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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

CityRealty Interview with CEO of Hasten

Aleksandr Lanin, CEO of Hasten, and one of their virtually-staged units

Aleksandr Lanin, CEO of Hasten, and one of their virtually-staged units

Anyone trawling through apartment listings may have noticed the upsurge of virtually staged apartment photos. The technique has proven to be a cost-effective and speedy alternative to traditional methods of staging vacant units. For those of you not fully warmed-up to the computer-aided technique, your reservations are understandable. Photos are the most important element to viewing listings online and we’ve all seen unappealing virtually-staged photos with disproportionate furnishings and unrealistic treatments. However, over the years, the realism produced by virtual staging companies has vastly improved – to the point many of the images are indecipherable from real photographs. 

In New York City, Hasten is one of the companies leading the way in producing life-like listings furnished remotely through renderers and computer programs. Their website touts that 84% of the city’s top-selling brokers use the company for virtual staging and that their net turnaround time is an incredible 12 hours. We had a quick chat with Hasten’s CEO, Aleksandr Lanin, to get the scoop on virtual staging and its price and time advantages over traditional methods.

One of the units virtually staged by Hasten, before image shot by Ralph Modica

One of the units virtually staged by Hasten, before image shot by Ralph Modica

Can you give me a brief overview of your company? 

Hasten's virtual staging department was founded in 2014, and nowadays more than 25 specialists are involved in the field of 3D visualization, architecture, design, and programming only for virtual staging itself. There are also analysts who track trends in design and advanced tools for working with 3D graphics, artificial intelligence, and virtual reality. More than 3,500,000 agents and photographers have contacted us since 2014. We contribute to the realization of more than 115 apartments per month only in New York.

Apartment at 400 Fifth Avenue staged by Hasten

Apartment at 400 Fifth Avenue staged by Hasten

How did you find your way into staging interiors and how long have you been doing them? 

Until 2014, we were engaged in visualization of interiors and exteriors, and acted as designers, working on the stylistics of the premises. Then, agents from different real estate companies of New York began asking us to work on their listings. At some point, we realized that we enjoy doing staging - now we spend over half of the whole workflow on it. Every year it becomes more and more actual in the sales process.

Before applying of 3D Visualization 

Before applying of 3D Visualization 

Result after 3D Visualization made by Hasten

Result after 3D Visualization made by Hasten

What is the cost of a virtually staging a single room and what's the typical turnaround time? 

The price ranges from 49-59 dollars, when the agent trusts us with the development of the concept and design of the room, and wants to receive the processed photos as quickly as possible. And does not exceed $150 for large rooms, as well as for the rooms where you need to do some 3D visualization. 

Our turnaround time record was when we delivered a client's images in 3 hours after the receipt of all the necessary details and materials. Typically, however, it takes 24-48 hours. The turnaround time depends on the agent's preferences, the number of photos, and the quick feedback —the more fluid the correspondence, the faster we understand of what client really wants.

Hasten staging of the outer space.jpg

The overall benefits are fairly apparent, but can you brief us on the advantages of virtual staging over physical staging? 

Physical staging has several drawbacks compared to the virtual staging: the price certainly, the limitations of types and sets of furniture, sometimes it is not possible to realize physical staging appropriately for luxury apartments -- furniture has to fit the style, and decor should be high-end, etc. 

The main advantages of virtual staging, however, are speed and convenience. Prior to our technical work, all the agent just needs to send us photos of empty rooms, describe preferences, choose favorite furniture sets and wait until the processed photos are ready. The speed, diversity, and simplicity of digital technology greatly outweigh the laborious solutions of the past.

Hasten virtually staged property.jpg

What's been the overall feedback from clients? Have you measured the response between staged photos vs non-staged photos

Judging from our client feedback, sometimes a prospective buyer/renter can be found the same day when the listing with staged photos was posted on real estate websites. Usually, it takes a week or two. We’ve had customers who could not sell an apartment for more than six months or a year using unfurnished photos, and the number of calls and requests dramatically increased the same day the photos were improved to virtual staging. So, we can say with certainty that the popularity of the listing grows exponentially, compared to the usual empty room photos — they just do not catch your eye, unlike the staged images.

staging Hasten.jpg

What are some of your favorite furniture pieces to stage with? Do you have different collections for varying tastes? 

The most important thing for us in the working process is to keep the harmony in form, color, and the materials used. In most of our works we use 3D furniture models of well-known brands such as Scavolini, BoConcept, Minotti, Poliform, etc. Working on the project, we do not adhere to the concept that all components should belong to the same manufacturer. Each project is treated individually, and both furniture and decor depend on the interior itself. 

In some cases, the client chooses their own furnishings, indicating this preference from the onset. After receiving a draft version of the work, the client makes corrections, and only until everything suits him/her, the final image is signed off on. The last word belongs to the client — we always provide our customers with what they want. That allows us to be the best in our business.

Originally written by Ondel Hylton for CityRealty and 6sqft.