Condo Mania

WITH CONDO MANIA IN FULL TILT, IT'S become evident to builders that the sales process doesn't mirror the process for a suburban, single-family detached neighborhood. From the product and the buyers to the marketing efforts and the phasing of sales, everything is different.

For example, “you have to think about how you move people in, because everybody's truck can't get in at the same hour,” says Kathy Courtney, director of sales and marketing for the San Diego division of William Lyon Homes.

It takes more than expertise in vertical construction to have a successful condominium project. Whether it's a three-story low-rise infill project or a true urban high-rise, a condominium project will require a different set of sales and marketing skills from that perfected in a suburban sales center.

One of the most notable differences in the process is the necessary emphasis on presales and the length of time between taking a deposit and closing the sale. Condominium developers generally need to have the building at least half sold before they can get construction financing, and a two-year time line to completion is common. So while sales agents in single-family communities might see the occasional investor, they're practically part of the business plan for condo builders. Warm fuzzies about the fabulous lifestyle and all the great people they'll meet won't mean a thing to investors; you need to talk their language, which is dollars and cents and financing structures.

Investor clients aside, the buyer profile of a condo prospect can be significantly different from that of a single-family buyer, says Garry Benson, a partner in Chicago-based Garrison Partners, a national sales and marketing company that specializes in product development and placement for large-scale residential development. Single-family buyers want to know about “the parts” of the community, their particular house, its amenities and upgrades, the flexibility of the floor plan, how the house will fit on the lot, and how it's built.

For multifamily buyers, it's more about “the whole,” meaning the lifestyle that goes along with living in the building. If this is a vacation or second home, the ease of maintenance and the ability to “lock and leave” is a hot button as well. The view from the unit is enormously important, as is the proximity to dining, shopping, cultural and sports events, and other services.

“Consumers don't care about the thickness of a high-rise wall because they never see it,” Benson says. “It's much more amenity- and place-driven than product-driven.”

It's also a purchase that's based much more on intellectual decision-making than is buying a single-family house, which can be intensely emotional.

“In multifamily, you're selling a lifestyle; in single-family, you're selling a life,” Benson says. “People are thinking, ‘I'm going to raise my family in this house.'”

Gennifer Grogg, director of sales and marketing for CondoLane, the condo sales and marketing division of Lane Co., an Atlanta-based multifamily real estate firm, calls her prospects “urban pioneers,” a different breed of buyers who can visualize the future of a neighborhood and want to be able to watch it all happen in front of them. They couldn't care less about three-car garages, and they're willing to sacrifice on the size of the kitchen or the master bath and the number of closets to be in what they consider to be the right place.

“In suburbia, those are the biggest selling items,” Grogg says. “In this type of product, they're more interested in the view, the outside area, the terrace, the location, and the amenities. Urban pioneers don't care about schools; they care about the nightlife. All the tricks you've used [in single-family sales], they don't care about.”

Among those urban pioneers are people looking for second homes or vacation homes, first-time home buyers who have been priced out of the single-family market, and empty-nesters who no longer want the upkeep of a large house and a long commute into the city when everything they want could be within walking distance.

Marketing to condominium buyers is another point of divergence from the single-family sales experience. Since shoppers are frequently computer-savvy and comfortable with technology, Web sites and virtual reality tours are practically a given. They help buyers look into the future to see how the buildings—and their specific units—will tie in with the visual landscape.

“The only way I can equate it [is that] it's just like building in the suburbs, but you can't show anyone what you're going to build for two years,” says Mike Templeton, former vice president of Chicago-based Concord Homes, a division of Lennar. “You have to create an environment of trust. ... It can be a complex process. With suburbs, in the horizontal environment, 300 homes spread out is easier to understand. People think, ‘I'm next to the park,' or, ‘I'm next to the pond.' In vertical, you have 300 homes, but they're from ground level to 20 stories up maybe. [Buyers] become very sensitive to their view.”

As a result, virtual marketing tools often place as much, if not more, emphasis on what's outside the window as what's inside the building. Many builders invest in photography, whether it's via blimp, balloon, mini-helicopter, or crane, to capture what buyers will be able to see from any unit in the building.

“There are so many nuances, even from the seventh to the eighth floor,” he says. “You're trying to provide a differential.”

William Lyon Homes also makes extensive use of virtual reality, even though its condo projects tend to be three or four stories over parking as opposed to soaring downtown towers. Buyers want to know how the building next to theirs will look when it's built.

“Sometimes you don't envision how that other building may seem to loom over you or affect your light,” Courtney says.

Since the sales center frequently is off site and out of sight of the building, signage and a distinctive logo become very important to identify yourself with the project, Templeton says.

So do collateral materials and architectural models, because, unlike single-family buyers, condo purchasers can't see, touch, or feel what they're buying, often for two years or more, says Nancy Cardone, executive director of New Homes and Communities by Illustrated Properties Real Estate in Boca Raton, Fla.

“An architectural model can convey a special relationship on a more personal level than print,” Cardone says.

Speaking of print, Benson notes that the condo buyer frequently purchases out of want, instead of need, and might not spend much time poring over the Sunday real estate section. You'll get more response from a print ad in the home and garden section of the paper, because “a good percentage of the people you'll appeal to don't know they're going to be moving.”

