In the best of times, the high-end real estate market presents a unique set of challenges that may not apply to residences at lower price points. Depending upon location, homes marketed as luxury properties typically start at $750,000, but they are set apart from the rest of the market by more than price. Buyers at this level often have very specific ideas regarding the kind of homes they want. Finishes, size, design and location all factor into giving a home those extra features that render it a luxury property.
It’s never been easy to find residences that check all the boxes for this group. But those struggles have been exacerbated since the onset of the COVID-19 pandemic as sellers pull back from having their homes shown, causing a national slowdown in the market.
However, Chicagoland’s luxury market is still active. Buyers who can afford high-end housing are still willing to take their time and do their homework while seeking the perfect property to meet their individual needs. Agents who are prepared and who have deep knowledge of the luxury market are well positioned to help them in their search.
It’s not just the properties that are different from the norm, though. Luxury buyers may be savvier about the market than the traditional buyer or seller, and they want agents who are capable of finding a home that meets their specific needs, sometimes within a challenging time frame.
Breaking into the high-end market
Despite the challenges, many agents dream of representing luxury clients. The allure of a sizable commission, the prestige of handling properties that may be worth millions of dollars and the opportunity to be referred to other potential clients seeking similar homes are hard to resist. But it’s important to put in the time, first.
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“You don’t really move from one housing type to the other; you earn it,” said Millie Rosenbloom, an agent with Baird & Warner in Lincoln Park. “It’s more of a growth. You need the knowledge in order to elevate yourself to luxury.”
One of the most important first steps in representing luxury clients is earning their confidence. “The trust comes from knowledge,” Rosenbloom said. “Knowledge of the market [and] of the process and also having a great support team around you.”
For Ginny Stewart of Jameson Sotheby’s International Realty in Hinsdale, the key to succeeding at the luxury level is to keep in mind that every client wants the best price on the shortest timeline, whether selling at the luxury threshold or at a lower price.
“For luxury, there may be more at stake and more competition,” she said. “However, I have sold homes in all price ranges and worked with clients from all walks of life. Our relationship management and personal investment do not change from my perspective, regardless of the price. I can have a $200,000 buyer or I could have a $5 million buyer or seller, and they get the same level of service. It does take longer for the $5 million one to sell, but I always give them the same service that I would want if I were the customer on the other side.”
Getting to know the cosmopolitan buyer
Trends in the luxury housing market have shifted to reflect a greater emphasis on mobility, convenience and personal well-being, according to the March 2020 Luxury Marketing Report issued by the Institute for Luxury Home Marketing. The report spotlights buyers in the “Very High Net Worth” bracket whose personal wealth ranges from $5 million to $30 million. They possess more than 25 percent of the wealth currently held by millionaires, according to the organization.
Buyers in this group tend to be in their mid-30s to early 40s and are often entrepreneurs and self-made business owners who are tech-savvy and “have leveraged this infrastructure to establish global businesses.” They own multiple properties in order to maximize their mobility and flexibility, seeking out smaller homes with easy access to transportation hubs, entertainment and other amenities. The homes they purchase tend to feature open-concept layouts that artfully use space to convey wealth and are designed to cultivate personal wellness.
Reaching those luxury buyers means staying on top of the latest marketing technology. Vincent Anzalone of Dream Town Realty rolls out high-end marketing tools that are designed to appeal to savvy buyers.
“There are pictures and floor plans and 3D walk-throughs,” Anzalone said. “The last is really important right now. On pretty much all my listings, we’re trying to snap 3D walk-throughs with a drone so that people can do virtual tours. We have an actual Oculus 3D portal set up. It’s almost necessary for every listing.”
While it wasn’t always this way, Rosenbloom embraces the more recent emphasis on digital marketing for reaching potential buyers. To her, digital marketing efforts rightly emphasize the features of the properties, rather than presenting them as homes offered by a specific agent.
