September 1, 2014

Hot Properties... But Will They Sell?

A recovering housing market should make Doug Thompson happy. As the owner of Doug Thompson Photography, most of his income comes from shooting ritzy pictorials of million-dollar listings. When the Southwest Florida luxury real estate market cratered during summer 2009,
his business disappeared.

The time off did provide his first vacation in years. “So I built a boat on top of a swamp buggy,” he says. He was planning to freak out some Caloosahatchee river revelers—if only he had a few more weeks.
But by the time season rolled around, buyers were ready to snap up prime luxury properties selling for basement prices. Realtors again began shelling out $2,400 a day for his services, and Thompson had to go back to work. By November, his schedule was booked two weeks out.

The message was clear: Vacation’s over. The Southwest Florida luxury market isn’t back, but it’s getting there.

In 2008, 155 luxury homes ($1 million-plus) were sold in Fort Myers. One year later, homebuyers purchased only 85. The Naples Area Board of Realtors (NABOR) also reported a 21 percent decrease in closings of properties over $1 million in ’09.

However, the numbers are slowly improving in 2010. NABOR recorded 130 closings during the first quarter, compared with 91 during the same period last year. The number of luxury homes sold in Fort Myers doubled in January from the same month in ’08 and remained fairly steady during the first quarter.

“The high-end market is starting to recover,” says Brenda Fioretti, president of NABOR. “The consumers’ confidence has improved, and savvy buyers realize that we’ve reached the bottom of home prices and they’re going to slowly creep back up.”

To find out what’s changed in the luxury market post-recession, we talked to three realtors in three different stages of selling multimillion-dollar homes. We found a marketplace where price controls the action far more than before the bust.

 

11410 Dickey Lane, Captiva

 

Mike McMurray—a realtor who, with Trevor Nette, works Captiva and Sanibel islands for VIP Realty—hires Thompson to photograph a large white mansion on Captiva Island over a weekend in March, but unfavorable conditions force him to delay the shoot. There are threatening gray clouds one day, and a wooden stake supporting a freshly planted tree the next. “No, no, no,” McMurray says. “No one wants to see a stick holding up a coconut tree.”

The weather and the landscaping finally cooperate on Monday, and Thompson spends the next two days—12 hours, earning roughly $4,800—capturing every cranny of the 6,677-square-foot, five-bedroom mansion. There are pictures of the closets, the pier, the pier at dusk, the tri-faucet continuously dripping water into the infinity pool, etc.

As Thompson canvasses the home, the owners and McMurray celebrate the start of the selling process. Drinks are poured, Michael Bublé croons from the surround sound, and they laugh a lot.

For Craig and Susan Scott, the owners who built the house, with Susan serving as co-architect, it’s time to put away their construction helmets and turn the heavy lifting over to McMurray. For McMurray, adding a mansion on the tip of Captiva Island to his portfolio is a boon. Selling it would also pad the pocketbook.

Everyone is happy—for now.

The Scotts agree to ask $8.9 million for the house they’ve lived in for only three days. And they are motivated sellers, allowing Nette and McMurray to parade prospective buyers through the house at will, a rarity in the luxury housing game.

They want to sell because they have even grander ideas for the lot next door. That’s where Susan plans to build her next creation, after offloading this one. “It’s a pretty expensive hobby,” she says. “But our penalty if we don’t sell is we have to live here.”

We can think of worse consequences. On a tour of the home, Susan points out the orange light fixtures designed to resemble ostrich eggs, the art/dance
studio, the Darryl Pottorf artwork hanging on the wall and Bob Rauschenberg’s stilt-house studio just off the mansion’s shoreline. The Scotts’ house is a beautifully simplistic mix of Old Florida, with its white walls and metal roof, and grandeur.

It’s McMurray’s job to serve as the pragmatic optimist, at once exhibiting confidence of a sell, but at the same time cautioning his clients about the lukewarm temperature of the market. And despite the drinks, music and revelry, McMurray understands that a revolution has taken hold of the luxury market.

“Not for a long time has [this market] adjusted in price toward the buyer’s favor,” he says. “Not only do we see sellers, but sellers that have some pretty incredible properties. An average market never gets these types of properties. But the cream of the crop will be picked off first. And there’s only so much cream at the top.”

By late May, the Captiva house is still on the market. There are no plans to slash the price. Instead, they continue to wait for the right buyer in a marketplace that offers fewer and fewer of them.

“The high-end market has been spotty,” McMurray says. “You see only so many guys who come into the market who can afford a house like this.”

 

6515 Thomas Jefferson Court, Naples

 

Outside a home she was showing in Pelican Bay, Victoria Harrison looks quizzically at the houses on either side of the property. “You know,” she says, “I think I sold both of those houses.” Down the same street, there’s a “for sale” sign bearing her name. Her ads appear regularly in the Pelican Bay Post.

