Luxury Insider: Do You Know What You Don’t Know That You Should Know?

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We all know that knowledge is power. That’s true in all fields. Real estate is no exception to the rule. In a business where the associates are predominantly independent contractors paid solely on a commission basis, success is indeed predicated on how good they are at the sport. Question for you: how do you define and qualify “knowledge”?

I heard so many different answers to that very question through the years that my head is spinning. Each one of them makes some sense, although not all of them are convincing. Try this fairly common answer for example: “I am a top producer, so I am an expert in my field.” It could be the case, but I would argue that there are quite a few real estate professionals who confuse “knowledge of salesmanship” and “knowledge of the business.”

The best agents possess both. They know HOW to sell, and they know WHAT it is that they sell. It is important to be good at getting buyers or sellers to pull the trigger because, after all, they want to buy or sell, not waste their time with an agent who does not know how to finish the job. At the same time, it is even more important to know everything that there is to know about the market and the property that might affect the value or the desirability of a house, especially at the top of the price ladder.

Believe it or not, a good fraction of the Realtors out there don’t even know such basic things as the population of the town where they have a listing, or the owner-occupied ratio, or the percentage of listings that actually sell, or the time on the market, or the delta in between the original listing price and the sales price, or…. Talk about knowledge is power!

No question that all good agents must know how to use their negotiating skills as much as they know how to leverage their business acumen, their knowledge of the business, the transaction process, the market trends, and of the property they wish to list or sell. If you have to settle with only one of the two types of knowledge, I would argue that the latter is more important than the former. After all, we are selling homes, not hot air.

Real estate is not meant to be an easy job. A real estate license only gives us enough knowledge to be dangerous. Learning is a daily requirement in the quest for excellence. The more we know, the more relevant and essential we are to the principals we represent. It is not a guessing game where it’s OK for buyers & sellers to pay for our mistakes. We know or we don’t. We belong to the profession or we are better off looking for another way to make a living.

What is important for a listing agent to know when answering questions from a possible buyer or a fellow Realtor? Pretty much everything, outside of legal matters and facts that only expert inspections can bring about. Yet, many agents who have a listing or are holding a listed house open over the weekend, would start perspiring heavily if they were “challenged” by some of the following easy questions:

  • In this town, what is the maximum square footage I could build on the lot?
  • Does this include the basement?
  • Tell me about the setbacks for construction and any existing easements?
  • If I were to put a second story, what are the maximum height allowed in this town?
  • If the house is an historic landmark, what can I do to renovate it or destroy part of it?
  • How many homes sold last year in this neighborhood?
  • How much have prices gone up, on average, so far this year?
  • Where do you see prices going over the next few months?
  • Tell me about the comps you are using to justify the listing price?
  • Tell me about the schools?…

Pretty basic stuff, really. Does not take much homework to come up with the answers. We are paid for the good ones. “Buyers beware” only goes so far. Buyers & sellers have to rely on what we know that we should know. Any argument with that?


Luxury Insider: Too Big or Too Small?

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Once upon a time, in the medieval days, homes were either huge or tiny, too big or too small. If you were born a Lord, chances are you lived in a castle big enough to play hide & seek with no risk of ever being found. Buckingham Palace, as an example, has over 100 rooms. Not bad, even for a Queen.

On the other end, if you were born a regular citizen, you could consider yourself fortunate to have a roof over your head, even if you had to share your small quarters with cows & pigs. No, life is not fair.

Eventually, many of the smart “little people” became entrepreneurial and set up lucrative businesses in the emerging world of commerce and finance. Bourgeoisie was officially born and, together with it, the need to display success. The word “materialism” was not yet introduced in the dictionary but existed just the same. All of a sudden, fancy townhomes were built on top of downtown shops and mansions started mushrooming in the countryside.

At the same time, monarchy went out of fashion, a lot of Lords went broke and many lost their heads to the guillotine. Today, quite a few castles have been transformed into museums. Others make terrific hotels or B&B’s, where tourists enjoy splashing bedrooms while the host, who collects the money, sleeps in the basement…

Over time, the square footage of a house has become a way to measure success. Location has always been a big deal of course, as were the style of the house and the quality of the construction, but size is still the thing. Big is good. Bigger is better.

Where are we today, in 2014? Well, not too far away from the Middle Age..… Those who made it have their name on a mega property in the most expensive zip codes and those who are not there yet are buying whatever square footage they can afford and hope to grow equity and move it to a bigger and better home.

