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Earning Those Big Commissions: The Challenges of Selling Luxury

by Chicago Agent

Jim Kinney knows about selling high-end real estate, the homes dotting the Chicago area with prices that start at $1.5 million. As vice president of luxury home sales for the Gold Coast office of Baird & Warner, selling the priciest of residences is Kinney’s specialty.

He knows, then, that moving these homes is no easy task.

also…

The Road to Riches

See how two luxury agents got their starts.

Humble Beginnings

Three luxury agents recall their very first listing. Some of these first listings are quite different from the listings they sell now!

It takes market savvy, hard work and, of course, a bit of charm. Agents have to dress the part. They have to network as if every sale depended upon it, because in luxury real estate, they often do. And they have to be willing to spend big dollars to produce the glossiest of marketing materials.

It sounds like an investment, but those agents who take the necessary steps to succeed in high-end real estate are rewarded with the most generous commissions in the home-selling industry.

“The high-end market has its own unique trends and demands from both buyers and sellers,” Kinney said. “If you’re an agent, you’ll have to rely on your sphere of influence to gain clients. It’s a lot easier for seasoned agents to work the high-end market than it is for brand-new ones. But it’s not impossible. You just have to understand this market and be willing to do what it takes to gain the respect and trust of the clients in it.”

What, then, does it take to succeed in luxury real estate sales? Chicago Agent spoke to some of the top performers in this field. And they had plenty of advice.

A Sluggish Market

Agents hoping to sell high-end homes should know one thing: it sometimes takes years to sell that multi-million-dollar property.

There are plenty of reasons for this. Fewer buyers can afford the priciest of homes. This means there’s a smaller pool of potential takers for each high-end listing. And the buyers of luxury properties are picky; they know exactly what they want. If a buyer wants eight bedrooms, a high-tech home theater and a huge plot of land, that buyer won’t bite on a listing that has just two of the three.

Because of this, it can sometimes take agents years to sell a luxury listing.

“It’s not unusual for you to sit down with a client, and you both know that you are talking about a sales process that could take years,” Kinney said. “Developing a good relationship with that client, then, is important. I always tell this joke: ‘I once had a client who was expecting her first child when we first talked about selling her high-end home. By the time I sold it, she had three children.”

Because there are so few buyers for luxury real estate, it’s important for agents to study the high-end market carefully. Agents need to keep tabs on any luxury homes that have sold in their market. They need to know what sales price these homes fetched and how long it took for them to nab an offer.

Just ask Beth Burtt. A broker/owner of Brush Hill Realtors in Hinsdale, Burtt is one of those experts in the high-end real estate market. And she never lets herself fall behind on market information.

“People can stop me in the supermarket or on the street. They can ask me, and I’ll be able to tell them how much a home is listed for and how long it’s been on the market,” Burtt says.

It’s this knowledge of the market that instills confidence in high-end homeowners. It also creates loyalty.

As Burtt says, agents should study their markets no matter whether they’re selling $100,000 homes or $1 million estates. It’s just that agents specializing in the luxury market need to do everything on a level that is just a bit higher.

“I’ve picked up clients because they are attracted to having someone who is passionate about this business, someone who knows every house on the market,” Burtt said. “I get calls from all kinds of people who want to pick my brain, whether it’s my clients, appraisers or other agents.”

“People can stop me in the supermarket or on the street. They can ask me, and I’ll be able to tell them how much a home is listed for and how long it’s been on the market.”
— Beth Burtt

Agents hoping to specialize in luxury real estate need to know why certain million-dollar-plus homes have sold and why others haven’t. They need to know what types of appliances dotted the kitchens of high-end homes that sold. They need to study the bathroom fixtures, flooring types and finishes of those homes that sold.

And then they need to share this research with their sellers.

“It’s incumbent on any agent in this market to study it thoroughly,” said Jay Rodgers, an agent with RE/MAX Excels in Geneva. “They have to do their best to evaluate where this market is going.”

For instance, Rodgers, though his own study of the luxury market, has discovered that the market for executive rentals is a strong one today. Rather than sell their million-dollar properties for a significant loss, luxury owners are instead holding onto their homes and renting them out to business executives who have been transferred to the Chicago area from other parts of the country.

To take advantage of this, Rodgers and his team have crafted a campaign designed to inform high-end owners that they have this option, and that it might make more financial sense in a luxury market that is so dominated by falling values.

