March 3, 2010

6 Mar

Creating Market Share

Part of creating market share is innovation.  As we are all aware the current real estate market is less than ideal, especially if you are a broker or a seller.  That is unless you know how to be innovative. 

 146W22St Barbara Corcoran tells how in the early 1990’s the bottom fell out the real estate market in New York city.  She was getting ready to announce the closing of her real estate company when a large developer called her and ask her to appraise a group of eighty eight apartments in six different buildings on the Upper East and West Sides of the city.  The buildings had been on the market for a number of years.  The developer and his investment partners had a $50 million mortgage on the buildings, making each apartments monthly maintenance fee 40 percent high than the rest of the market.  Buyers were also having a hard time finding financing (sound familiar?). The lack of financing combined with the high maintenance fees had made the apartments nearly impossible to sell.  If that wasn’t enough, real estate values in general had dropped nearly 40 percent and many of the apartments needed repairs or renovations.

 

What seemed like an impossible task, Barbara turned into an innovative opportunity.  She first explained her idea to the developer, then to the underwriting bankers, next to the the lead lender on the project, and finally to the majority investor.  With everyone on board, Barbara set about the work of preparing for the sale of the apartments.  First she enlisted the help of two of her staff members.  Next she set about re-pricing all of the units. She added up all the asking prices of each of the units, and then divided that amount by the number of units in all of the buildings.  Then she deducted 10 percent for the amount that the buyer would normally negotiate off the price anyway.  All units went for the same price no matter what floor it was on, view or no view, new kitchen or old.  Then she did her best to remove any objection a buyer might have.  There was no board approval needed.  One of the larger banks with a big stake in the properties agreed to provide mortgages to the buyers. Finally, there would be no maintaince fees for the next two years.  She had included those fees already in the selling price.

 

Next Barbara pulled out a custom made rubber stamp and brought it down with a sound thump on one of the eighty eight prepared contracts. The stamped clause gave the buyer two weeks to consult their attorney and return the contract for a full refund of their deposit.  She called a meeting of all her sales staff and announced that they had eighty eight apartments to sell in six building in the Upper East and West Sides and that they were going to sell them all in one day.  All studios would be sold for $49,000, all one bedroom would sell for $99,500, and any two bedroom unit would be sold for $165,500.  Then she did something very clever.  She refused to give the addresses of the buildings to her sales staff.  She told them that this sale would not be open to everyone and it would not be advertised.  The address and unit numbers would be revealed only on the morning of the sale.  Barbara asked that her staff tell “only your very best customers and of course your families”.  The sale would be limited to one per customer and on a first come, first served basis, and start at 9:00 am sharp!  Two weeks before the sale she “added a little fuel to the fire” and quietly and confidentially expressed her concern to a few well chosen staff members that she was concerned that there might not be enough apartments to go around.  

 

When the morning of the sale finally came Barbara was shocked to see a crowd of buyers outside of her office that stretched to the end of the block.  The line had started at 4:00 am that morning and by opening at 8:30 am there were hundreds of potential buyers eager to get an apartment.  As promised at 9:00 am sharp a list of the apartments and an attached map with the unit number and address clearly marked were handed out.  Starting at the front of the crowd and working their way back the staff members handed out the information.  Once a buyer had made their choice, signed the contract, and left a deposit the property was immediately take off the market.  Buyers were urged to to have several choices when they returned to the office incase their first choice had already been taken.  It was organized mayhem.  Some buyers worked in pairs comparing units in different buildings over cell phones.  One buyer flew in from Paris to buy a one bedroom unit, sight un-seen, on the highest floor in a building six blocks away from Barbara’s office after camping out on the side walk since 4:00 am that morning.

 

Barbara had started out that day with eighty eight apartments that no one had been able to sell in over three years and her own company near bankruptcy.  At the end of that same day all eighty eight units were sold to happy new owners and Barbara and her sales staff had netted over a million dollars in sales commissions.  Her innovative thinking allowed her sell the un-sellable and save her company which she later sold in 2001 for $70 million.

 

I have another real estate success story for you but I think I will save it for you until tomorrow.  As always, I welcome your comments and questions.

Alexzandra D.

http://alexzandrad.web.officelive.com/contact.aspx

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