Jay Zenner

The quip that the three most important things in real estate are "location, location, location" has become such a cliche that we don't give much consideration to what it means anymore. I've posted a couple of times on my blogs about an experiment that I do sometimes going to a community I'm unfamiliar with on Realtor.com and examining the copy written for the higher end homes for sale in that market. It's strange but something always seems missing. It's context. It's what kind of forest is this? It's what's the location, location, location all about for this home?

We don't normally feel this in our own markets because we already have the context. We know the relative proximity to shopping, employment centers, good restaurants. We know if it's an urban environment or a quiet suburb. We know what the arts community is like, the economic situation, the government issues. Because of this we tend to forget that many of our potential buyers are moving here from somewhere else and yet we don't provide that context for them. The fact that Durham is the center of the universe for minor league baseball means something, after all. Or the fact that Durham is home to the most important documentary film festival in the world and is held here every spring. I've seen more attention given to ice makers and crown molding that are taken for granted in a certain level of home than information that conveys what the community has to offer. Location, location, location.

So, where does the context come from? It's actually a good subject for blogging but you can't cover everything in a few posts. One of the things that I did recently was put together my list of the top ten websites that were essential for getting to know my community. I posted it on my two local Durham blogs, DurhamLuxRE.com and SpringtreeTerritory.com.

The effort to put it together was more difficult than I thought it would be because of the problem that I mentioned. I do know the context already and had to struggle and put myself in the shoes of someone who didn't live here or know much about the community. But I think it was worth the effort and, even though I've lived and been active in Durham for over 25 years, I learned some things too.

The new site at www.springtreeterritory is coming along fine. I'm learning a lot about SEO. There's a terrific tool from Hubspot at www.websitegrader.com that will assign a grade to any website and compare it to several of the websites that compete in the same space.

My latest post on on SpringtreeTerritory.com is a year end wrap up of the Durham market. There is a glimmer of hope finally in the year-to-year quarterly numbers. The 4th qtr. of 2009 is the first in two years to actually improve on the same quarter in the previous year. In fact there is a dramatic improvement...26%. It must be remembered, however, that there was a lot of uncertainty in the 4th quarter last year with the election of a new president and the collapse of the financial markets.

To get the full story on the Durham real estate market you can go to the site through the link here.

The Traditional Elements of the Marketing Mix

When I first got my real estate license I assummed that my many years of marketing experience and the knowledge I had acquired renovating and flipping a couple of condos would be a good basis for my new career.

I was mistaken.

I didn’t fit the profile at all of what the industry considered a potentially successful agent. In fact, I wasn’t very successful. What the industry traditionally looks for are the gregarious type that is willing to network incessantly at the country club, church, kids’ school, etc. Many of the most successful agents religiously maintain contacts with past clients and prospects and love doing it. They are gregarious almost to a fault. A managing broker looked for people who could envision their faces on billboards and bus stop benches and relished being recognized in the supermarket as the local “top producer.”

Agents typically get two types of training.

Initially most of it is associated with obtaining and keeping a license. It is designed to keep them out of trouble and protect the consumer. It focuses on the legal concept of agency and using the appropriate forms.

The other training focus was on drumming up business. It relied on tried and true practices for farming neighborhoods and communicating with past clients and working your “sphere of influence” that included family and friends. Even things like print advertising and open houses which appear to be selling homes are really more useful for promoting the individual.

Which gets to the point.

How come there is so little training on selling homes? The simple answer is that it just wasn’t necessary. In a boom market with more buyers than sellers, everything sells eventually and more sophisticated marketing isn’t necessary. But this isn’t a boom market anymore. Sellers outnumber buyers by a wide margin. Maybe it’s time to consider whether the glad hander on the billboard has any marketing skills. Here are a few questions to ask any agent that you are considering to list your property whether it’s rental property in a declining neighborhood or a multi-million dollar estate.

1. What is your pricing philosophy and how do you determine the appropriate price at which to list a property? Paradoxically, luxury properties are the most difficult to price but the least elastic because they are usually unique.

2. What promotional activities do you propose and who do you target them for? Often overlooked in the promotional plan is the middleman, the buyers agents who can strongly influence what properties they will see and consider.

3. What is your marketing budget? You may be surprised that many agents won’t spend much more on a million dollar home than they will on the average listing that is around $200,000 in our community. Shortsighted? Maybe, but if they know the property could sit on the market for a while or not sell at all, this money comes right out of their lunch money.

4. What is the “unique selling proposition” that you would use to promote this property? This gets at their understanding of both the importance of the product in the real estate marketing mix and also what is promotable. The most promotable feature may have nothing to do with the house at all and more to do with the community.

I vividly remember reviewing a template in the first few weeks of my career for preparing a marketing plan for a prospective listing. It was comprised mostly of things like “place sign in yard,” “place directional signs at key intersections,” “take pictures,” “place in MLS,” “put flyers in info box,” “put lockbox on front door.” I wondered to myself if this was all there was to marketing a home.

What I discovered was that that was all it took…then. But this is now. The best agents still have to be able to establish rapport with potential clients but they are also going to have to demonstrate they can market homes.

