Traditionally, luxury real estate is one of the hardest market segments to try and break into. Why? There are a few common reasons. It might be the presence of a dominant agent already ensconced in the community or the fact that everyone already has a peer in the real estate business. It may be because the agents themselves don’t have the patience to work in a generally slower-paced market (less transactions to go around, tougher competition and slower sales process). It could be that they are simply not prepared for the unique challenges a high-end market poses. In my experience, it’s usually a combination of these reasons that prevents most agents from becoming successful in luxury real estate. There are many things you need to know before you make the quantum leap into the next price range. We’ve put together a list of five factors that will help you decide if a move to luxury real estate is right for you.
Know What You Are Getting Into. Agents often make a blind leap into luxury real estate because they think that’s “where the money is.” Of course, it’s simple math. If you get the same split, it pays to list homes with higher selling prices. In theory, you can make more money by doing fewer transactions. On one hand, that’s true, but if you go into luxury real estate with this mentality, you are probably destined to fail.
Yes, your income per transaction goes up significantly. That’s great, but there is often a new set of challenges introduced when working a high-end market: the competitive stakes are much higher, social circles are much more closed, politics are different, and there are many other factors which I will detail throughout this article. In addition, marketing and servicing costs are generally more when dealing with luxury homes and clients. Both buyers and sellers expect more and demand more and the properties themselves need even more attention (marketing, staging, photography, etc.) to appeal to a more sophisticated crowd. You may want to check out Real Estate Marketing for more.
Carol Barkin of Toronto, Ontario has been a successful Sales Representative for 20 years, but it took her some time to build her business in her high-end markets (both in the city and in a lakefront recreational market about an hour outside Toronto). “For me, the biggest challenge was making that first connection,” she says. “They already have tight social connections and know how to get what they want, so building relationships is a matter of trust. It’s important to relate to clients as a friend and a helpful peer, not just present yourself as a service provider.”
Patience, Patience, Patience. It’s clear that high-end real estate is a different animal than traditional residential markets. It tends to move much slower. Generally, there are fewer homes on the market at any given time and there are fewer buyers out there with the means to purchase such expensive properties. The stakes are higher for everyone involved. So on average, it takes significantly longer to sell one of these homes. In addition, there is a lot of competition out there for a limited number of properties, so it often requires more patience to break into the market and build a strong client base. This is truly a case where the end usually justifies the means if you have the right understanding and commitment going in. Though listings are harder to come by and it takes longer for them to sell, the large check at the end of the transaction is worthwhile. But not all agents have the stomach to wait longer in between commission checks. Oftentimes, this is the hurdle that stops them in their tracks.