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CTBUH Technical Paper Subject: Paper Title: Economics/Financial Selling Luxury Residential High-rise; Pre-sales Through Completion Author(s): Calvin, B.1 Affiliation(s):
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CTBUH Technical Paper Subject: Paper Title: Economics/Financial Selling Luxury Residential High-rise; Pre-sales Through Completion Author(s): Calvin, B.1 Affiliation(s): 1 The Calvin Group, LLC Publication Date: 2009 Original Publication: CTBUH 8th World Congress, Dubai. March 3-5, Paper Type: 1. Book chapter/part chapter 2. Journal paper 3. Conference proceeding 4. Unpublished conference paper 5. Magazine article 6. Unpublished Council on Tall Buildings and Urban Habitat/Author(s) Selling Luxury Residential High-rise; Pre-sales Through Completion Brenda Calvin The Calvin Group, LLC, 3960 Howard Hughes Parkway, Ste 500, Las Vegas, NV USA Tel: , Fax: , Abstract In the continuing evolution of the selling of high-rise residential, the developer, architect, general contractor, engineers and on-site sales teams must join forces to maximize the success of any new construction project. The sales team should be included as early as possible, in the planning stages of a building, to consider the salability impact of the decisions that are being made. After all, the sales staff consistently listens to the potential buyer s likes and dislikes. Likewise, the sales team must be extremely educated and prepared to act as a liaison for the developer and to accurately answer the intricate questions of the prospect in the purchase process. Many of the old techniques and selling strategies should be set aside as this is a new era and a new way of looking at on-site sales. This type of selling cannot be based on a step-by-step, pre-packaged selling strategy, especially for the luxury high-rise product. This is advanced selling; where potential buyers are extremely savvy. The on-site sales agents are reaching for a very lofty goal, but as a unified team versus competitors in a sales office. The potential buyer s decision to purchase is weighing heavily on their first Biography impression and the rapport or connection with the on-site sales agent. Brenda Calvin is the Broker/Owner of The Calvin Group, LLC, a boutique real estate brokerage specializing in the sales, marketing and consultancy of luxury residential high-rise properties. Ms. Calvin has sold exclusively high-rise condominiums for the past twenty years in the US; currently in Las Vegas, NV. Her innovative sales programs, tailor-made for Keywords: High-rise residential, high-rise sales, on-site sales, tall building sales, luxury residential, team selling. each project, have gained much attention, selling out entire buildings well in advance of construction completion. Her consultations Introduction with high-rise developers come from her extensive knowledge Please gleaned note over the the term years, prospect assisting is developers utilized in avoiding The costly selling mistakes of residential and maximizing high-rise their in an sales on-site results. throughout Such a consultation the paper recently and is took defined her in to the India business with a highrise environment developer is seeking a vital her part guidance. of the success Ms. Calvin of a building. is a Certified potential International buyer Property who has Specialist. not yet purchased. Additionally, Also she please writes as a a This monthly type of column selling entitled, is an art; Vertical a very Update specialized, for intricate a well-respected note that real many estate of publication. the ideas and Ms. suggestions Calvin is a that distinguished are made member profession. The Social truly great Register, salespeople Who s Who listen in to Luxury potential Real Estate in this and paper a member would of be The inappropriate Council on Tall or unfeasible Buildings and for Urban buyers, Habitat. giving the sales team and consequently the developers of buildings other than those targeting the developer, a unique advantage of having the pulse of the luxury high-rise residential market. marketplace. The bond between developer, architect, general contractor and sales team is one of concentrated Types of Residential Buildings: focus for the duration of the construction process (2-5 Destination Resort Style clusters of towers years). around an amenity center, attraction, activity (Ski Area, During pre-sales, the sales team is selling Ocean-front, Gaming) somewhat of a dream; a lifestyle in a building that does not physically exist yet. Therefore, the skill of vivid Urban Centers may have more than one tower in a picture painting is an asset, as a large portion of the central urban core population cannot visualize from simply looking at a floor plan. In order to sell with accuracy, the salesperson Mixed-Use, Mid Sized usually built around themes, must be able to understand the architectural plans in order such as retail; retail may be above the residential to accurately answer the enquiries of potential buyers. Technology, with 3D animation and virtual tours, Boutique Urban small number of units, usually very becomes a welcome tool in assisting with the process. As unique product types the construction progresses, more responsibilities emerge. The on-site salesperson now additionally has a working Boutique Sub-urban - Usually mixed use, creates a small relationship with the buyer s agent, if any, the mortgage self-sufficient city, away from city core entity and the title/closing entity. The luxury real estate buyer is a sophisticated real Hotel/Condominium deluxe hotel rooms associated estate purchaser. In many cases, they have five or six with a hotel brand, small square footage homes that they concurrently own in different parts of the world and they do not mind paying a little extra for Hotel Residences Associated with a respected brand, quality materials and finishes. As a result, the luxury separate entrance, larger than hotel/condo unit buyer has high expectations for their high-rise homes and the amenities. Selling Luxury Residential High-rise; Pre-sales Through Completion Brenda Calvin The Calvin Group, LLC, 3960 Howard Hughes Parkway, Ste 500, Las Vegas, NV USA Tel: , Fax: , Abstract In the continuing evolution of the selling of high-rise residential, the developer, architect, general contractor, engineers and on-site sales teams must join forces to maximize the success of any new construction project. The sales team should be included as early as possible, in the planning stages of a building, to consider the salability impact of the decisions that are being made. After all, the sales staff consistently listens to the potential buyer s likes and