The Rich Buyer, Rich Seller Blog

They're here!

Finally!!!
After numerous delays, the first 2,500 books arrived from the printer yesterday.   We had almost 2,000 envelopes waiting--addressed, stamped and ready.  Stuffed and sealed, they will be at the post office when they open tomorrow morning for shipment via First Class mail. 

I think getting the book in the hands of all of you who have so eagerly anticipated it is a great way to ring in the new year!

Now accepting orders

If you stopped by our booth at the NAR convention in Las Vegas, you know that we are now accepting pre-orders for the book. 

In fact, we have a special offer for those of you who buy the book before the end of the year.  Not only will we give you a discount of more than 15%, we'll pay the tax and shipping on your order. 

That's right, order now and we'll ship you your copy as soon as it is off the presses -- for only $25.   

Act now.  This special offer ends at midnight, December 31, 2007. 

Order Now!

$25

For those of you who took advantage of this special offer,
thank you and enjoy your books!

Looking at late November

Well, the end of October has come and gone, and we have no books!  The design and production process has obviously taken longer than estimated.  Although we have no dates from our broker/printer, we are now expecting the Second Edition to come off the presses by late November or early December.

As soon as we have a firm date, we'll let you know.

And to the Members who have  been  waiting so patiently for your books (there are well over a thousand of you), thank you for your patience.  The wait is almost over!

To the printer...

The wheels of production are turning!

The proofing of the manuscript for the new edition of the book is almost complete, and it will be off to the print broker early next week.  He'll be managing the layout, cover design, selection of paper and cover stocks, printing, and binding.   

We don't have any firm delivery dates yet, but I think it is safe to say that those of you who are waiting so patiently for your copies can expect to have them in hand before the end of October.   

Change terminology when working with luxury sellers

When you work in the upper tier, you quickly discover that the properties are often very customized and that finding comparables can be challenging.  What's more, sellers often argue that the homes you choose as "comparables" when doing a CMA aren't really comparable.  So, instead of referring to them as comparables, call them "relevant properties."    This small change in terminology acknowledges that these homes may be very different than the subject property, but are still the homes which are most relevant when doing a market analysis. 

$103 Million Home Sale Sets New U.S. Record

Four pricier properties are on market from $165 million to $125 million

The cloud over the current residential real estate market has a silver lining.  The upper-tier market continues to boom, as evidenced by the record-breaking sale of a residential property in East Hampton (NY) for $103 million. The race is already on to top this new record with four other homes currently on the market from $165 million to $125 million.

Although the sale in the Hampton’s is a new U.S. record, the world record residential sale was set earlier this year in London with the purchase of a flat across from Hyde Park for nearly $200 million  (U.S. dollars) by Sheikh Hamad of Qatar.    

The new U.S. record sale was supposed to be hush-hush; but, the news was quickly out that Schlumberger Oil fortune heiress Adelaide de Menil and her husband Ted Carpenter had sold the ocean front property to Ron Baron, founder of Baron Funds Investment Company.  The transaction breaks the previous record for the most expensive U.S. home sold which was set in 2001 when former telecom mogul Gary Winnick paid $94 million for a Bel-Air estate. 

At Least five sellers are so optimistic that the luxury home market will stay strong that they’ve priced their homes at more than $103 million record. The chances are good that the buyer in the Hamptons won’t be king of the residential hill for long, we may see a new record in the next 18 months or so.

Leading the pack as the priciest residence on the U.S. market is “Beverly House,” a Los Angeles (CA) compound previously owned by William Randolph Hearst and recently listed at $165 million. Second on the list of high priced homes is “The Pinnacle,” currently under construction at the members-only Yellowstone Club in Montana. It is offered for sale by the club’s developer, Tim Blixseth, for $155 million.  The three other highest priced homes include Saudi Prince Bandar’s ‘Halva Ranch” in Aspen (CO), priced at $135 million; “Fleur De Lys,” a Los Angeles(CA) property priced at $125 million; and Donald Trump’s $125 million Palm Beach (FL) re-do. The $100 million estate known as “Tranquility,” at Lake Tahoe (NV) rounds out the list of homes priced with nine digits. 

Although the U.S. housing market slipped overall in 2006, the luxury market has continued to boom, as a result of rising wealth at the top of the demographic pyramid. Sales of homes priced at $5 million and above jumped last year and rose a staggering 31% in the first quarter of 2007, according to new research by DataQuick.

One interesting fact about the new record sale is that the buyer didn’t want the existing homes on the property.  So, they were removed for his convenience, leaving him with a fabulous site for building his custom home. The houses were donated to the nearby community for use as city buildings.

The Importance of Price Bands

Maureen Kennedy, one of our members in the Bay Area, sent us an email this morning highlighting an article on the cover of today's New York Times ("Can’t Sell Your Home? Maybe It’s Priced Too Low"). She noted that it reinforces the importance of analyzing your market by price bands. 

The essence of the article is that there is a "split" in the market and that, even in areas that are commonly thought to be in "freefall" there are certain price segments performing well or even booming. 

"In the New York region, sales at the top end — that is, homes in the most expensive 5 percent of the market — have also been rising, while they have been falling in the middle and bottom of the market. The same is true in the San Jose, Calif.; Seattle; Denver; and Houston areas. In San Francisco, Los Angeles, Phoenix and Miami, high-end sales are down but not by nearly as much as sales in other price segments."

I thought I would mention it here as it is an interesting article, and analyzing your market by price bands is one of the concepts that Laurie covers in the book.  It is a really important concept that can offer important insights and powerful tools for outperforming your competition and dealing with buyers and sellers.   

