Are Luxury Real Estate Agents in Trouble?

Is being a luxury agent a good thing? Or because of these upcoming changes… Are there some headwinds on the horizon and it may actually be a… bad thing. 

For years, agents that operate in the luxury market have been looked up to. Almost idolized. Heck, there are a bunch of HGTV Luxury Real Estate shows… Real Estate agents… TV Shows! Ha. 

I mean the big paychecks just make other agents drool… And some agents hate… And the general public as well... 

So does this new economic climate spell a doom and gloom scenario for some agents. 

I think the answer is yes… With a big asterisk. Let’s get into this. 

Real quick, hey it’s Jeff Chubb. I am a recovering RE/MAX, then eXp Agent that now is partnered with REAL. If you have any questions about my experiences, then know I am an open book and ready to help… All confidentially of course. And if you like the content, then I appreciate you slamming that like button right down there and considering subscribing!

So will the VERY HARD to earn gravy train continue? Let’s dissect this a little. 

It’s the new world of a decoupled fee. Now imagine you are a Ten Million Dollar buyer. You are obviously a highly educated successful business person. Would you stroke a $250,000 to $300,000 check in order to have an agent represent you?

I don’t see it. But I also don’t operate in the luxury market. I was talking with a luxury agent and he said that yes they will. And that’s my asterisk that we will get back to in a couple of moments. 

So that’s the ten million dollar buyer. Maybe that’s the ultra luxury agent? Maybe the ultra luxury agent is affected, so how about the normal luxury agent. Let’s call them the $2 to $3 million dollar agent. 

So do you see a $2 to $3 million dollar buyer stroking a $50 to $75 thousand dollar check for the services of a buyer agent? 

I have to say. I don’t. I think there will always be some young buck who is willing to do it for lets say…  $25 thousand dollars. Because let’s really be honest with one another. Is there really a $25,000 twenty five thousand dollar difference in the amount of work that an agent does when working with a $2 million compared to a $3 million dollar buyer? 

I personally don’t think so.

And I think it could also really depend on the situation. I live in a luxury market. The average price is around $1.5 million. Now this isn’t really a market where I work too hard because I had decided long ago that I didn’t want to crap where I eat. But let’s say a relocation buyer came in with the price range between $1.5 and $2 million and needed to buy this week. So one weekend worth of work in my backyard. Literally, 17 houses for sale in the entire market.

Would I demand a fee of 2.5% of the purchase price? I have to say, I don’t think I would. I would be pretty negotiable on that… Especially if it was in the winter when the weather is crap! 

I just don’t see how pricing doesn’t go down on the buy side. 

Now on the sell side… I don’t see the pricing going down. If I was to do a strategic market analysis, then I could even map out situations where listing agents actually… Increase their pricing! 

The list side of the business looks pretty darn good from my perspective. 

So where is the asterisk? Where will luxury agents be able to drastically increase their value proposition over the young buck agent that is looking to make a name for themselves and cut into the big guys market share? 

The answer revolves around inventory… Off-market inventory to be exact. People want what they can’t have. Even if it is an illusion. 

A luxury agent that is strong in a market and / or has strong relationships in the marketplace will be able to offer a buyer off-market opportunities that are only available for their clients that are under a buyer contract. 

Oh, yes Mrs. Buyer. Well I am the number one agent in X market. I understand you talked to Billy who said he would do it for $25,000 dollars, but I currently have 15 off-market houses in the areas that you are looking in. My fee is 2.5% of your purchase price. 

That is the asterisk. That is how luxury agents get buyers to stroke large checks. He who controls the inventory, controls the market. 

So is the luxury agent as good as dead? Personally, I wouldn’t write them off. The ones that are top in their market and have cultivated deep relationships over the years are going to do just fine. 

The ones who pop one here or there. The ones who rely on the Zillow leads or sources like that with a shallow relationship, those are the ones that  I believe will be affected. 

Ha, I can actually see a scenario where they end up making more money and coming out of this even stronger. So if you were cheering for their demise, then I am sorry, I just don’t see it. 

Again, it’s Jeff Chubb. You can reach me at 617-775-7687 and all my other contact information is below. 

Until next time!

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