Setting Right Price-Point Is Key to Selling Product
- Jun 16, 2010
San Diego–A handful of executives from urban and resort real estate companies have together launched The Solvere Group to offer developers a new way of selling real estate projects. Solvere means solution in Latin.
The team includes Ed Monce, former CEO/Partner, and Larry Greenberg, both of The Ryness Co., and Brendan Mann and Mark Myhedyn, formerly of S&P Destination Properties and Playground Destination Properties.
Utilizing a sophisticated analytical approach to validating the prices of real estate along with finding and preparing buyers to buy, The Solvere Group claims it offers an understanding of market values that not only help developers sell more effectively, but encourages comfort among buyers.
Monce and Mann talk to MHN about this new strategy and how they think it can move product off the market.
MHN: How is your company different from other sales and marketing companies? What is the new approach to selling?
Mann: We recognized that the way real estate is being sold over the last number of years will not be the way it will be sold going forward. We’ve taken the expertise of the urban and resort real estate worlds, and the selling methodologies of the two, and blended them together to set a framework that is going to be effective going forward. In the resort world, you always had to find the buyers and ensure that the product was fulfilling the need, and the sales methodology had to do that. In the urban world, we dabbled in that. Now we see, people are not buying three or four or five of anything and so real estate has to make sense, and sellers need to have a foundation story as to why that is.
MHN: Do you already have clients?
Monce: We have been consulting with many different groups. Brands and developers including The Ritz-Carlton, Four Seasons Hotels, Trump International, Westin, W Residences, Starwood, The Carlyle Group, Forest City, Trammel Crow and Kor Group to name a few.
MHN: What is the big focus of the company?
Monce: The big focus is that the world has to change from price-point selling back to real estate usage and lifestyle again. The marketplace is dictating that and it’s already happening. Once you improve your price or validate your price for the product, you can get back to why people buy in the first place, which is for the sake of homeownership versus as investment vehicles. That’s what this methodology brings. We’ve brought in analytics and we look at the market dynamics beyond real estate.
Mann: In many markets, people are just fearful of overpaying and are sitting on the sidelines. With the help of analytics, we are able to create the comfort with the buyer and help them move on pass that point which can be paralyzing. They can then focus on real estate.
MHN: How important is timing in this process?
Monce: Timing is huge in our evaluation of what we do with the product. If it’s a new building, and the project is less than 20 percent occupied, the seller has a lot to do to get it right. Real estate takes on its own life and you have to have people in it to give it the heart. We position the product so that a buyer will buy it. There is a saying: Every day that you don’t have your product priced properly and the offering done properly, you get to buy it back. Of course, sellers can’t afford to do that anymore.
MHN: How long do you stay on the consulting team?
Monce: Usually till the last unit is sold and closed.
MHN: What are the top pointers for selling a product?
Monce: 1. You have to be price effective;
2. You have to have a product that delivers the lifestyle that’s wanted in the marketplace; and
3. You have to complete a whole story to make that happen.
MHN: What are the biggest mistakes a developer can make while selling a project?
Monce: We see a lot of mistakes based on timing. A very good market will absorb a lot of mistakes in a building; such as poor floor plans and presentations to buyers, and higher prices. Those are cyclical and we know they will happen. In this economy, a developer is hanging on.
Are developers taking the right positioning for the building? It doesn’t matter how much money they spent on the construction or on the building, pricing has to be based on the market. Everybody is trying to anticipate when and where the market will go. The only thing we know is what’s reality today and that’s’ the biggest mistake people are making. Developers set prices based on Performa or what they need it to be and buyers don’t accept that anymore.
Mann: Many of the mistakes have been made on a project and we come in to correct them.
MHN: Have you seen any changes in the last six months to one year since you started the company?
Mann: The biggest change is the availability of consumer financing. It didn’t matter if the seller priced the building properly and had a great product and the place worked etc. if there was no ability to get a mortgage on it and the seller was in the water. That’s one of the things we are starting to see free up a bit. As that starts to happen, the economy will go forward, small businesses will be able to borrow money and people can start hiring, and buy homes and all that sort of stuff. That’s the most significant change we have seen in the last six months.
Monce: The biggest thing we have been able to do is work with developers as consultants to get them through to where their product can find finance. You have to be able to do that, because if people can’t get loans they aren’t going to buy. There are only so many cash buyers out there. And buyers are also smart enough to know that if a building can’t get financing, they shouldn’t put their money into it. So that’s really where we have been spending a lot of time in the past six months. We have worked with various organizations and created financing that didn’t exist before that on all types of real estate.
Another thing changing is that buildings now have the ability to move forward. They were almost stuck within themselves because builders were losing them; control was being transferred to receiverships and bankruptcy courts and debt stacks etc. We are now seeing the government trying to push through that pipeline. There has been significant movement in the last 90 days. Of course, things are not yet perfect.