There is, however, something significant progressively changing the paradigm. The lifestyle of the wealthy is now vastly different from what it was during the Post war era. Back then, people actually lived in and enjoyed their home every day of every month. With the ease of traveling, growing job mobility and the convenience of doing the coffee/newspaper pause downtown rather than at the breakfast table, a lot of people look at their home differently.

Ask yourself the following questions: “How much time do you actually spend in your house?”… “How much time do you actually spend in your yard?”… “Are you enjoying all of your house or are you a….prisoner in your own home to justify the mortgage?” I know quite a few friends who go overboard: they paid a few hundred thousand dollars extra to buy a house with a bunch of extra bedrooms just to have a couple of beds for relatives when they visit once every other year for a couple of days! As much as I like entertaining, I think that for the extra money, you could buy a life pass to the Ritz Carlton for your guests and guarantee that you & they sleep better at night!

Over the last sixty years or so, condos have been exploding all over the US, from big cities to small suburbs and villages. At first, they attracted thousands who were looking for functional layouts, beautiful common grounds and convenient locations at a very affordable price. Today, buyers are far more diverse. Condo living is becoming a trend. I am not just talking about singles, seniors, students or buyers who cannot afford the price of land, I am talking also about wealthy buyers who deliberately choose to live that kind of trouble-free life.

The price tag for luxury condo living can be pretty heavy too. Security, concierge desk, club house, exercise room, pool & spa, restaurants, etc…don’t come for free. I know nothing can replace a beautiful single family home surrounded by beautiful grounds. There is no price for serenity, privacy and full ownership. So the choice in between a striking mansion in the suburbs and a fancy condo in the heart of the city has never been tougher. Decision… Decision…. I guess, if you can afford it, you should settle for both!


Luxury Insider: What’s Next After Labor Day?

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Summertime came & went already… Did you go on vacation, got a good rest and got a nice tan to prove it? Hope so for you. It’s good for the mind to go into neutral every so often. Summer 2014, however, has not been exactly quiet and relaxing for everybody and in all businesses. Try real estate for example. No time to smell the roses for the true pros; July & August have been hot in every way.

Some people might argue with the above statement. After all, sales units are actually down year-to-date, in many markets this year, particularly (and paradoxically) in the most buoyant of them. The Silicon Valley is a good illustration of this peculiarity. However, this apparent slow-down is more a mirage than the reality of the marketplace. Let me make my case…

First, the number of sales units does not always tell the story. For one thing, we can only sell what is available to be sold. As you know, we are suffering from the most acute (and often incomprehensible) shortage of inventory that I can remember. Give me more listings and I’ll give you more sales. A lot more.

But, no matter how relevant the number of transactions may be to describe the velocity of the real estate market, it is not, in my view, the N.1 indicator of a hot market. Prices are. And price appreciation during the last two months, in many sought after areas such as the Silicon Valley, has certainly continued at a good tempo, seemingly unaltered by the “slow” season.

I know what you are going to say: that too is all about that supply & demand dichotomy I was referring to earlier. Well, OK, up to a point. Prices don’t go up simply because of listings scarcity. There is a lot more to integrate that the eyes don’t see. The significant fact is that most people believe again in real estate; they believe in the value of purchasing a home, whether to live in or to leverage as an investment. The recession years are now well behind us and, if nothing else, the appetite for real estate has grown after a long diet.

There is more. US real estate is wanted. This is particularly true in the San Francisco Peninsula & the South Bay. Even when the domestic demand shrinks, for all the good reasons we can understand during tough economic times, the international demand makes up for some of the loss and keeps on driving prices higher and higher yet.

For most foreign buyers coming to town, prices are no object. They don’t perceive our real estate prices as being too high. In fact, many of them find local homes to be very affordable compared to what “similar” properties would go for in the countries they come from. Not to mention that in some Asian countries, for example, you stand to lose the property that you paid dearly for upon the expiration of a multi-years lease. Title remains with the State.

Hence a growing migration of international buyers to the US. Hence the upward pressure on prices. Cash deals, multiple offers and wild over-the-asking price offers are the new normal. It is what it is. As a Realtor, I am not complaining, I am just observing.

The thing to always keep in mind in the real estate business is that buyers “make” the market. Not the sellers; not the real estate agents. We have to look at the buyers’ behavior to measure the pulse of the market and understand where it is going. Today, the trends are good. Prices, more than units, are the expression of this optimistic view.

