This summer we’re looking at the state of the luxury agent & broker in today’s increasingly complex real estate market. In October, we’ll gather in Beverly Hills at Luxury Connect to share best practices, network, and create blueprint for the luxury agent/broker of tomorrow. Don’t miss it.
Homeowners whose homes are assessed in the multimillion-dollar range are waiting to see what the new tax laws are going to mean for their 2019 tax returns — and many who live in California are asking their luxury real estate agents and brokers about it. Stephen Shapiro, chairman at the Westside Estate Agency, says there are two questions that he hears all the time from high-end clients: “Where’s the market headed?” And “What does the new tax law mean for me?”
Luxury agents and brokers are going to be gathering, networking and learning at Luxury Connect, October 16 through 18 at the Beverly Wilshire Hotel, where guests will talk about their biggest challenges, the untapped opportunities and how to make it in high-end real estate. It’s programming and events targeted specifically for luxury agents, who will learn how to answer these questions and more.
Shapiro answers the first question (right now, anyway) with, “The market is due for a correction.” With the second, it depends on the client.
For the first time in 2019, Shapiro’s clients will be facing a cap for how much they can deduct for any paid state and local taxes, which include property taxes; the cap is $10,000. “And in the price range we deal with — a $20 million house — property tax is $200,000,” he explained. “The same house is costing significantly more money than it was prior to this tax law, and people who have to go to work and earn a living are going to think more carefully before they spend their money; they’ll have to extrapolate how much more the house is costing them.”
Like brokers all over the country, Shapiro also struggles with a common challenge: recruiting high-quality agents. “The biggest problem is acquiring quality agents when they’re being offered commission splits that are just not reasonable,” he noted. “You can’t give somebody 90 percent or 95 percent” and still operate in the black as a brokerage, especially at the high end.
Hear wisdom, witticisms and advice from brokers like Shapiro, who have found a way to thrive in the highly competitive luxury market, only at Luxury Connect.
What do you think the luxury agent of the future looks like?
Similar to the luxury agent today. I think the reason might be that the real luxury agent relies on referral business, and if you don’t have a referral base or a hook to business, then you probably are replaceable.
What do you feel are the challenges facing the luxury market this year?
People reducing commissions to make deals. That’s no. 1. No. 2 would be overpricing listings.
You get what you pay for. There’s experience and expertise; the license that everybody has is the same to practice. The experience is not. So what happens is, you get less-experienced agents who feel they can only get listings in one of two ways. One would be overpricing and the second would be reduction in commission rate.
It’s up to the real luxury agent to be able to convince the seller that he’s providing a service that’s greater than the person who’s able to reduce their commission. If you were a lawyer and you just got out of law school, you’d only get paid $150 an hour, but if you are a highly qualified litigator or defense attorney, you may get $1,500 or $2,000 an hour because of your expertise. You can always get somebody cheaper, but you can’t always get someone with more experience.
I just got a $35 million listing and the seller showed me proposals from agents who were willing to take it at 1 percent. They may work as hard; they may not work as smart. They may not have the connections.
What are some of the biggest problems you’ve faced in growing your business?
The biggest problem is acquiring agents in the company. Compass is essentially destroying the building for their internet startup business that they’ve created, and they’re offering to pay such a huge commission split that brokers like me would not be in business if we gave those numbers. The biggest problem is acquiring quality agents when they’re being offered splits that are just not reasonable.
Compass has hundreds of millions of dollars, but when they go public, there’s going to be management that comes in and says “this is unsustainable, you’re losing tens of millions each month to operate your business.” You can’t give somebody 90 percent or 95 percent, and sometimes they’re giving agents 110 percent on their first deal.
If you’re running a business, you have staff, telephones, computers, advertising. You can’t do it without keeping part of that commission. As the new people in the business see different ways to economize the business, they’re going to realize “we can’t stay in business and give agents these outrageous splits.” That’s the first thing they’re going to change. They’re doing it to build GCI (gross commission income), then they go public and cash out, and someone else will take over the management of the business.
How has technology changed your business, and what are you most intrigued by that you’re not currently using?
I do it differently and we do it differently — technology has made us mobile, so we can work anywhere from a variety of connectable instruments. Twelve years ago you didn’t have a smartphone; you had to spend more time in the office hooked up to a desktop. Now you have a desktop, laptop, iPad, smartphone, you could be anywhere. That’s the biggest boon to technology.
I personally, and I don’t know each person in the office, but in the price range that we deal with, I don’t use any social media. That’s not how I’m trying to attract business. I get enough emails a day. I don’t want to go home and check Facebook and Instagram. That’s not my clientele. My clientele is more like me, so I’m not interested in doing it that way.
I think any technology that’s out there that I like, I incorporate from a business point of view. We were the first company to have scanners and use DocuSign. We avail ourselves of those different things that are immediately beneficial to the business instead of waiting a year and seeing if the price is cut down. The best technology for us is email and text, where we can reach many people at the same time.
What’s the question you hear most from your clients? And what’s your answer to them?
Where’s the market headed? That’s the No. 1 question. And I answer it right now with, “we’re due for a correction.”
Thinking of bringing your team? There are special onsite perks and discounts when you buy those tickets together too. Just contact us to find out more.