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Building a luxury business in a shifting market

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Jumping over hurdles to get to the closing table is nothing new for real estate professionals selling luxury properties; it’s practically in the job description.

They don’t let obstacles undermine their determination to complete a transaction, whether it’s the federal tax overhaul, which has turned luxury buyers into bargain shoppers looking for reduced prices to make up for higher taxes; or Chicago’s constant bids to increase the real estate transfer tax, which Realtor associations have managed to shut down for now; or buyers’ uncertainty about whether or not the market has bottomed out; or younger buyers’ preference for smaller spaces and the sharing economy.

Although market conditions and the political climate are making it tougher to move luxury properties quickly, these sales are still happening. The agents and brokers we spoke with for this article have all recently sold properties priced at at least $1 million in a matter of days. And they do it by knowing what today’s buyers want and presenting it to them in the right way.

Understanding — and explaining — the changing market

It’s important to set clients up for success by establishing expectations up front, according to Tommy Choi, president of the Chicago Association of Realtors and co-founder of Weinberg Choi Realty Keller Williams Chicago Lincoln Park. He gives buyers and sellers an “under the hood look at the market,” letting sellers know they need to be patient as luxury properties can take from nine months to a year to sell and explaining how similar properties are faring in the current market. For buyers, Choi said he takes time to explain what the valuation picture looks like in particular neighborhoods now and how property taxes can increase in this climate.

“Chicago is a world-class city, filled with opportunities for everyone,” Choi said. “The luxury market in each neighborhood provides its own definition of value. It’s not just the inside walls of a home. On a micro-level, each neighborhood brings its own amenities and history.”

In the experience of Joanne Nemerovski, a broker-associate with Compass Chicago, Lincoln Park, the Gold Coast, DePaul and Streeterville are all regions of the city that have always sold better than others. “But now the West and South Loop, Bucktown and Wicker Park are all thriving,” she said.

Still, the luxury market is struggling. Choi said the non-luxury market in the city has been outperforming the luxury market for the past couple of years, in terms of closed transactions and median sales. He attributes the situation to the federal tax overhaul, an increase in local property taxes and sluggishness in the new-construction sector. Due to increased costs of land, labor and materials, new construction is priced at a premium and taking longer to sell. This has resulted in shadow inventory — resale homes that should be on the market but aren’t — because sellers are afraid their properties will suffer the same fate.

Part of making deals happen in shifting markets is understanding what buyers want. Knowing that an appropriately priced home with updated finishes sells quickly today, Kim Alden, broker and luxury specialist with Baird & Warner in Barrington, begins by asking sellers what’s more important to them: selling their home for the most money or selling it in the quickest amount of time? The goal, of course, is to do both but, sometimes they have to choose, she said.

Fulfilling wish lists

Overall, luxury buyers are not as interested in the size of a house as much as they are in finishes; they want a turn-key experience, said Joey Gault. The senior broker of The Wexler Gault Group at @properties in Highland Park noted that social media plays a role in buyers’ must-have lists as well. “They are so focused on everything they see online at Houzz or Pinterest. The good homes that are updated and fill buyers’ needs are selling.”

Gault’s team put two homes on the market in early March and both sold for top dollar — $1.15 million and $1.35 million — within the first couple of days. She credited the fact that each listing contained the most sought-after finishes for the quick sales. “It’s a formula: white kitchens, dark floors, quartz countertops and gray walls,” Gault said. “If you have it, your house sells.”

From the city to the suburbs, one commonality is that traditional buyers don’t want to handle home improvement projects. “It’s more of the investors who want to do renovations … but they are staying away from luxury properties, because the market time is greater and the investment is larger and riskier,” Alden said. She added that, in general, the luxury market has been slow but momentum seems to be accelerating into spring. “It was pretty non-existent last fall and picked up since the end of December and beginning of January, when interest rates went back down into the 4 percent range and people saw that as a buying opportunity.”

Marketing differently

In a two-week timeframe, Nemerovski sold three homes priced between $1.595 million and $2.595 million in the heart of Lincoln Park. “One sold within a day or two,” she said. “One had been on the market for a short time last year and we just reintroduced it and it sold in a day; and one I had on the market for quite a long time. We did a price reduction and that sold.”

The key to her success is targeted marketing. She considers whom the potential buyer of a property could be and aims postcards, flyers and social media ads at them. “For example, there’s a large home we’re trying to sell now,” she said. “I’ll try to find clients in townhouses in the immediate neighborhood and hope those people are ready to make a move up.”
However, Nemerovski never tries to convince anyone to make a move. “I want to help my clients compare the options and give them a real education so they can decide what works best for them in the real estate world,” she said. “An educated client never has buyer’s or seller’s remorse.”