dislikes. Likewise, the sales team must be extremely educated and prepared to act as a liaison for the developer and to accurately answer the intricate questions of the prospect in the purchase process. Many of the old techniques and selling strategies should be set aside as this is a new era and a new way of looking at on-site sales. This type of selling cannot be based on a step-by-step, pre-packaged selling strategy, especially for the luxury high-rise product. This is advanced selling; where potential buyers are extremely savvy. The on-site sales agents are reaching for a very lofty goal, but as a unified team versus competitors in a sales office. The potential buyer s decision to purchase is weighing heavily on their first impression and the rapport or connection with the on-site sales agent. Keywords: High-rise residential, high-rise sales, on-site sales, tall building sales, luxury residential, team selling. Introduction The selling of residential high-rise in an on-site environment is a vital part of the success of a building. This type of selling is an art; a very specialized, intricate profession. The truly great salespeople listen to potential buyers, giving the sales team and consequently the developer, a unique advantage of having the pulse of the marketplace. The bond between developer, architect, general contractor and sales team is one of concentrated focus for the duration of the construction process (2-5 years). During pre-sales, the sales team is selling somewhat of a dream; a lifestyle in a building that does not physically exist yet. Therefore, the skill of vivid picture painting is an asset, as a large portion of the population cannot visualize from simply looking at a floor plan. In order to sell with accuracy, the salesperson must be able to understand the architectural plans in order to accurately answer the enquiries of potential buyers. Technology, with 3D animation and virtual tours, becomes a welcome tool in assisting with the process. As the construction progresses, more responsibilities emerge. The on-site salesperson now additionally has a working relationship with the buyer s agent, if any, the mortgage entity and the title/closing entity. The luxury real estate buyer is a sophisticated real estate purchaser. In many cases, they have five or six homes that they concurrently own in different parts of the world and they do not mind paying a little extra for quality materials and finishes. As a result, the luxury buyer has high expectations for their high-rise homes and the amenities. Please note the term prospect is utilized throughout the paper and is defined in the business as a potential buyer who has not yet purchased. Also please note that many of the ideas and suggestions that are made in this paper would be inappropriate or unfeasible for developers of buildings other than those targeting the luxury high-rise residential market. Types of Residential Buildings: Destination Resort Style clusters of towers around an amenity center, attraction, activity (Ski Area, Ocean-front, Gaming) Urban Centers may have more than one tower in a central urban core Mixed-Use, Mid Sized usually built around themes, such as retail; retail may be above the residential Boutique Urban small number of units, usually very unique product types Boutique Sub-urban - Usually mixed use, creates a small self-sufficient city, away from city core Hotel/Condominium deluxe hotel rooms associated with a hotel brand, small square footage Hotel Residences Associated with a respected brand, separate entrance, larger than hotel/condo unit What influences a purchase of high-rise residential? Many things influence whether a prospect purchases in your building or in a competing building. Sometimes it is simply a logistical matter of his or her time frame. For example, a competing building is going to be completed earlier than your estimated construction completion. Here are a few of the top reasons that prospects purchase in a high-rise: Location Amenities View Security Finishes (See Figure 1) Perceived prestige Price Technology Exterior architecture Common Areas Interaction with sales person Figure 1. Interior photo demonstrating model finishes (Muir, 2003) Selling a residential high-rise in an on-site environment is a vital part of the success story of a building. As much as 85% of a purchasing decision today is based on the interaction that your buyer is having with your sales representative. (Segall, 2007) This means that the sales team s preparedness, charisma and sales ability is one of the developer s key instruments in attaining success. Professional Sales Team The synergistic bond between developer, architect, general contractor and sales team is one of concentrated focus for the duration of the entire construction process. Whether a developer is pre-selling the building or selling the building after construction is complete, closing the sale and transferring the title to a new purchaser is the goal and the means to profitability of the project. The professional sales person s role is critical. They are the liaison. They are charged with taking everything that the developer, architects, engineers have designed and conveying the information to the prospective buyer, who in turn, writes the check. The professional sales team can be established in several ways. The team can be a third party real estate brokerage that has a listing agreement with the developer. In this scenario, the real estate broker for the brokerage more than likely will be listed as the Broker of Record for that development. The sales team works for the brokerage and is assigned to a particular development. In many cases, the sales personnel are self-employed agents or contractors with their real estate licenses hung with the Broker of Record. Note that in most states in the US, real estate agents are not authorized to work independently; they must hang their licenses with a broker. The agents are generally compensated with a monthly draw, which at closing, is deducted from the commissions owed to the agent. Being a real estate broker requires significantly more education and a number of years as a full-time practicing professional agent. Additional requirements will vary from state to state. Another way for the sales team to work is to work directly for the development firm. These real estate agents may be actual salaried employees or they may be self-employed. Even if the agents are salaried, there are commissions paid at the time of closings. Regardless, as agents, they cannot operate without a real estate broker. If the developer is a licensed real estate broker, he or she may be the Broker of Record for a project. In many cases, the developer does not want to take on the additional