Labor Day is now behind us. We are about to start a “new year” of sort when the fall season pushes summer away. A big wave of buyers is approaching. It would be nice to see more listings hitting the streets. Chances are it will happen. Cross your fingers and stay tuned.


Luxury Insider: Is It Ok To Hold A Million Dollar Home Open Over the Weekend?

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I often hear from both home sellers and agents that it is not appropriate (and therefore not recommended) to hold a weekend open house for the public if the subject property is a multi-million dollar luxury home. In fact, I heard the comment so much over the years, that I almost got to the point of believing it! Well, I still don’t… generally speaking.

Before I dig deep into the arguments which may be used to validate one side or the other, let me state clearly that I understand the difference between an estate-quality property and a more standard home. I made a good living understanding and leveraging such difference. The marketing strategy and scope are indeed altogether different, because we are not dealing with the same buyers, in terms of means and needs, nor are we dealing with the same type of sellers. That’s why Intero has a “Prestigio” Division by the way.

However, if we agree to keep things simple, we will probably agree that, irrespective of means and needs, buyers, in all price ranges, are…buyers. They share the same emotions and desires. The same thing can be said of sellers. Principals, on either side, always appreciate when we facilitate & deliver on their respective ultimate objectives, whether it is to buy or sell.

If they wish to sell, their chances of winning largely depend on the number of prospective buyers who get to see the house. If they wish to buy, their chances of finding the right home largely depend on the opportunity they have to access the properties they may like. That is of course the value of the open house option. It is easy: buyers can look at various homes, with or without the family, whenever they have a little time and when they are in the mood.

Of course Realtors are best to guide buyers through the maze of options and explain the pros & cons of each location and each property. Still, sometimes, it is fine to stroll around town, relaxed, and do home shopping as we do window shopping in a mall. My wife loves to do both!

So what’s wrong, if anything, about an open house at the high end?

Here is a list of the legitimate arguments being presented by the critics or the skeptics among home-sellers, followed by the counter-arguments, whether legitimate or not:

  • Q- “It makes no sense to have an open house in my price range” – A- Maybe it does not but we should not disqualify the option. The open house could very well be attended by…wealthy people too.
  • Q- “My house is way too large to be held open” – A- If it is too big for one agent, it might not be for two. If pertinent, we can plan for three agents to be present.
  • Q- “I would rather have my agent welcome visitors and show them the house” – A- Sure, and this is exactly what is likely to happen, but this preference should not necessarily eliminate the open house option.
  • Q- “I don’t want undesirable people to see my house” – A- This one is a little tougher since we cannot judge people on a quick look. A wealthy friend of mine was prevented one day from entering The Ritz (where he had a room for the week) in Paris because he wore jeans! .. He canceled his reservation… Of course, on the seller’s advice and his consent, we can demand name, contact info and even proof of identity to visitors, whenever needed.
  • Q- “I have too many valuables” – A- When a house is for sale, whether open or not over the weekend, there are elementary precautions to take as to reduce or avoid altogether the risk of a visitor stealing pricey objects. Anything small and of great value, such as jewelry or art should not be offered to the eyes, they should be under lock or in a different place.

The open house option adds a new dimension to the marketing of a property. Many homes, regardless of price, sell on open house or as a direct result of an open house. This option needs to be discussed with a responsible agent on a case basis, rather than arbitrarily be discarded. Good luck.


Luxury Insider: A Digital Magazine for Intero’s Premier Properties

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PM_I13_COVER smThis month marks the release of the 13th issue of The Intero Prestigio Magazine. Composed of some of the finest luxury estates Intero has to offer, this Prestigio Virtual Magazine gives you a glimpse into the world of high-end properties. Since it is an online piece, feel free to enjoy it at your leisure, whenever you can take the time to relax and open your eyes to an album of beautiful homes. This also allows you to instantly share it with friends and family through social media, websites, or email. Browse through the gorgeous photos and find the property information and unique qualities of each one of the exceptional properties featured.

Prestigio is a division of Intero Real Estate Services, a Berkshire Hathaway affiliate, specializing in the marketing of high end homes and estates in all relevant markets, whether local, regional, state-wide, national and international. We offer a wide scope of marketing coverage multiplying the opportunities to reach out to the most qualified buyers globally.