“I made it a point to learn this market inside and out,” Rodgers said. “I was out studying streets and learning the names of the people who lived there, even before I made my first high-end sale. I wanted to be able to speak knowledgeably about market conditions and neighborhoods. That way, I could give clients a certain comfort level that they otherwise might not have had.”

Rodgers is also working with clients to provide them with an important reality check about today’s high-end market. Housing values are falling for all property types, including properties that list for $1 million or more.

“The high-end market is lagging behind the market for more moderately priced homes,” Rodgers said. “That’s an important fact for sellers to realize. Some of the sellers have not yet adjusted their prices to reflect the market conditions today.”

Rodgers, though, has hope: once these sellers do adjust their prices, he said, it should provide a solid boost to luxury sales.

Kinney agrees that luxury homeowners need to be realistic when it comes to the current residential real estate market. It’s important for their agents to help them set realistic prices.

And it’s equally important for agents to tell these owners when it might make more sense financially to wait before listing a house. By being honest with their luxury clients, agents go a long way toward building the trust that high-end owners so dearly value.

“It’s so important to impress upon the client the need to get that property priced properly to the market if they want to sell,” Kinney said. “If they don’t want to go to where today’s price is, they’re better off not being on the market.”

Experience is Key

The agents interviewed for this story all agreed on one factor: experience is key to landing high-end clients.

The owners of million-dollar properties don’t want to work with rookie agents. They’ll only trust their listing to those agents who have a proven track record of moving properties. For this reason, high-end agents say, it’s nearly impossible for new agents to move immediately into luxury sales.

“Buyers and sellers can deal with a cycle or two, whether they’re up or down cycles. But what’s happening today in our economy freezes people’s way of thinking about the real estate market. There is no way of knowing what’s next. Every morning it’s, ‘What’s next?’”
— Houda Chedid

There’s a reason for this: veteran real estate agents have experience with a wide range of markets. They know how to sell homes in both tough times and good ones.

Houda Chedid, a broker associate with Coldwell Banker Residential Brokerage in Lake Forest, is a good example. She’s a luxury specialist who knows her market. She can tell homeowners in this segment exactly what challenges they face and what steps they can take to move their homes as quickly as possible.

“The biggest challenge today really is the economy,” Chedid said. “Buyers and sellers can deal with a cycle or two, whether they’re up or down cycles. But what’s happening today in our economy freezes people’s way of thinking about the real estate market. There is no way of knowing what’s next. Every morning it’s, ‘What’s next?’”

Because of this uncertainty, high-end sellers are more likely than ever to seek a listing agent with years of experience.

Chedid, for example, has proven success in marketing and moving high-end homes. She’s not shy about spending dollars on professional brochures. She doesn’t hesitate to take out ads in specialty publications that target doctors, lawyers and business executives.

And she’s an expert when it comes to networking. It’s these networking relationships that often led her and other luxury agents to the perfect buyer for a million-dollar-plus home.

“Networking is very important in selling anything, but with luxury homes, it’s even more important to network with other agents,” Chedid said. “The luxury buyers are very private buyers. They choose agents whom they trust. They’re looking for an agent who will protect them and present them properly.”

The most realistic path to a career in selling high-end real estate is a long one: agents need to develop a large list of clients over the years. They can then build to pricier listings as these clients continually move up the housing ladder.

They can also rely on referrals from these clients to build an even bigger sphere of influence. After several years of succeeding in the more traditional realms of the housing market, agents can gradually take on higher-end listings, until they’re finally representing million-dollar homes.

Thinking Quickly

High-end sellers tend to be busy people. They’re running successful businesses. They’re involved in charities and professional organizations. They’re constantly taking on more challenges. Because of this, they don’t tend to have much time, and they want their real estate agents to solve any problems they might have as quickly and creatively as possible.

“These are people who have big demands on their time,” Rodgers said. “You have to be creative with your marketing efforts to reach a very specific group of potential buyers.”

“In an environment where there are few transactions to begin with, you have to go into these high-end deals with an open mind. You have to search diligently for the core reasons why clients are doing what they’re doing. You have to be ready to think of a solution that they might not have thought of.” — Jay Rodgers

Creativity is also important. Rodgers points to a high-end sale he completed last year in St. Charles. He was representing a buyer with A-plus qualifications. But the buyers wanted a specific type of home, and weren’t willing to budge from these requirements. After nearly two years of looking to no avail, they told Rodgers that they’d decided instead to build the house of their dreams.

