Christie’s International Real Estate: “Luxury Defined” Survey

credit: Christie’s International Real Estate

 We all know that the luxury housing market operates on a different level than the residential housing market. They’re not subject to the same rules, trends or appreciation. They are largely insulated from money flows and political shifts. Luxury homes are trophy properties, which, like expensive art, come with a certain prestige and emotional attachment, unlike the average residential home an investor can flip and sell. 

Christie’s conducted this study in 10 cities: London, Cote d’Azur, New York, Hong Kong, Paris, Toronto, Miami, San Francisco, Los Angeles and Dallas. The study, called “Luxury Defined: An Insight Into The Luxury Residential Property,” can be found here to read for yourself. I wanted to share a few parts of the results that I found particularly interesting.

• Of the 10 surveyed cities, there are fewer than 33,000 properties selling above $1 million. (The equivalent of all available properties in the Atlanta metro.)
• San Francisco, LA and Dallas are experiencing a much greater number of buyers than there are available properties, leading to a 70 percent increase in luxury properties since last year. 
• Luxury homes are two items combined: They are both real estate and a luxury possession. When economists and those of us in the real estate industry are making predictions, we consider both the market for luxury goods as well as the market for real estate. While many predict housing prices across the US in the non-luxury sector will increase only with inflation in the coming year, luxury goods are predicted to grow at about seven percent. 
• Jeff Hyland, a CIRE affiliate in Beverly Hills agrees that luxury homes will go more the way of luxury goods than the rest of the real estate market in the coming year, noting that many of his clients are finding little return in the stock market and are instead recognizing the value in purchasing a home. With real estate, not only do you get to own it, but, unlike stocks, you also get to enjoy it in the meantime. 
• The number one rule of real estate has always been, as you’ve certainly heard, “location, location, location.” That hasn’t changed. In fact, today, it’s even about micro-location. Buyers have expectations for the right balance of convenience and privacy, and they’re not likely to settle for less. 
• One last note: While many international buyers, which consist of over 30 percent of luxury sales in seven of the 10 cities CIRE surveyed, are still financing, many U.S. buyers are paying in cash. According to the survey, almost 100% of sales over $5 in Los Angeles were paid in cash last year. 

Be sure to read the entire study on Christie’s International Real Estate’s website. It’s well worth the time. 

Tips for buying your first investment property

I’ve spent a lot of time researching, touring and managing investment properties over the years. I’m a firm believer that real estate is one of the best investments available, so I’ve not only recommended that to buyers and sellers at J. P. King, I’ve also invested in it personally. There are plenty of opportunities for current or curious investors to get into the business of being a landlord today, especially considering there are still plenty of soft markets. I wanted to share a few pointers that I’ve learned from my personal experiences as an investor.

Seek advice from seasoned investors on what type of property you want to invest in.

So much of what I’ve learned about real estate has come from talking to and surrounding myself with people who are smarter than me. As far as an investment property is concerned, housing in many areas provides excellent investment returns, especially when you factor in appreciations. When you determine what type of property you think would suit you best, seek out people that are already doing what you want to do. Ask what they’ve learned, what they wish they’d known, and how they got started.

Decide how long you want to stay in the investment.

Unlike many other investments, real estate in not liquid. If you’re not committed to a long-term investment, when it comes time that you’re ready to sell, it may take some time. Be sure you’re prepared — both financially and personally — to endure how long you’ll need to hold on to the property to see a steady return.

Determine if you want to be a landlord.

When I first started out with just one or two rental properties, I managed them myself. As the number of small rentals I owned increased, I hired a property manager to take care of the details for me.  Being a landlord can be a stressful job at times, and a water heater going out or a leak rarely occur at a time that’s convenient for you. You’ll need to decide which route you want to take.

Find the right partner.

If you decide you want a partner in your investment, be sure it’s someone that will bring special skills to the partnership. Whether it’s a spouse or a friend, make sure your goals are the same for investment timeframes, that you’re on the same page about who will manage the property, and that each of you knows his or her own responsibilities. Working all these details out on the front end will save time and frustration later.

How much do you want to invest?

Deciding a firm budget and securing preliminary financing commitments before you start shopping will streamline the buying process. Sellers typically prefer buyers whose financing has pre-approval, and having a firm budget will assure you’ve determined your goals and that you’re on track to attain them.

Bigger isn’t always better.

Many renters prefer a smaller, more affordable home. Even if a larger home is available at a good price, make sure it’s something that a renter would want to live in. Consider its location, amenities and what you would need to charge for rent each month. Each of those are often more important to renters than size.

Are you considering the real estate business for your investments? If you’re already a seasoned investor, what advice would you give?