Take a look at the beautiful homes that are the finest in the San Francisco Bay Area and beyond… you just might fall in love with your next home!

View the virtual magazine for yourself here.


From Coastal Estates To Family Farms, Prestigio’s Digital Magazine Has It All

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A mobile friendly way to experience Intero Prestigio International homes

Intero Real Estate Services, Inc., a Berkshire Hathaway affiliate and wholly owned subsidiary of HomeServices of America, Inc., is releasing another issue of their Intero Prestigio digital magazine. The digital magazine is a combination of the innovative, tech savvy power of the Silicon Valley real estate company and their division specializing in high-end real estate, Intero Prestigio International. This issue includes a Craftsman Farmhouse located in Woodside on 6 acres with 2 guest houses and the historic Wilson House, a fully renovated 1870’s Italianate style home overlooking the city of Santa Cruz.

PM_I13_COVER smThe magazine offers enhanced and global promotion for Intero’s most exclusive homes and estates. Designed with ease of circulation in mind, it can instantly be shared through social media websites and email. As if reading a handheld magazine, online viewers can browse through gorgeous pictures and enjoy articles written by the luxury real estate icon, Alain Pinel. The digital magazine aims not only to raise awareness of properties offered in the Prestigio collection, but also to exhibit their finest qualities. This piece only touches the surface of what is offered through the Prestigio marketing program.

Renowned real estate entrepreneur Alain Pinel, Senior Vice President and General Manager of Intero Prestigio international, is the primary mastermind who pioneered and launched Intero Prestigio as part of his goal of expanding Intero’s luxury brand. From local print advertising to international display, properties in the Intero Prestigio collection have an elevated level of exposure to help them sell quickly and efficiently.

“Technology has linked all corners of the world together on an unprecedented level and it is clear that we are only going to grow more connected,” states Alain Pinel. “We no longer have high-end buyers confining their search for luxury homes to their neighborhood––or even to their own country. Nor are people searching in the conventional ways of decades past. Globalization has been the buzzword for some time now, yet nowhere is it as real and apparent as in the high-end real estate market. We, at Intero, put the puzzle pieces together. That’s why, among a host of innovative tools and services, we created this online magazine to reach the worldwide audience using the digital means that connect us together.”

View the digital magazine for yourself here.

 


Luxury Insider: Understanding the Mind of Chinese Buyers

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If you were a freelance writer and you were turned down by a publisher on an article, how would you like to receive this kind of response:

“We have read your manuscript with bondless delight. If we were to publish your paper, it would be impossible for us to publish any work of a lower standard. And as it is unthinkable that in the next thousand years we shall see its equal, we are, to our regret, compelled to return your divine composition, and beg you a thousand times, to overlook our short sight and timidity.”

No means No, regardless how you spell it, but phrasing it that way is not quite the same blow to your self-esteem. While it is not likely you will ever receive this kind of reply (if you even get a reply…), it would not necessarily be uncommon if you were in China. Different people, different ways.

The above text was presented to me and 30 or so other real estate specialists attending the Luxury Portfolio Conference in Shanghai in July. It sets the tone for a captivating demonstration of how challenging cross-cultural communication can be, by an expert on the subject: Jeffrey Dong, a Chinese -born intercultural training consultant who spent years in the West.

The main take-away from the presentation is, of course, to not be misled by pre-judgments, stereotypes or generalizations when dealing with clients of a different culture. Ultimately, success, as a Realtor, is not based on how good we are at imposing our best style recipe to all clients, regardless of their cultural peculiarities, but to try to understand where they come from and adapt to them.

This is particularly critical when working with Chinese buyers. So, let’s try to study the “Chinese Mind”.

First, here is the list of the most common stereotypes associated with Chinese buyers in the West:

  • They “always” demand rebates, whether in the form of price, or commissions, or both
  • They take legal contracts lightly, occasionally “cancelling” a deal unilaterally
  • They like to work with the listing agent, even if they have another agency relationship
  • They have a tendency to work with several agents at the same time

You know what? If indeed there is some truth about some of the above traits, we are responsible for the misunderstanding. Why? Because we are often guilty of treating all clients as if they all had the same brain cells and heart beats as we. They don’t. They cannot understand our ways, our traditions, our standards of practice, our rules, our laws… Unless we take the time to explain them, and at the right time, that is as a preliminary discussion, before driving to the first home.

