An interview with with Patricia Cliff, Author of The Art of Selling Real Estate
Patricia, you’ve been selling luxury residential real estate in New York City for over 35 years. What challenges did you have to overcome in selling in one of the most competitive upscale urban markets in the world?
Among the greatest challenges that I had to overcome: the increased number of agents plying their trade in my market. When it became known, especially in the mid 90s, that a lot of money could be made selling in the NYC Market, people from every walk of life entered the field. In the 1970s, for instance, there were about 1,000 people selling in our market. If you were a really top producer, you could earn somewhat north of $100k at that time. Today top producers in our market earn north of $1M. By the mid 1990s, there were more than 15,000 licensed people selling residential real estate in Manhattan. Since the 2008 Great Recession there has been a huge influx of people into the field who had their positions in middle management phased out. There are now approximately 27,000 licensed agents selling in Manhattan. Fortunately the old rule in sales still applies, that the top 20% of the agents do 80% of the business. Nevertheless, each new person entering the field siphons off some transactions, so the competition is fierce and you always have to be on your toes and looking over your shoulder, making certain that you deliver the best service and remain the “go-to person” for your clients.
For those considering going into real estate as a career move what would you advise they should consider?
Having a firm overview of your financial picture is key for anyone entering a commission business. Many people consider going into real estate without assessing how they are going earn their basic living expenses, be able to pay their taxes, have something in reserve at the end of the year, and plan for a retirement income. As an independent contractor, all of the financial planning falls on your shoulders and those who have neglected this will live to regret it. Before entering this business, one should engage in careful financial planning. It is also advisable to have a business plan, because this field requires investment of some of your capital in things like advertising, self-promotion, entertaining, etc. Paying quarterly estimated tax returns is also extremely important. In general, it is important to understand that you might not see actual income for 6 months to a year, even if you start out selling right out of the box. There are often long periods between having a buyer wanting to purchase a particular property, and actually closing the deal and cashing the check – to say nothing of numerous obstacles that can prevent the deal from closing at all. My rule of thumb has been to always keep 20% of every commission check in reserve. Don’t even be tempted to spend it. You will need it for the rainy day, or taxes, or to make investments in real estate that will enable you to make money while you sleep. Poor planning and not having appropriate financial reserves will interfere with the focus that you have to bring to this business to be successful at it.
What did the housing collapse of the Great Recession do to real estate and those who work in it?
We were very fortunate in New York City. The Great Recession didn’t really influence our prices until the fall of Lehman in September 2008; the rest of the country had been experiencing declining prices and foreclosures long before that. Following the Lehman collapse, our market pretty much froze and people were in a state of shock because they couldn’t realize a profit on the sale of their homes. Agents who couldn’t weather the storm, because they hadn’t squirreled away a significant financial cushion, were forced to leave the business. At the same time, many people who had lost their jobs in other industries came pouring in, because they saw an opportunity to make a significant income during the recovery. Our market was also one of the earliest to recover, so those who used the stagnant time to hone their skills and learn the ins and outs of the industry from the bottom up during the Recession have been rewarded.
Why do agents need to build life-long relationships with their clients as trusted advisers?
Agents need to think of this as an ongoing relationship and not a one-shot deal. Since there is a lot of competition out there, agents should make each transaction the beginning of a relationship and not the end of one. You want to be the “go-to person” for all of the real estate questions that your former clients might have, even if they seem frivolous and will not profit you financially at that moment. You also want to keep your clients updated, in a non-annoying and unobtrusive way, of market conditions, and new developments in the real estate business via a newsletter, blog, or whatever. The National Association of Realtors says that 75% of clients have forgotten the name of their agent after seven months. It is the job of the agent to make certain that this does not happened.
Are real estate agents relevant today?
Are they adapting to the influence of the Internet on their business? Real estate agents are more relevant today than ever before. There is a lot of raw information available on the Internet, but there is also a lot of misinformation. Making a major purchase like a home requires a smart, experienced and diligent guiding hand. When was the last time that a computer held your hand, or told you that your happiness in a transaction was their primary focus and concern? The Internet is for window shopping and the agent is there to tailor your needs to the available product.
What trends are you seeing in the industry?
Especially since the Great Recession, there has been a downsizing of the space inflation requirements that we had seen in the prior 10 years. McMansions are out and less grand, more efficient, greener homes are in high demand, even at the luxury high end of the market. Even the rich don’t want to be heating and cooling what is essentially unused space for rooms which were previously designated as music rooms, billiard rooms, etc. A careful evaluation of how a family lives, where they spend their time and how they utilize their homes has been going on and people are anxious to have more efficient, less costly life styles.
You have a passionate interest in increasing affordable housing for the underserved and have donated your time and expertise to neighborhood charities and housing associations. You are also donating 50% of the net proceeds to these causes. What can or should be done to help people seek affordable housing?
There is no simple answer to these issues. They are very complex and vary from region to region and depend to a large degree on how supportive the local community is prepared to be. Homelessness is caused not only by an insufficiency of affordable housing, but by many other factors which play a significant role such as the current jobless rate, the special needs of the mentally ill and addicted population, the influx of returning veterans with brain traumas and PTSD, teenage runaways from abusive families, young people aging out of foster care, battered women seeking protective shelter, etc. Each of these populations has special needs which have to be examined and dealt with. My overriding personal interest at the moment is less in trying to provide specific affordable housing than in trying to understand these diverse needs and ascertaining appropriate solutions. It never ceases to amaze me that politicians and the general population don’t see providing affordable, appropriate permanent housing as a primary factor necessary to building a fair and just society. There is an organization that I am involved with called, “Community Solutions” that is just such a think tank. I applaud their efforts in trying to view, understand and remedy these issues on a national level.
Where do you see the real estate market heading in the next two to three years?
I don’t have my crystal ball polished today, but generally speaking, the population is growing and the economy is recovering and there has always been a major desire for home ownership in the U.S. Available inventory is now meeting demand and it appears that mortgage interest rates will remain low, but now at the all time lows that we are presently experiencing, so this too will encourage home ownership. All of which points to the fact that there will be a steady recovery. With good stewards of our economy, I am cautiously bullish on the real estate market over the next few years.
Learn more at http://patriciacliff.com/the-art-of-selling-real-estate/