But Rodgers wasn’t ready to give up. Instead, he worked with his buyers to engineer a trade. The buyers found one of Rodgers’ listings that they liked. To complete the deal, though, Rodgers had to get creative. He suggested that his seller clients purchase the home that his buyer clients were trying to move. The buyer clients would then purchase the home being offered by the sellers.

The move, it turned out, worked wonders, and the deal closed.

“The home that the sellers ended up with was a great home,” Rodgers said. “It was a path to them accomplishing what they wanted. They wanted to sell their bigger home and trade down. The buyer, on the other hand, was moving up. It made sense all the way around.”

Rodgers predicts that his seller clients will eventually sell the smaller home that they purchased in this deal. But they’ll probably wait until housing values finally stabilize.

“In an environment where there are few transactions to begin with, you have to go into these high-end deals with an open mind,” Rodgers said. “You have to search diligently for the core reasons why clients are doing what they’re doing. You have to be ready to think of a solution that they might not have thought of.”

And those agents who can pull this off? They’ll find that they’ve gained the trust of their high-end clients. These high-end clients will then turn to them for their future real estate needs. And, just as importantly, they’ll refer their friends, family members and co-workers to these creative agents.

This is how luxury real estate specialists thrive.

Connections

Luxury specialists also have another advantage: they tend to be well-connected to a wide range of potential buyers and sellers.

Kinney explains it like this: high-end homeowners tend to be active in charities and philanthropic organizations. This means that agents who want to specialize in this market have to be members of these organizations, too.

Those agents who spend time moving in the same circles as do the area’s wealthiest homeowners will become familiar faces to high-end clients. And when these homeowners need to sell, they’ll be more likely to contact the real estate agent who happens to sit on the planning committee of their favorite philanthropic institution.

“In the luxury market, so much of your success depends on personal relationships,” Kinney said. “The more organizations you belong to that benefit the causes important to your potential clients, the more likely you are to form relationships with potential clients.”

Kinney has taken his own advice to heart. In the past, he’s held leadership positions with the Illinois Eye Bank, Greater North Michigan Avenue Association and the Bright Promises Foundation. Kinney is quick to point out, though, that agents can’t join these associations just to meet potential clients. They have to believe in, and be strong supporters, too, of the work that these organizations do.

Professionalism is another key for those agents who want to specialize in high-end sales, Kinney said.

This means using only top-quality photos for online listings and printed sales materials. It means creating high-quality video tours and writing marketing copy that flows well and is free from any embarrassing typos.

“A lot of what you are representing is the client’s ego or perception of themselves,” Kinney said. “Everything you do as far as marketing goes has to be flattering and appealing.”

Burtt says that photos are more important than ever for high-end real estate. That’s because so many potential buyers scour the Web before they even make a list of which high-end homes to visit.

If the photos online don’t showcase the residence in its most positive light, many potential buyers might take a pass on even visiting the property.

“Fabulous photography is so important today,” Burtt says. “People look at the photos so early in the process now. In the past, people looked at the photos when they were in the actual house holding a brochure. Now, good photos are what lure them to the house.”

Then there’s dressing for success. It might seem like a minor detail, but luxury clients don’t want to see their agents wearing flip-flops and jeans. They want agents who look like professionals.

This is why Kinney comes into the office wearing his suit and tie.

“If you’re working with a buddy, you can dress down. It can be casual Friday,” Kinney said. “In high-end, though, your personal appearance goes a long way with clients. Remember, you are an extension of that client. You have to pay attention to your image. Dress like you belong in this market.” C.A.

Contact:

Jim Kinney
Baird & Warner
312.981.2081
jim.kinney@bairdwarner.com

Houda Chedid
Coldwell Banker
847.987.8517
houda.chedid@cbexchange.com

Beth Burtt
Brush Hill Realty
630.204.8090
BethBurtt@aol.com

Jay Rodgers
The Rodgers Group – RE/MAX Excels
630.377.1400
jay@rodgersgroup.com

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Comments

  • Robert McIlvaine says:

    A great article. It’s good to get some ‘inside’ information from agents who work with clients of that caliber, because some agents, such as myself, that haven’t been in Real Estate very long just haven’t a clue as to what it takes to handle a high end listing and the article puts it into perspective to some extent as to how hard the agent has to work to get the deal done. Great job!

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