In fact, at The Institute we have a free web application called My Market Graphs that members can use to segment and analyze their markets, and create graphs for presentations and marketing materials. 

Here are some additional ideas about how to use price segmentation analysis in your dealings with  buyers and sellers.

The Super Rich are Investing More of Their Fortunes in Multiple Homes

The number of rich not only increased last year, the rich got richer.  The good news for you (if you sell luxury properties) is that the wealthy shifted a substantially higher percentage of their investment portfolios into real estate in 2006 -- and nearly half of those dollars were spent on second, third, or fourth homes! 

According to the just released World Wealth Report (registration required), an annual study prepared by Merrill Lynch and CapGemini, the number of financial millionaires jumped to 9.5 million worldwide. That’s up 8.3% over last year.

Of the total, 3.2 million are in North America. The report defines financial millionaires – also referred to as high net worth individuals (HNWI) -- as those with a million dollars or more in investable assets, not including their primary residences.  Total wealth of the world-wide group reached $37.2 trillion in US dollars. 

Last year, the global wealthy pulled substantial dollars out of “alternative investments” such as hedge funds, commodities, foreign currencies and venture capital funds.  Instead, they placed a whopping 24% of their total investments into real estate, an increase of 50% over 2005. 

While 51% of the HNWI’s overall real estate investments were in commercial real estate and real estate investment trusts, a whopping 49% of the total real estate investment went into vacation and second home properties, generally not financed with mortgages.  Statistics for North American millionaires are similar, with 41% of real estate investments in residential properties.

The wealthy are buying multiple homes.  North American vacation and second home sales are out performing the market overall and the number of trophy properties offered in the double and triple digit millions continues to grow both in the US and abroad. In 2006, US property sales in the $5 million and above range jumped 18% over the previous year and are up 31% in the first quarter of this year, according to DataQuick, a research firm which tracks homesales.

The recent record sale of a 20,000 square foot London penthouse overlooking Hyde Park for about $200 million to Sheikh Hamad of Qatar (a new world record as best I can tell!) and the sale of a custom home lot in New York’s Hamptons for $103 million are evidence that the super rich see trophy homes as smart investments that also make a statement and enhance one’s lifestyle.   Growing wealth is a global phenomenon.  The wealthy are citizens of the world, and the demand for uber homes from Dubai to London and from Moscow to New York is strong.

According to the World Wealth Report, "HNWIs are well-informed about present and approaching economic conditions and quickly reallocate their portfolios to capitalize on market trends. This year, globally, HNWIs liquidated some of their alternative investments to realize significant returns from real estate investments.”   

All this is great news for real estate professionals who work in the luxury market and a strong indication that the BIG opportunity in real estate today can be found where the luxury, vacation/second home, and international market segments intersect.

Determine seller's pricing expectation before doing the CMA

Here's just one quick idea from the upcoming Rich Buyer, Rich Seller book:

Determining your seller's expectation about what his or her home will sell for before you do your pricing research can simplify the process of coming to agreement with the seller about the best list price.

While, you can simply ask, "Oh, by the way, what are your pricing expectations for this property?"  the seller usually turns this question around and responds with, "You're the expert, what do you think?" At this point, it may be tempting to give a ballpark figure.  Resist. Instead you want to sidestep the issue of price until you are ready to discuss it.  You probably already say something along these lines to avoid the too early discussion of price, "I would never do you the disservice of taking price lightly.  It's too important.  I want to go back to the office, thoroughly review the comparable listings and sales, give this some serious thought, and when I come back tomorrow, we'll talk about my recommended list price.  We'll also talk about the marketing plan for your property."

Here's a more effective question to ask, "As I begin my comparable research, is there a particular property sale you'd like me to pay special attention to?"  Chances are they have heard about a neighborhood sale which they are using as a benchmark for the value of their home.  Of course, they believe their home is worth much more!

The property they have in mind often sold for much less than the final sales price they heard through the neighborhood grapevine.  What's more, the home may not be a reasonable comparable.  If you don't ask this question, you may go back to your office and do the best CMA in the history of the world, ignoring the property your seller has in mind because it is not a good comparable sale.  However, your seller will look at your perfect CMA and think that you missed the most important comparable.  He still has the incorrect price in his mind and nothing you can say seems to change his attitude about price.  You are mistified as to why he's being so unreasonable in the face of your acccurate CMA.

By asking the question, "As I begin my comparable research, is there a particular property sale you like me to pay special attention to?" you can go back to your computer, determine the price that home really sold for, decide if it is a good comparable, come back with your recommended value, and then be prepared to discuss the sale your seller heard about.  This allows you to overcome what may otherwise be a silent objection to your suggested list price.

Updated Rich Buyer, Rich Seller book available soon

The newly updated and expanded edition of my book, -- Rich Buyer, Rich Seller: The Real Estate Agents' Guide to Marketing Luxury Homes -- is in the works and should be available later this fall. 

The original book hit the market at the end of 2002, just before The Institute for Luxury Home Marketing opened its doors.  We've sold 10,000 of the books since then, including those which our members receive in our training sessions.  Because the luxury home market has changed in the last several years, rather than reprinting the original book, it made sense to revise and expand it with lots of new information and  ideas.  For those of you who've asked -- yes, there are more stories, too.

The Institute for Luxury Home Marketing (ILHM) will be the publisher again and the book will be available exclusively on our website (It's not available in bookstores).  In the meantime, we are totally SOLD OUT of the original book.  Resist the temptation to buy a used copy on Amazon or ebay as the going price on those sites for a single book is more than $100!   Instead, wait for the new and improved book which will sell for a whole lot less than the ebay price and contain a whole lot more.

Watch this blog for more details on the book's release date.