The Chinese, from what I observed over the years and learned from Jeffrey Dong’s presentation, are very complex people. The Chinese mind has been molded over some 5,000 years of unbroken civilization and influenced by several philosophies, dogmas and social systems. Sometimes those work in harmony; sometimes they are conflicting. The three main doctrines can be grossly defined as follows:

  • Confucianism: Order is a key word here. Strict adherence to a hierarchical system. Knowledge is power. Education is the path to knowledge. Among other things, it teaches respect, modesty and humility. Family/Community/Country represent the foundation of life.
  • Daoism: Follows the way of nature. More room here for individualism, spontaneity, personal thoughts and feelings. Be yourself, as we would say in the West.
  • Buddhism: Don’t worry about people’ imperfections and life being sometimes painful. Conserve your ethics, mindfulness & wisdom through meditation and enlightenment.

The mix of these teachings (particularly Confucianism), explain the Chinese’ values, beliefs and attitudes. It explains their patterns of thinking and communicating. As an example, Realtors often complain that the Chinese do not give straight answers. Maybe they don’t, and it is often out of politeness & respect. “Yes” is not commonly used and has many meanings; “No” very rarely expressed. Nothing is black or white. The truth is in the middle, it is grey in a world of ambiguity.

Although it may be a bit too simplistic, it is tempting to compare the key dimensions of culture between “American characteristics” and those most Chinese people share:

  • Individualism vs. Collectivism
  • Need for certainty vs. Tolerance for ambiguity
  • Short term attention/goals vs. Long term
  • Task vs. Relationship
  • Informality vs. Formality

If you are in real estate and you have the ambition of becoming a star, chances are you will work more and more with Chinese buyers, just because there are more & more of them and they buy more & more of what you list & sell. Accordingly, you will have to adjust your ways to that of the clients whose trust you need to succeed.

Understand that, even though you feel most comfortable being straight, direct, impatient and sometimes argumentative and even confrontational… You will need to adapt your style for those clients who are more indirect, elusive and require both more understanding and a longer warm-up time. My advice? Read Confucius.


Luxury Insider: What Does The Name Berkshire Hathaway Mean To You?

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As you “heard” me say a couple of times in this column, real estate companies were not born equal. Some were born with a silver spoon. Some got a plastic spoon. So is life for all business ventures.

Even if all companies were alike on the starting line, they sure would not grow at the same speed or in the same direction. Some flourish and some falter. The difference? Basically 2 magic words: vision & means. A mix of both gives you the reason for being there in the first place, and then the power to stay there, survive challenges and sustain a growth momentum.

With this in mind, it is particularly comforting to know that our very dear company, Intero, was recently acquired by Home Services of America Inc., a Berkshire Hathaway affiliate. Yes, Berkshire Hathaway. You know the name. You know the man behind the name: Warren Buffett. Both the man & the brand are synonymous of trust & success.

If you don’t mind, I am going to break my rules and indulge in self-satisfaction for a little while. You see, I, as most everyone working there, like Intero. We are proud of our firm. For good reasons. For one, it was celebrated as the fastest growing real estate company in the country. In just a few short years after it came about (2002), it became a leader in the Silicon Valley, arguably the most competitive market in the country.

Perhaps more significantly, Intero’s growth, in terms of volume of sales and revenues, grew organically, each & every year, uninterrupted. Someone noticed. The expert.

Generally speaking, real estate companies do not think of selling while planning to open shop or on their date of birth. They are fiercely independent. Then, like all of us, they grow up. They see the future differently. They sometimes choose another path for growth, in the interest of their associates, their managers, their staff…And mostly in the interest of their customers and clients.

When Berkshire Hathaway Home Services rings your bell, you open the door. You listen. Nobody in the real estate business (or any business for that matter) knows more than they do. No other firm inspires the same respect. Last year, the brand was voted the best real estate firm in the country by people best qualified to judge: buyers & sellers.

Warren Buffett, judging by the many books I read about him, has a simple, sane & safe business way to look at potential acquisitions. He wants to buy success and growth potential (Hard to find in the real estate field full of land mines these days). Then, he wants to meet and get to know the owners, those who are running the show. The meeting of the minds is based on trust, mutual respect…. And the numbers of course.

The reason for all that is quite simple: he wants the people who built the success story to stay on the jobs, the same jobs; to keep on running the firm. He does not want to do it or does not care to put new people at the helm. Why make waves; why make a change if all goes well? It’s a win-win.

