CNBC | Sotheby’s International Realty sees big growth in a tough market, while telling people ‘what they may not want to hear’
During a year when the words “slowdown” and “slump” were used to describe the luxury housing market, 2016 turned out to be a banner year for Sotheby’s International Realty.
The firm reported on Monday that it saw record global sales last year, most coming from a tough U.S. market that experienced pockets of softness in key regions. All told, Sotheby’s has seen annual volume explode over the past 12 years, from $4 billion to $95 billion in 2016. That’s within shouting distance of the more than $166 billion Coldwell Banker, another luxury real estate giant, moved in 2015.
CEO Phillip White told CNBC in a recent interview that Sotheby’s International Realty makes “the consumer the real focus, and that’s important when you do business in the luxury space. We made a decision early on to provide the consumer a high level of exceptional service and true global exposure.”
High-end clients “want to be taken care of and catered to, and that’s what we really brought to the business,” said White, a 36-year real estate veteran who’s been the firm’s CEO since 2013. “Then we were able to expand it quickly in the high-end markets of the world in a pretty short period of time.”
The company’s big year took place in a luxury market that retrenched worldwide, but was particularly acute in some places, including New York. The ultra-exclusive enclave of the Hamptons saw sales tumble 8 percent in 2016, according to Town and Country Real Estate, while luxury units sales in Manhattan plummeted by 18 percent last year, according to data from real estate broker Donna Olshan.
Against that backdrop, Sotheby’s International Realty recorded $85 billion in domestic sales volume, while increasing its sales force and offices. However, White said the firm’s recipe for success included elements that are unconventional, and perhaps a bit counterintuitive when servicing demanding high-end clients.
“There are not a lot of people who can buy some of these places, and we have to work hard to get in front of the right people,” said White, a former Marine. However, “sometimes we have to tell them things they don’t want to hear.”
Needless to say, the ultra-rich aren’t usually considered the sort of people who take “no” for an answer, and often expect a certain result. However, White explained that honesty and transparency are key ingredients to moving luxury homes — especially in a challenging market.
“That’s when you have to do your homework and be prepared,” White said, adding that Sotheby’s International Realty agents perform extensive research on a particular market to assess a home’s true value.
“If you go into someone’s house and say ‘it’s worth this [much]’ and the seller might be disappointed, you can tell them you looked at” other houses in the area, White said. Then, the firm explains “how their house compares to all the others, because you took the time to go through all the others. That’s doing your job.”
He added: “It’s easier to go along with them, but that’s not doing them a service because it’s not going to sell. It’s doing them a disservice.”