Harrison, a realtor for Downing Frye in Naples, casts a long shadow in Pelican Bay.

Her open houses in the area helped her land a listing for a 6,409-square-foot, five-bedroom manor in the gated Pelican Bay community of Georgetown. The home resembles a Tuscan villa, with its red tile roof and columns, and its floors are made of imported Italian marble. The back door can be opened to effectively remove the home’s back walls and turn it into a European terrace (with an infinity pool, of course).

But despite Harrison’s influence and the overall splendor of the home, it’s been on the market for more than a year and received only the tiniest of nibbles. The owners, a European couple who wish to remain anonymous, and Harrison have lowered the price five times, from $3.25 million in May ’09 to $2.69 million this May. Still, it does not sell.

They ripped out the cultured marble counters—a synthetic material
—and replaced them with the real thing. They gold-plated the faucets and retiled the master bath. They changed the knobs on all the kitchen cabinets. Still, it does not sell.

Properties currently for sale in Georgetown range from about $1.9 million to $2.9 million, which means the house might have been overpriced initially. A property’s price tag must be in line with others in the neighborhood.

The owners aren’t discouraged.
“In this market, this is the norm,” the wife says. “I’m not worried.”

In more than a year, there’s been one serious bite. But that prospective buyer couldn’t close because a business venture went south and the money disappeared. Meanwhile, Harrison has spent upwards of $5,000 marketing the house.

That number continues to climb with every month the Georgetown home sits unsold—a hulking, lush reminder that the market, although progressing, hasn’t come close to sniffing pre-recession peaks.

 

260 18th Ave. S., Naples

 

Bill Earls sits inside his BMW sedan, which is idling outside the gatehouse of an exclusive Port Royal community.

Earls has been in the real estate biz for 27 years and for 20 straight, he’s been John R. Wood’s highest producer, he says. The Wall Street Journal ranked him among the top 20 brokers in Florida. He’s eclipsed $200 million several times.

And he still can’t get past some of his clients’ gates.

“It’s me,” Earls says into the speaker box. “It’s me, guys.” Finally the gates swing open. “I had to guarantee I was alone,” he explains into his cell phone. “They don’t like any surprises. I just sold a $26 million house in the development, and I had trouble getting in the gate.”

From the outside looking in, real estate seems to be a democratic and capitalistic pursuit. Democratic because everyone can look at a house (hence the term “open house”); capitalistic because, eventually, whoever pays the highest dollar wins.

When dealing with luxury real estate, however, one soon learns to maneuver in stratified air space. For example, Earls has listings in the $15 million to $20 million range. But we can’t go there.

“We don’t let just anyone see these homes—it’s only through qualification. If they’re offended, we pass, because if they’re offended easily they probably don’t get it,” Earls says. “If you want to buy a $6 million home, you have to show me something.”

Instead, he takes us to a $5.95 million, 5,569-square-foot, four-bedroom home near downtown Naples in a community called Aqualane Shores. It’s eastern seaboard in style, with large bay windows that overlook Aqua Cove. The floors are reclaimed pine, the kitchen is iced in Carrera marble, and there’s an outdoor grill and a six-car garage. What, we ask, would $15 million more get you?

Earls considers both aesthetics and price points. On one hand, he says the Aqualane Shores house will sell because it’s architecturally significant. On the other, he prices homes based on what other homes in the area have closed for.

A combination of intelligent pricing along with lavish trappings is more important than ever. Before the recession, if buyers overpaid, they didn’t care. Housing equity climbed higher and faster each day. “It was Monopoly money, man,” Earls says. “If you paid $100,000 too much for a house, what did it matter? Just wait a few months.”

Not anymore. Like McMurray, Earls has seen the prices of the choicest pieces of real estate in Southwest Florida plummet. It’s not all bad, he says. In fact, if he can price a property correctly, it moves faster than ever.

“I sold $100 million [in 2009]. Already this year, I’ve hit $100 million” by May, Earls says. “When properties are priced right, we sell them. It’s engaging the buyer. The proof is I sell through my inventory. I could do $200 million if I had the inventory.”

Earls adds to his evidence in mid-May, when he closes the sale of the Aqualane Shores house after five months on the market. He won’t say much about where the buyer came from (“He probably saw it advertised in Gulfshore Life magazine,” Earls quips), but the customer does receive a discounted price of $5.3 million.

The buyer gets such a heavy markdown in part because he has cash on the table and is prepared to close quickly, Earls says. In the end, it’s perfectly indicative of a sale in the current luxury market. The seller’s a winner because he managed to sell; the buyer’s a winner because he made off with a steal.

“It was well bought,” Earls says. “It would’ve been $500,000 more in a hard market. These are A-plus properties being sold a discount at a time.”

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