxury home market in Durham is not more vibrant, is that the Durham "brand" has not caught up with the emerging reality. This is not a unique observation. During the last couple of years the Durham Convention and Visitors Bureau has headed up an effort to brand Durham as the city "Where Great Things Happen." The group that developed this slogan and the the graphics associated with it represented a broad spectrum of community groups. As you might suspect, some compromise would be necessary to reach a consensus. Nevertheless, if promoted aggressively and adopted widely, this will improve the situation. To put some legs under it, it needs a more concrete emphasis. Just like marketing homes, the community needs to emphasize what marketers call a "unique selling proposition."
For years the Chamber successfully promoted Durham as the City of Medicine in spite of the fact that the vast majority of people consider medicine as something you take when you are sick. What the city fathers had in mind, of course, was medicine as a noble profession and it let us emphasize the number of people that lived here with post graduate degrees and the ascendency of Duke as one of the leading medical centers in the world.
With that firmly established, the strongest reason we can offer people to look closely at us now is the fact that we are rapidly becoming the "arts and entertainment" hub of the Triangle. The cumulative impact of our great selection of fine restaurants, the DBAP and the DAP, the Arts Council, the Golden Belt development, the Carolina Theater, and the new Performing Arts Center is that it's not a hard case to make that Durham is a great place to live, maybe even the best place in the Triangle to live. The emphasis on "arts and entertainment" was what propelled the initial marketing of downtown revitalization. That direction also helped it attract residential and business development as well as encourage additional growth in arts and entertainment.
The real estate community and especially those that market luxury properties need to wave that banner more and more. The copy in our brochures and on our web sites needs to address the fact that people aren't just looking for shelter, they're looking for a lifestyle. If we depend on news outlets to create our image the emphasis will be on what is dysfunctional and dangerous, not what is beautiful and enriching.
Currently the City Council is debating a proposed budget that drastically cuts the funding to several arts organizations that have been part of that revitalization. Without taking sides in the debate about whether public funds should be used, community support of our arts organizations is critical to enhancing Durham's image and establishing our "brand."
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
When I first got my real estate license I assummed that my many years of marketing experience and the knowledge I had acquired renovating and flipping a couple of condos would be a good basis for my new career.
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