Will Your Contract Stick at Closing?

We all know the hassles and inconveniences involved with selling a home. You make sure the house is always spotless, you have to find somewhere to go when prospective buyers come to tour it, and you may even bake fresh cookies to give it that “Welcome Home” feel and smell. (I’ll admit, I’ve done it.) With all the stress that can be involved in selling, when you finally receive a contract, you want to make sure it sticks. 

I saw an article a while back talking about the number of REALTORS experiencing trouble with contracts closing. Whether it was because a buyer couldn’t get financing, a low appraisal or a flaw in the inspection, they estimated at the time that only 47 percent of contracts were closing on time. So how do you make sure your contract sticks when you get an offer you’re pleased with?

Have your home in good repair.

A frequent cause for concern for a buyer is when a home needs significant updating or repair before they can settle in. The buyers looking at your home are just as ready to move as you are, and any cause for concern on an unfamiliar home can be a red flag. If your home needs a new roof, foundation improvements, electrical updating, etc., taking care of those before you list it may actually make you more money and produce a cleaner contract in the long run. 

Fully disclose known problems.

If there is an issue with the home that you aren’t able to take care of prior to listing and selling, it’s better to be upfront and disclose rather than allowing it to become an emotional issue — for you or for them — before closing. 

Have your agent tighten up on contingencies.

It’s not at all unusual for a buyer to add a contingency to the contract. For example, some buyers want to sell their home before closing in a new home to avoid the risk of paying two mortgages. If you agree to those terms, it might be wise to include in the contract that you have the right to continue to market and receive offers on the home so you can move on quickly if they don’t come through. You can even go as far as ensuring you have the right to accept another offer if you receive an equal or higher offer before their home sells. Be sure you work with your agent to keep your options open. 

Negotiate on the important terms.

If it’s important to you that you close on time or that your buyer’s financing is in order, make that abundantly clear in the contract. 

Have an auction.

You knew this was coming, right? In all seriousness, though, it can be a viable option for the right properties. An auction sells a home “as is, where is”, so there are no contingencies. The marketing period prior to the auction date allows potential buyers to do their homework beforehand, then they’re ready to bid and enter into a contract on auction day. 

Have you had experiences like these buying and selling a home? Maybe you’ve learned the hard way. What wisdom can you share to make sure your contract closes on time?

[Photo Credit]

Four Housing Predictions for 2013

I hope you’ve all had a happy new year so far. As I’ve been looking ahead to what 2013 will hold for the real estate market and how we at J. P. King will adapt to it, I’ve found more reasons to be optimistic than I have in recent years. Happy New Year to those of us in the real estate business, right?

The information I’ve studied certainly coincide with my personal experiences so far, and I wanted to share some of those things with you.

There are fewer residential properties available. 

Less inventory isn’t a bad thing, in this case. I’ve encountered buyers that are overwhelmed with the inventory we’ve had in recent years, which hindered their buying process. The best sign of less inventory is obvious: Our economy is beginning to heal. A recent report by CoreLogic said the number of homes in “shadow inventory” has dropped over 300,000 in the past year. Fewer homes on the market mean fewer foreclosures and higher prices for those homes.

Home prices will rise. 

Like I touched on a moment ago, I do think home prices will rise this year. Many of the reports from surveyors and economists I’m seeing agree that prices will rise anywhere from 3% to 3.5%. That’s great news.

Fewer buyers are driven by low rates. 

Again going back to the first point, buyers are actually more driven by the increasingly-limited inventory than they are the low interest rates. Since most buyers are confident interest rates will stay low for the next few years, it’s not a motivator to buy right now. A survey I saw said it’s the decreasing availability of homes for sale that push a buyer to purchase a home now. This will be the first year that those low interest rates haven’t been the top motivator.

Buyers aren’t as concerned about the economy. 

That’s a refreshing change of pace on so many levels. The economy and changing taxes are certainly still a concern for many, but it’s the rising prices of homes themselves that buyers are considering in their purchase decisions.

Overall, I think 2013 will continue to bring stability for the economy and the housing market. While the overwhelming buyers’ market is in the early stages of diminishing, the strengthening economy behind it is great news for all of us.

What do you predict from the real estate market this year? Do you agree or disagree with any of the points above?

Do you really stand a chance at a bank-ordered auction?

I ran across this article the other day on Business Insider. Titled “Here’s Why Homebuyers Don’t Stand a Chance at Foreclosure Auctions”, it naturally caught my attention, especially since we have a bank-ordered auction coming up in Florida next month. 