Lately, Alden has been hosting open houses, something she has never done before at the luxury level. “I actually got a couple under contract through a luxury open house,” she said. “Buyers right now are searching online for basically everything and they feel very comfortable walking into an open house, whereas they might not be as comfortable calling an agent and setting an official appointment.”

Making listings sparkle online

At every sales meeting, Gault and her business partner, Beth Wexler, are reminded by Thad Wong, co-founder of @properties, that the first showing is always online. Only after the buyer has seen and expressed interest in the online listing can the second, physical showing happen.

That’s why they only post pictures online that show the home in a positive light. This can require effort on the sellers’ part when there’s a need to make their home look more current, especially in the crucial bathroom and kitchen areas.

While it may seem that wealthy sellers would be more willing to spend money on getting a home ready for sale, that’s not necessarily the case. “We want our clients to spend the least amount of money to get the best price,” Wexler said, noting inexpensive updates such as spray-painting cabinets white, painting walls gray and virtual staging can make a difference.
Originally a technique for unoccupied listings, virtual staging has become a way to empty out rooms of outdated furnishings and photoshop in on-point pieces to create a look that drives buyers to showings. “If we can get people in the door, we can sell,” Wexler said. “It’s not deceiving because it’s not the bones of the house, it’s just pictures.”

Creative deals and emphasizing value

The market is shifting and everyone is looking for a deal, according to Alden. “In my past recent sales, all of the purchase prices were well below the construction price or the last sold price. Buyers are trying to make up for the tax ratio by going in lower with price and attempting to get their taxes reassessed at the new purchase price,” she said.
Oddly enough, on more than one occasion, Alden has had potential buyers refuse to make an offer unless she could lower their property taxes; something she does not have the authority to do. “When you’re looking at a $2.5 million house and taxes are $60,000, it’s a lot to swallow,” she said. “In some cases, we have done reverse offers, offering a year of tax credits to help entice buyers to make that offer.”

Part of making luxury deals pencil out is determining whether or not financing will be necessary or beneficial. Recently, Alden had three luxury sales in Barrington Hills within five weeks, and also sold a luxury property in Highland Park that had been on the market for a long time. But the prices were all lower than the sellers wanted, and two of the three buyers paid in cash.

Looking back on all of her luxury transactions, Alden said about 80 percent were cash deals. “Maybe they think it’s a better investment to not be paying interest on it,” she said, noting the interest on a jumbo loan product, 15 to 30 years down the road, could cost more than the home itself.

In contrast, on the North Shore and in the city, Gault, Wexler and Nemerovski all said many clients are taking mortgages, even when they don’t need to, for the tax write-off. But as consumers settle in to the new realities of the tax reform bill passed in 2017, that may be less enticing than it has been in the past.

A barrier Nemerovski has come across is clients wanting to wait before taking the leap, because they are uncertain whether the market has bottomed out or not. “The only way to gauge it is based on experience,” Nemerovski said. If they really want the house and they’re making a long-term purchase, she tells them, “You can always resell or rent the home. You have to do what makes your family happy.”

In spite of all the obstacles, Nemerovski still believes people will always want to live in their own home and enjoy their creature comforts. “It will still be the American Dream,” she said.


by Melanie Kalmar

What to make of virtually staged listings

Out of sheer nosiness, I’ll occasionally look at listings in our building. One floored me: I had no idea our neighbors were so chic! Then I clicked the next photo and saw reality: a vacant unit with rusty radiators and peeling paint. It was virtually staged — digitally repaired and repainted, with new lighting, furniture and art added to the photos.

Welcome to the brave new world of virtual staging: no matter how terrible a place looks in person, it can be magically transformed for the Internet — with the help of a little computer-generated imaging.

It’s often hard to tell actual from imaginary space. Architects have always produced renderings, and agents stage with rented furnishings, but now it’s commonplace to do it all on the computer.

Scott Harris of Brown Harris Stevens likes it.

“Virtual staging is really helpful to give buyers a glimpse of the future,” he said. “New floors, new kitchens appear magically — all without a seller having to commit to doing that work before selling. Buyers often can’t see themselves in an unrenovated space. They need help with the vision part.”

Unlike some agents, Harris shows the unvarnished floors, too.

“We always show the actual condition,” he explained. “It’s important not to create a feeling of disappointment when buyers arrive. Our relationships with agents and buyers are built on trust and I wouldn’t want to mislead anyone. There are many opportunities for agents to grow buyers’ trust, and many ways to erode it. I wish all agents took the longer view, which requires truth in advertising.”