Bucking the trend?

I define the luxury market somewhat arbitrarily as anything listing for $700,000 or more.

Amidst all the terrible economic news it might be surprising to learn that the luxury home market in Durham may have held its own during the 3rd quarter of the year…or, at least, it hasn’t gotten any worse. During the quarter, 12 homes listed for over $700,000 sold, compared with 8 in 2007. 6 more are pending. Year-to-date there have been 30 sales, which is one more than during the same period in 2007.

While Durham stayed even, year-to-date sales of luxury homes in adjacent counties slipped. Orange was down 42% (81 sales this year and 139 last year,) Wake was down 14% (352 this year and 410 last year) and Chatham was down 43% (28 this year and 49 last year.)

Declining inventory but not from sales

During the 3rd quarter 27 luxury homes were newly listed or relisted in Durham. In spite of this, inventory, or the number of homes in this category, declined from 86 to 77. If you do the math this means that 24 previously listed homes were withdrawn or the listings expired without being sold. In a less than robust market, you might expect that owners with no great urgency to sell might withdraw them and wait for conditions to improve before relisting.

Where are they?

Of the 77 listings, 20 are in Hope Valley (including Surrey Green), 16 are in Treyburn, 9 are in Croasdaile, 6 are in the Oaks, 4 are in Trinity Park/Hillandale/Watts Hospital, 4 in Maida Vale, 2 in Meadowmont, and 1 each are in Southpoint Manor, Duke Forest and Forest Hills. 13 are not in a subdivision or neighborhood. To see details on any of these properties, you can use the BestHomePro search tools on the Lux Neighborhoods page or DurhamLuxRE.com. I’ve set up searches there for each of the key luxury neighborhoods in Durham. You can use these links to search anonomously any time you want but, please be my guest and register at the search site and follow developments in any neighborhood you like by saving a search and turning on the notifications feature. It’s a good way to track developments in a market as they happen and it will not generate spam from me or anyone else.

Of the homes sold or under contract, 4 are in Croasdaile, 2 each in Treyburn, the Oaks, Maida Vale, and Hope Valley, and 1 each in Forest Hills, Duke Forest, Southpoint Manor, and Meadowmont. The final one not in a subdivision is on Glenn Road.

Price cutting seems to be the primary marketing strategy

Of the 77 luxury listings currently on the market, 39% or 30 have had price reductions ranging from $10,000 to almost half a million. Of the 18 homes that sold or went under contract during the quarter, 11 had price reductions ranging from $25,000 to $400,000.

An alternative to price cutting…raise buyer agent compensation.

Trenton Road Contemporary - $1,199,000

It is my contention that one of the ways to make a listing competitive without necessarily reducing the price is to offer an attractive commission to the buyer’s agent. This gives the buyer agent with a qualified buyer in tow extra incentive to show the listing. (There is more about this strategy in the Luxury Marketing Report. Get it here or from the link in the sidebar on the left.) In Durham we are actually beginning to see the use of this strategy some. Of the 77 luxury homes on the market, 39 offer the buyer agent 2.5% of the sales price. 5 offer less than that with the lowest 1.9%. 30 offer 3% which used to be the standard. Two offer 3.5% and 2 more offer 4.0%. Two of them are new homes in Southpointe Manor. One is a unique contemporary and one is offered by a commercial broker for its development potential. The contemporary is offered by Anne Carpenter of Howard Perry and Walston for $1,199,000 and is pictured above. For more information about it click here.

This is something to try as an alternative to lowering the price of a listing and can actually net the seller more. Some sellers are uncomfortable with this because they already feel like agents make too much money on these high end properties. Some listing agents are reluctant to try it because it can mean that the buyer agent will make more on the transaction than they will. Personally, I have no such reservations. If it gets my client’s property sold, any compensation is better than no compensation.

More information All this information is drawn from data available to any REALTOR with access to the Triangle Multiple Listing Service and does not include transactions that did not involve a REALTOR. If you have questions about any of it please don’t hesitate to call me at 919-819-6666 or email me a jay@jayzenner.com. More information about the DUrham luxury home market can be found at my blog, DurhamLuxRE.com.

I usually wait until the end of the quarter to take a look at the quarter’s activity in the Durham luxury home market but it’s been an interesting summer in some ways. The summer is usually not particularly active but since July 1, six homes in the $700,000 or more category have closed and another 8 are pending.

Inventory is down slightly to 79 active listings. What is interesting is that 21 of those homes have been on the market less than 60 days. The inventory is down from 86 homes at the end of the quarter. If this doesn’t add up for you it is because there have been a number of homes that have been withdrawn from the market during the period or the listings expired. This suggests to me that if the market was a little more vibrant than the inventory would be much higher. Many sellers will not (or can not) cut their prices and will stay put until the market improves. Only three of the 14 closed or pending homes are new homes, which suggests some improvement in the resale market. Let’s hope this trend continues.

At the end of the quarter, I’ll compare Durham’s statistics with our neighbors to the east and west. Learn more about Durham's luxury home market at DurhamLuxRE.com where you will find profiles of Durham's luxury neighborhoods with map searches centered on the neighborhoods.