My favorite Warren Buffett‘s quote about keeping the same leadership team in place says it all: “If my job was to manage a golf team, and if Jack Nicklaus or Arnold Palmer were willing to play for me, neither would get a lot of directives from me about how to swing.” Makes sense, don’t you think?

So here we are, a proud affiliate of Berkshire Hathaway. We were strong; we are stronger. We are moving forward. In a way, it is life as usual for all of us, except that we are now playing on a bigger field, with the best ownership, the best players and the best resources, financial means, tools & services. All that for the most important reason of all: to satisfy, more than ever, the needs & ambition of our clients, in the Silicon Valley and worldwide.


The Luxury Insider: The Shanghai Express

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No doubt the best place from which to see Shanghai is to stand on The Bund and watch the post-card view of Pudong, on the other side of the Huangpu River.

Perhaps the best time to see Shanghai is at the crack of dawn, when the sun plays hide & seek between the skyscrapers of Pudong, enveloping what looks like an island in a cloud of haze. Or is it in the late afternoon, when the special effects of the sun transform Pudong in the make-believe décor of a movie studio?

Shanghai

Or again, the best photo-op may be when the sky turns dark and Pudong is lit up like Times Square on New Year’s Eve, with an explosion of colors on the Oriental Pearl Tower and dancing lights & forms on the glass façade of the skyscrapers.

No matter the time of day, no matter the day, Shanghai looks magical, strikingly beautiful, incredibly powerful, and yet So mysterious. It is China, at least it is the new window, the new pulse, the new symbol of a new & proud China.

I spent a few days there, at the end of July, to attend a conference organized by The Luxury Portfolio International, our global high-end marketing partner. It was quite an education. It was an eye-opener.

For all of us, real estate professionals focusing on the high-end, it is only a fact that the Chinese have become the leading buying power at the top end of the US luxury market. From what I learned at the Shanghai conference, we’ve seen nothing yet.

One word is enough to understand the new China: “wealth” is that word. It creates, within the country as well as overseas, a major paradigm shift in the way the Chinese see themselves, see others, and act accordingly on their needs or desires. Traditions are deep in China but so are aspirations.

Fred Lam, one of our top luxury market specialists in California and one of my travel companions in Shanghai, explained to me what we may call the Chinese philosophy of life. All their life, he said, the Chinese see themselves as pushing a massive heavy ball uphill. There is no stopping, no matter the fatigue, because the ball cannot stand still.

This “tale” says a lot about the Chinese insatiable drive to excellence. Excellence usually translates into success and money. Money is flowing today. At this point, China counts around 2.9M $millionaires, according to Rupert Hoogewerf, one of our speakers at the conference and chairman of the Hurun Research Institute. Perhaps more telling about the new wealth is the fact that the number of Chinese $billionaires, 358 on the books, is in fact more like 650, meaning more than any other country.

For the most part, their fortune has been fueled by real estate. For the most part, their fortune is spent in real estate. It is a game-changer, there, here and everywhere.

In Shanghai, a town of roughly 30 million that keeps on growing, real estate is on fire. Prices have gone up vertically in recent years and managed to gain another 12.6% this year, according to the Hurun Luxury Consumer Price Index. In Shanghai, $1M buys roughly 1,000 square feet in an “average” neighborhood. If you are looking for a nice pad in the pricey French Concession, you are looking at $5M and up. If you fancy a brand-new luxury condo in one of the Pudong towers facing The Bund and with a view forever, you better be ready to break the bank.

One such unit (a penthouse suite) is available: 7,534 sqft, 4 BR/1 maidroom/5BA/2HalfBA. The price? $32.3M USD, i.o.w. $4,287/sqft. Still breathing? Now, if you want a beautiful Mediterranean-type villa in a gated country club community, we can offer you a nice one only 20 minutes from the Pudong Financial District. For $86,300,000 USD, you get 9,289 sqft (yes, 9,290/sqft…), 6BR & 4BA. And don’t forget to pay an additional $740/mo in HOA.

Finally, please keep in mind that you don’t really own the place. You are actually leasing it for 70 years, no more. That’s the deal in China. After that, it is supposed to revert back to the State. If you think that luxury homes are expensive in the US, think again.

What does it mean to us? A lot. I kind of know who is going to buy trophy homes in the US in the years to come. Today, China is already the N.1 buyer of US real estate in $volume. That represents a mere $22B, over 25% of all international sales. 76% of these transactions are cash. The Chinese buyers are already setting the price in Los Angeles, San Francisco, New York, and Seattle.