Here are four listings — three staged virtually, and one decidedly not

A one-bedroom at 167 Perry St. as it actually exists, above.

A one-bedroom at 167 Perry St. as it actually exists, above.

The same Perry St. apartment “virtually staged” with furnishings added via computer imaging.

The same Perry St. apartment “virtually staged” with furnishings added via computer imaging.

A one-bedroom, one-bath in a doorman co-op at 167 Perry St., with river views, a wood-burning fireplace and a small balcony is on the market for $1,399,000.

https://www.bhsusa.com/manhattan/downtown/167-perry-street-3n/coop/19267685

Virtual furnishings lend a hip feeling to this Hudson St. pad.

Virtual furnishings lend a hip feeling to this Hudson St. pad.

In far west Soho, a one-bedroom, one-bath with high ceilings and huge windows at 255 Hudson St. is for sale for $1,175,000.
https://www.bhsusa.com/manhattan/downtown/255-hudson-street-5f/condo/19401875

Festival virtual furnishings enliven this Upper East Side offering.

Festival virtual furnishings enliven this Upper East Side offering.

In Carnegie Hill, a two-bedroom, one-bath in a doorman building has a serene bedroom sporting the kind of complicated bed linens you rarely see in real life. $999,999.
https://streeteasy.com/building/60-east-96-street-new_york/6c

The real McCoy: The photo of this E. 50s flat features the actual furnishings.

The real McCoy: The photo of this E. 50s flat features the actual furnishings.

Nothing virtual about 434 E. 52nd St., a two-bedroom, two-bath with yards of built-in bookshelves, 13-foot ceilings, and a wood-burning fireplace, going for $1,695,000.
https://streeteasy.com/building/434-east-52-street-new_york/4e

BY MARTHA WILKIE

Select agents offering 3D views

Craig Neil

Craig Neil

Real-estate marketing continues to evolve exponentially. For decades, agents looking to advertise homes for sale had one option, besides planting signs in front yards: the print media. Then, in the mid-1990s, the advent of the internet shook the status quo. But that only offered a wider, and cheaper, exposure for Realtors’ still photographs. It took almost another two decades for dramatic advances to appear. Now Realtors are expanding their presentations with drone photography, virtual staging, and 3D tours.

The best 3D tours are a real step up from the “virtual tours” that appeared a few years ago. Those either seem stilted or tacky in comparison to the 3D tour, and sometimes turn out to be simply slide shows with music. The more naturalistic 3D tour allows you to move around in the room, and among the rooms, and zoom in to inspect details.

You either navigate with the computer mouse or arrow keys, or your finger with touch screens. Moving through a property on the smartphone can be more fun than on the computer, although you’re limited by the smaller screen size.

For a more immersive experience, you can get a pair of Google Cardboard goggles for $10 and view these house galleries in a realistic dimensionality.

All of these options are available for a few home listings at homesantafe.com, the website of Realtor Paul McDonald (Sotheby’s International Realty). “I do think there is an issue with the users’ familiarity with technology and their desire to do something like this, so it would seem to me to appeal to the younger of mind,” he said. “It’s pretty rare that someone has said they want to buy a house as a result of just seeing the 3D tour. Like other technologies that are tiptoeing in these waters, it’s more about the selection process.

“I think like any technology it’s kind of clunky at first; whether it ever gets to critical mass I don’t know. I have a good friend in business who said, ‘The problem with your industry is the delivery of your product: you have to get in your car and go out and see it.’ This gets us one step closer.”

McDonald has his own Matterport 3D camera. The Matterport has nine lenses: three down, three straight ahead, and three up. The photographer attaches it precisely level on a tripod, then makes a series of exposures in a circle, repeating the process at 30 or 40 locations in the house. When you later view the 3D imaging, there is a circular figure at each location and you can progress from one to the next to move wherever you want in the home.

The Realtor has heard that Zillow is testing a similar technology that would allow the average real-estate agent to assemble a dimensional home tour using an iPhone. “The other part of this technology is looking at it in terms of the three mantras of business — faster, better and cheaper — and if the Zillow model works, you don’t have to go buy a Matterport camera [for about $3,000] and it doesn’t take you a couple hours to do a house.”

The Matterport facility also offers viewers another perspective, focusing on the plan view, looking down on the room layout from above.

Check out the Tesuque Creek property listed on McDonald’s website and you see an example of virtual staging. “This is another technical aspect of marketing a home that’s not real, if you will. They take a CAD drawing, they select things they want to dress it up with [furniture, rugs, paintings on the walls], and then send it ovenight to India, using massive computing power, and when it comes back... you’re not going to believe it’s not really staged when you look at the image.