legal liability of a real estate brokerage. Therefore, the developer may form a separate company (a brokerage) to offset some of the liability. This entity becomes the brokerage for the project. However, there is still the need for a licensed broker for this new entity. Someone, with the proper credentials will be named Broker of Record. Sales Team Methods of Working There are a number of methods of working in on-site sales. Highlighted here are two of the most common methods: Competitive floor or a team concept. A competitive floor is the arrangement whereas each agent is on their own to produce sales. Real estate agents are almost always compensated on an incentive basis. This means that there is a rotation system in place or a system of taking turns for new leads. As prospects call, come to the sales center or send an , a rotation of agents is put in place by the receptionist. The receptionist maintains an extensive database of prospect information, assigning an agent to each new lead. Each sale is a result of one on-site agent and commissions are paid upon closing to that on-site agent. There are issues that arise out of this method. For example, what if one agent initially presents the property to a prospect but the prospect does not sign a contract on the first visit? This is common in the luxury market. However, what if the prospective buyer comes back a second time to the sales center to sign a contract? If the initial agent is off that day, who gets credit for the sale? This scenario only gets multiplied if a prospect comes back multiple times. The answer is that it depends on what rules are set up in advance. In many cases, on a competitive floor the sale generally goes to the initial agent. The logic is that if the initial agent would not have impressed the prospect during the first visit, the prospect would not have come back. However, from the 2 nd or 3 rd agent s point of view, this was time spent with a prospect for which someone else receives the compensation. Additionally, this is time spent away from their own prospects and likewise their earning potential is lessened. If the prospect senses this tension, the interaction may not result in a sale. There are five basic obstacles to any sale: No need, no money, no hurry, no desire and no trust. Overcome those, and no becomes a yes. (Zigler, 2002) Most of these needs are perhaps met when the prospect arrives at the sales center, with the exception of trust. This must be earned. The residential sales process is a delicate one. All of the prospect s needs must be met; all the positive investment indicators must be in place. However, there is another very important, un-quantified factor; the prospect s gut instinct or intuition. On a competitive floor, when a prospect comes to the sales center, the receptionist inquires as to whether the prospect has ever been to the sales center before or spoken to an agent on the phone. Then the receptionist checks the database to determine the agent who was assigned to the prospect. If the prospect is not easily found, this becomes an interrogation of which both parties feel frustrated. This affects the gut instinct factor of the prospect. Before you know it, the sales team and the project are known as pushy, unfriendly etc. An alternative to this method of working is a unified or team concept, putting the prospect first and foremost. This is where all of the sales staff work together to achieve the common goal: to sell out the building. It does not matter who makes a sale, the entire team receives a commission, albeit a smaller amount per transaction. However, each agent is compensated on every transaction. The receptionist still keeps a database and the prospect is always connected with the initial agent, if possible. This leads to truly satisfied buyers. It eliminates the interrogation that a prospect gets walking into the competitive sales office and it makes a happier, more civilized work environment, as well. Is this method effective? The Calvin Group has received many positive comments from prospects, turned buyers, on this structure of selling. Our last building was sold out a year in advance of construction completion at a 50% increase over the projected sales volume. Potential issues with the team method would be if one agent is not contributing as much to the sales effort but is receiving the same compensation as an agent putting forth extreme effort. There are some sales people who have an innate ability of building trust and rapport with prospects, explaining the project with great enthusiasm. These professionals generally have remarkable closing ratios (this ratio compares purchase contracts written to number of presentations an agent completes). As a manager of these individuals, the author has found it prudent to not be too quick to judge. There are some prospects who relate to this personality as described above and there are others who are offended by it. Alternatively, there are agents, who are much more low-key and, in the end, have the same or better closing ratios as their more gregarious counterparts. It takes a variety of sales team personalities to appeal to the variety of buyer personalities. Also, if it becomes obvious that an alternate sales person has a connection with a prospect, the initial agent can relinquish the prospect to the other agent, for the overall good of the team and its sales goals. If it becomes obvious that there is a sales person who is not closing and not working well with the other team members, this must be addressed and a decision has to be made to remove this person. However, this individual would be identified in the competitive floor method, as well. Therefore, it is not a symptom of the team method of selling. All in all, after having worked in both environments, the team method is far superior because everyone wins in this scenario, including the developer. It also supports high integrity among the team members. Sales Strategy In order for the buyers to have confidence in the project during pre-sales, the salesperson must be able to have at least a working knowledge of the architectural plans to present to buyers and in order to accurately answer the inquiries of potential buyers. Great communication skills are of utmost importance. Even so, it is the experience of the author that a large percentage of prospects have difficulty with spatial relations. This is a foreign concept to most readers of this paper due to the fact that your profession requires that you have the capacity to create and or read architectural plans. However, many times when the sales person goes over the floor plan with a prospect, it becomes obvious that the prospect can
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