“Years ago, it was important for a seller to have print advertising in well-known, high-end publications,” she noted. “That is totally gone today and is focused on digital. [Sellers] are comfortable with this change and want results. We would spend the money to put luxury homes into high-end publications, and the odds of them selling from that were slim. In fact, I always looked at it as a branding of [myself] and not as much for the property.”
Setting a high bar for listings
Selling luxury real estate presents a unique set of challenges. Stewart said that, for her, the most difficult aspects of representing luxury clients are the extended timeline on such purchases and the cost of marketing. Due to COVID-19, she recently added virtual open houses to her marketing efforts and received an offer on the first one she held.
“You have to spend quite a bit more in marketing, in advertising, in photographs and in just time alone,” Stewart said of marketing luxury homes. “They’re expensive homes to market, and the expectations from the client side are usually higher. It takes more of my time because I accompany all my showings. I like to meet the buyer and the other agents and get the home set perfectly.”
Anzalone said that the level of knowledge luxury buyers bring to a transaction can be intimidating. “I’ve found luxury clients to know all the stories and all the deals for every building in all the neighborhoods,” he said. “They know the comparable sales before you even get there. Before you get there, make sure you know all the comps because your client is most likely to know them already. You have to be ready. Educate yourself.”
The luxury market under COVID-19
The challenge of this market segment is magnified by the ongoing COVID-19 pandemic. Chicago is no exception, though the impact of the coronavirus outbreak here has been relatively light when compared to other markets. According to the National Association of Realtors, national sales of existing homes fell by 8.5% from February to March as the pandemic took hold and states and municipalities implemented preventative measures such as shelter-in-place orders.
Illinois and the Chicagoland market defied that trend and showed some resilience in March, according to Illinois Realtors. Statewide, home sales across all price points were up by 4.7 percent for the month, compared to March 2019. Median home prices increased from $241,000 in March 2019 to $260,000 in March 2020. In Chicago proper, year-over-year home sales rose by 1 percent, from 2,062 last March to 2,082 in March 2020. Median prices jumped from $290,000 in 2019 to $320,000 in March 2020.
Anzalone said Chicago’s luxury market has been somewhat protected from the drops seen in other cities because values for such properties here have not increased as aggressively as they have in other places. He mentioned that he has a full-price offer on a listing that’s based on pre-coronavirus values.
“Essentially, it’s a shorter fall,” he said. “We’re not going to go down 20% because that would be pre-2008. Interest rates are low, and people can afford more.”
Anzalone said he’s still holding a few showings, but he’s taking precautions by keeping everyone 6 feet apart; enforcing the use of face masks, gloves and booties; and making sure surfaces are wiped and disinfected. There’s still a demand for luxury homes, he noted, and people who need to buy will take whatever steps are necessary to do so.
“If you have a property that is something unique — it isn’t just big and it’s in a good location with a lot of outdoor space in an A-plus building like 9 W. Walton or the Waldorf Astoria — those are seeing a lot of activity,” Anzalone said. “If you have something special, people are out there spending or at least looking.”
Like Anzalone, Rosenbloom is still showing properties. She also takes precautions to prevent the spread of the novel coronavirus.
“It’s slow, but we are still showing,” she said. “Buyers are wearing masks and gloves, and sellers are coming in after them and wiping everything down.”
Rosenbloom also noted that the people who are willing to take these precautions are serious customers on both sides of the transaction. “There is still a demand. What we’re finding is that the people who are looking are those who have a need, so that need is there. We’re not seeing so many people who are just curious or looking,” she said. “The majority of sellers are willing to do showings. They’re taking precautions.”
Stewart said that, though much of her activity has come to a halt due to the pandemic, she expects the market to have a broader appeal to luxury buyers when the economy reopens.
“I have heard that many people are interested in investing in property in the suburbs, rather than highly dense areas like the city,” she said. “I have two prospective buyers looking now, and they’re both from the city. Their reason for coming here is that they want more space and more land around them.”