“I feel like these two technologies are competing in this arena. We see this virtual staging assisting new-construction projects. I’ve used it on a home that was empty and I wanted to get going on the marketing. I think these are both tools that we didn’t have a couple of years ago that are going to be with us forever.”

Another Realtor using the Matterport system is Craig Neil with Keller Williams Santa Fe Realty. He said the resolution of the Matterport pictures has improved to the point that the agent can often use captures from a 3D tour of a house for websites and even brochures. “You’re saving money because you don’t have to do both 3D and regular photography.”

Neil and his business partner Sarah Said own their own camera. “Sarah has been a Realtor for more than two decades but I’ve just been in real estate for two years,” he said. “I come from the tech side; I worked for Apple for three years and I worked with Google doing Google ‘business view’ shooting, which is linked to Google Street View. I used my Nikon D7000 with a wide-angle lens and I’d take three different exposures at four angles of a circle, then composite those 12 images together to make a circle and then connect them to other circles.”

Neil said he agrees with McDonald that the 3D technology appeals more to a younger audience. “I would guess 5 to 10 percent of people use this.

“The two things I think are of the most benefit to me as a Realtor is that for people from out of town who have seen the 3D tours, they’ve already walked through the houses and they know which properties they want to see. And most important, if they were here and walked through the actual house and later they can’t recall where the kitchen was. They contact me and I give them the link and they just go online and they can see it all.

“The market is so competitive right now that people want to get a head start. They see the listing come up and say, ‘We’re thinking of coming to Santa Fe in three weeks,’ and I have to tell them, ‘Well, that house is going to be gone in three days.’”

By Paul Weideman

Take a 3-D Apartment Tour to See the Real Estate Listing of the Future

333 East 91st St Teaser Video

MANHATTAN — Real estate broker Bianca D'Alessio was taken by surprise when a woman relocating from Boston to New York called last week with an offer on a new condo in an Upper East Side building, saying she had already done a “walk through.”

D'Alessio never took the woman on a tour of the model apartment at the Gianna, at 184 E. 64th St., but the buyer felt as if she had already seen enough of space, since there’s a 3-D model of it on the building’s website.

“I received an offer based on a visual tour,” said D'Alessio, of Nest Seekers. “You can zoom in on the quality of the finishes and see the magnificent fixtures. As you’re ‘walking through,’ you can see the detailing on the closets. You can zoom in and see there’s a Toto toilet and a Sub-zero refrigerator and Wolf range.”

Offering 360-degree three-dimensional tours is taking the presentation of real estate listings to the next level, brokers said. The tours will soon become more commonplace as technology has made creating such virtual tours cheaper than ever, many believe. 

3-D listing (Image courtesy of GeoCV.)

"For your client [who is selling], you want to be getting the right people through the door," said Alessio, who began incorporating 3-D listings in June. "I think it even weeds some people out. When you have this tool, it's almost their second showing, and you know they're interested as soon as they walk through."

GeoCV has been offering its services — including the 3-D tour, high-quality photos and a dollhouse-like floor plan — to brokers like D'Alessio since June. It plans to unveil a do-it-yourself kit at the end of the year for brokers to rent or buy, with a special 3-D camera that attaches to a smartphone using the company’s custom-made rotation device, explained Anton Yakubenko, GeoCV's CEO and co-founder.

It takes about an hour per 1,000 square feet to do a photo scan of an apartment and two days to turn around the finished product. The company currently charges 10 cents per square foot for its services, with a minimum of $199 per listing.

“It’s really a disruptive price for the market. It costs two or three times more from others,” Yakubenko said about other companies offering 3-D services.

His company uses "new generation" smartphones with 3-D cameras, he said, and is moving toward using a regular smartphone with a special attachment. Other companies tend to use pricey special cameras rather than smartphones.

His company is also developing an application to create virtual-reality tours of real estate listings, which new developments are increasingly using to give potential tenants a better feel for how the spaces will look when finished.

The demand for VR, Yakubenko noted, is less than the 3-D model right now, since few people have VR headsets at home to view listings. But he envisions a future where brokers have headsets in their office or can bring them to clients’ homes.

“It’s time-saving for agents and clients,” he said of the tools that can cut down on unnecessary trips to open houses.

The 3-D tours even help apartments that may need work and don’t show well in photos, he said.

“An agent was selling a townhouse needing significant renovation. He wanted buyers to understand the work involved,” Yakubenko said.

While some homes in similar condition often languish on the market, this particular townhouse, in Crown Heights, sold in a couple of weeks, he added.

D'Alessio agreed that more transparency can help apartments with potential pitfalls.

“It’s better to know what you’re walking into than be surprised,” she said.

Originally written by Amy Zimmer dnainfo.com