The article basically explains that, at a foreclosure auction in Detroit, hundreds of end-user bidders were frustrated because a millionaire swept up all 650 properties at an auction. Understandably frustrating, no doubt. It goes on to say that real estate investors “are enemy No. 1 to potential homebuyers these days.” While I do agree with certain parts of the article — investors are always bidders at our bank auctions — there are several points I disagree with and felt like I should respond to. To “debunk” the myths, if you will. 

First of all, the article quotes a real estate expert named Brendon DeSimone, who says: “I always tell buyers they’re not gonna play with these boys. It’s the big leagues. They’re men with cashier’s checks and they’re fighting for these homes. They treat them like stock, like candy.”

I don’t know about how this auction in Detroit was conducted, but at our auctions and the auctions of several other companies I know of, the playing field is leveled, rather than tipped toward the investor. Each bidder, whether an investor or an end-user, is required to have a cashier’s check and pay a certain percentage down on auction day. That doesn’t mean it’s hard to bid or compete. It means that you have to organize your financing ahead of time, just part of the due diligence process. Once that financing is in place, you’re qualified to take on the “big league” players.

DeSimone goes on to say that you can’t compete unless you have cash. This is completely false. If buyers do their due diligence and find a home they love, they should still have the time to get financing in order. Whether financed through a bank or paying cash, when you’re the winning bidder on auction day, the bank will gladly take your money. 

That’s the great thing about an auction, actually. In a traditional real estate transaction, the bank has the opportunity to review each offer before it responds, and perhaps it will be more likely to choose someone who can pay cash. At an auction, once you’re registered, the bank doesn’t know if you’re an investor or end user, and, as long as you follow through to closing, they don’t care. 

If anything, I’d say that the end users are more likely to win the property at an auction. Investors have a certain budget they have to stay within to turn a worthwhile profit. As an end user, if you’ve found the home you love, you don’t have to worry about turning a profit. You’re looking for the best place to call home, so you may actually be able to pay more for the property than the “big league” investor. 

What do you think? Have you ever bought a bank-owned property? Was it for end use or an investment property, and how did it work out for you?

Photos of one of the nicest properties you’ll ever see

I try to use this blog to talk about real estate issues that pertain to everyone, rather than focusing on our high-end properties, but sometimes you run across a place that you just have to share. Padua Stables in Ocala, Fla. is one of those properties.

Working at J. P. King, I’ve had the opportunity to work with many wonderful and successful people selling some spectacular properties. Working with Satish Sanan and his team has been an honor, and it’s great to have a seller so personally involved and committed to the auction of his property. It’s easy to see how he’s been such a successful entrepreneur.

When I first met Mr. Sanan and toured Padua Stables, my mind kept returning to our auction of Calumet Farms in Lexington, Ky., almost 20 years ago. The improvements of this 763-acre property are fantastic and extensive. The property’s 13 homes and 11 stables are just the beginning. I’ve included some pictures here, but you can click through to see the rest on our website and our Facebook page, if you’d like. Mr. Sanan has produced several Graded Stakes and Breeders’ Cup champions at Padua Stables, and we’re looking forward to his May 31 auction.

Why the National Realtors Land Meeting convinced me we’re still recessing

Last week, I attended the National Realtors Land Meeting in Denver. It was a great opportunity to spend time with other land professionals from across the country. We had excellent speakers with perspectives ranging from economists, tax professionals, mineral and water rights experts to alternative energy advisors. We also had a few speakers discuss what was going on in the local land markets, and I was asked to present on the auction method. Auctions have been an often-turned-to alternative for selling land for several reasons:

1. Auctions allow for land to be liquid like other asset classes
2. Land owners today are more conscious of their cost of ownership and understand a quicker sale often results in a higher net price than a prolonged listing process.
3. When land can be divided and offered in parcels at auction, the sum of the parts are often greater than the entirety, again netting the seller more money.
4. The seller determines the terms and conditions of the sale, and the property is sold without contingencies.

Because of this, many land professionals are interested in bringing the auction alternative to their clients, which is why we’ve teamed up with Mossy Oak Properties. But more on that to come.

My take on the forecast from these speakers is that prime agricultural land could continue its current appreciation, and with the elections and expiring tax codes approaching, this will continue to create uncertainty. All of that means we are likely still several years away from a recovery, contrary to many national publication articles leading readers to believe we are coming out of the current downturn. I hate to be the pessimist here, but I do believe that’s where the market stands.

Today, I’m on my way to the Alabama RLI meeting in Clanton, Ala., where I look forward to seeing many long-time friends and top land brokers and get learn even more about our market.

What about you? Do you think we’re coming out of the downturn or do you also have reason to believe we may be in this recession a few more years?