More is in the cards. You just have to look at the number of Chinese students enrolled in US schools. There are more than 200,000, including 90,000 in California. FYI, one of the main reasons why the Chinese buy here is to give their kids a place to live while getting an education. Parents are following, as 60% of the wealthy Chinese are emigrating to Western countries; mainly in the US.

The question of the year is: if you consider that in many luxury markets, something like 50% of the residential sales over $10M involve Chinese buyers and the number of such buyers (together with the dollar amounts invested) may grow as much as 20% a year, what do you think the picture will be at the high-end in 5 years?…

A piece of advice to the top guns of the luxury market: time to learn how to speak Chinese.


Luxury Insider: Pricing Right: Strategy, Tactics, or Black Magic?

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The market, over the last two years, has been so hot (after being so cold) that a good many home-sellers and Realtors got to thinking that price does not matter much nowadays when dozens of anxious buyers are waiting in line with a bid in their hands, hoping to get a house. Well, wake up. Price matters.

Typically, one of the most agonizing questions both sellers and their agents dread the most (aside from the commission issue…) is indeed “What price should we put on the listing to produce the fastest sale at the best price?” Today, this question is very relevant, perhaps more than ever. Depending on the local market, the uniqueness of the property and its price range, you may explore different approaches to maximize your chances.

The choices have always been and will always be the same:

  • Overprice: deliberately or by ignorance
  • Underprice: deliberately or by ignorance
  • Price at what we perceive to be “market value”

Remember that there is no magic recipe that works every time. Again, you need to take the pulse of the market at that very moment and understand that what works at the low-end rarely works at the high-end. Just supply & demand common sense. Let’s look at the three options and briefly analyze the pros & cons of each one.

  1. Overpricing: Hard to define what is an overpriced listing. As far as I am concerned, an overpriced listing is one that does not sell! In other words, , a property is not “overpriced” if a buyer buys it, even if we thought it was when we put the For Sale sign on the front lawn. The supply & demand dance can do strange things in a good market. Want an example? Look at what happened in the Silicon Valley over the last 30 months or so: very little inventory, huge pent up demand, cheap mortgage money, reassuring economic news , more stable job market, wave of rich IPO’s, etc. Results: in the mid range of the market, between $1M & $2M, selling prices have jumped, on average, well over 10% per year. Now, before you get too carried away, let’s use a little wisdom that only experience gives us. In the real estate business, the past is not necessarily a good guide to predict the future. It is not because prices have jumped yesterday that we can count on the same thing tomorrow. What we can say, looking backwards, is that if a house in that region has been on the market more than a month and did not sell yet, chances are it is indeed overpriced. Overpricing, in any market, is a dangerous idea. In my book, it is a terrible idea. If the market is slow, it makes no sense. If the market is hot but the house does not move quickly, it will soon grow old and collect dust as Realtors will always prefer showing new listings rather than those which have been aging on the shelves. Your choice.
  2. Underpricing: Talk about dangerous games!… You must have a strong heart to deal with that option. It can work to the sellers’ advantage. It can hurt just as well. In the hot market we have been enjoying for a while in the Silicon Valley and many other markets throughout the US, underpricing is getting to be as popular (and risky) a sport as bungee jumping. The idea is to tease anxious buyers with a price 5 to 10% lower than what we perceive to be the market price and manufacture a bidding war which may result in multiple offers and an ultimate sales price well over the asking (and presumably over what we the house would normally sell for…). Some agents make a good living advising their clients to take a chance. They may even win more listings using such gimmick with some degree of success. That, of course, is a bit deceptive since it is a strategy that can backfire. Keep in mind that underpricing does not guarantee a higher price. It could go the other way. Do I like this option? No. I just don’t like to play games. Your choice.
  3. Pricing at “market”: If you, as a home seller or as an agent, think you know at what price a buyer and a seller are likely to come to terms in any market, because you have a bunch of reliable comps (recent local sales of similar properties, active listings…) I suggest you use that option rather than play with a grenade. You may put a tiny cushion on top of the price to allow for possible negotiation. If the price is too high, you will soon know and you will cut some right away. If the price is too low, well, you will benefit from a buyers’ frenzy. If the price is right, you will obtain a quick & easy sale. A win-win. I like that. We all sleep better when we do business that way. Your choice.