If there's a challenge to marketing a con-do project, it's that you're not alone. The market is hot and the competition is fierce. In Miami, where 60,000 to 70,000 units are projected to come on line in the next two years, it's not unusual for a condo developer to spend a quarter million dollars on a sales preview party. With so many projects competing for the buyers, Cardone says, sales and marketing needs to be sophisticated “without overloading someone's senses.”

Without the draw of a model-home complex, a condo project's sales center plays a critical role in helping buyers visualize their future digs. Builders who make the investment say it's worth every penny to build a model unit inside the sales center.

“It makes a huge difference,” says Templeton, whose company turned a triple-wide trailer into a scale model. “It takes all the guesswork out of it. There's enough guesswork with the views. This gives them a comfort level. It kind of clinches the deal. ... With as great as virtual [reality] is, and we love it, there's still no substitute for a model.”

That's great when you have the space, but in urban locations where retail rents are high and vacancy rates are low, space may limit that option. For ATLofts at Atlantic Station, Lane Co.'s 303-unit rooftop loft project atop a retail/entertainment district in Atlanta, the sales center won't support a full model, but it does showcase the units' finishes and has a demonstration kitchen.

“That was really important to me to show, to lock them in emotionally, where they can touch and feel and show their friends,” Grogg says. “It becomes reality. It's beautiful, it's comforting, but it's more about an emotional lock-in over the months ahead.”

Garrison Partners always tries to do a full-sized model in a sales center, Benson says. When that's not possible, the company will model a kitchen/living/dining area and define it by hardwood flooring, with the sales area done in carpet.

The one other essential element of a condo sales center is a scale model of the building, Benson says. The multifamily version of a topo table, the scale model lets prospects envision the building's scale in relation to its surroundings and even locate their condo. In one project, Garrison Partners installed a 10-foot-tall model, connected to a computer that would illuminate individual units.

Virtual reality also has a strong presence inside the condo sales center, Templeton says, letting prospective buyers walk through the lobby, the fitness center, the pool area, or any other common areas the project boasts.

One final difference for the condo sales center: Finding a location can take time and needs to be initiated much earlier than for a single-family development, where a month's lead time is often all that's needed, Templeton says. His sales centers have been in retail and office spaces. He's even looked at leasing space from a parking lot. The best site will be within view of the building and have both heavy walk-by and drive-by traffic.

If that's not doable, though, it doesn't mean you won't generate traffic. Grogg says that after two different locations for its trailer fell through, her first sales office for ATLofts was on the ninth floor of a hard-to-find office building and had nothing but a model of the project and a TV running a video.

“We sold like crazy,” she says. “It really shocked me.”

If the buyers, the marketing, and the sales center are different, the sales skills need to be different too. Some of the best single-family sales pros would tank on a condo project, Grogg says, because they don't understand the mind-set of investor buyers who can dominate presales. They're not used to the speed in which a condo deal occurs—buyers tend to make their decisions much more quickly than single-family buyers—and projects can sell out in weeks, or even hours. Or they aren't trained in holding a buyer's hand for two years to make sure they make it from the giddy haze of putting down a deposit to the reality of a walk-through and a closing.

Grogg says she can tell the strength of a project's sales team by how quickly it sells out. The shorter the time for the sellout, the less savvy the sales agents and the more money they're leaving on the table.

“There are a lot of order takers out there, and they get lost in the momentum of the event,” she says. “[They are] just going so fast, and [they] don't have experience to do what's best for the developer, the property, and the customers. They'll sell out every single two-bedroom, and the developer is stuck with one-bedrooms and has to give them away. ... When you slow it down and have talented people understanding everything from correct phasing and pricing, you can still have a quick exit strategy.”

The most important skill Grogg sees in condo sales is a thorough understanding of financing options. Many of the people who cancel their sales do so because they're nervous about their job or the financing changing during the 18 to 24 months until they close. CondoLane negotiates 18-, 20-, and 24-month rate lock-ins with lenders to help alleviate those concerns.

The sales agents who excel in the vertical environment are the ones with a high comfort level doing presales, Templeton says.

“They love that environment, creating a backdrop of what the building is going to be like,” he says. “You have to continue to maintain a relationship and keep the dialogue going for 15 to 24 months.”

With the speed of the sales process, Grogg says, it's not surprising that a lot of condo buyers have some level of buyer's remorse. “The buyer gets very stressed out on a quick sale. They walk away saying, ‘What did I just do?' You'll see big fallouts because people are treated like cattle.”

The key to overcoming that, she says, is slowing down the sales process from selling out in three hours to running it out a whole month and building a relationship. Since you may have two years until the project closes, there's plenty of time to do that. Without a system to make it happen, though, buyers can easily fall through the cracks and feel like they've been forgotten. Get-to-know-the-neighbors events, such as cookouts, game nights, and group trips to nearby cultural or sporting events, are a great way to keep them excited about their purchase decision.

“You almost have to become a part of the family,” says Courtney. “Send the kids birthday cards; use any excuse to call somebody. You want to make sure they don't get discouraged, especially the younger people, because they'll keep looking, and you want to make sure they don't jump.”