Ritz-Carlton Residences Palm Beach
With much of the world still in a real estate winter, Miami’s quick-moving market is making developers and brokerage firms compete for the residential projects that are left, with a series of incentives.
Brokerages and developers are offering everything from increases in commissions to iPads to luxury vacations to help ramp up sales.
With inventory dropping drastically, developers and brokers are doing what they can to compete for sales.
“What happened in our little piece of the world — we’re enjoying probably an anomaly as related to the rest of the real estate market,” said Philip Spiegelman, chairman of ISG, which recently joined with developer Jorge Perez to form a new sales company, Related ISG. “Things are selling rapidly across the board, principally to buyers from Latin America.”
Spiegelman said the way this his firm was helping brokers was with increased marketing assistance, along with a series of structured bonuses in commissions.
Others are taking a bit of a flashier approach.
The Ritz-Carlton Residences Palm Beach in Singer Island, for example, is offering a three-tiered vacation reward plan for brokers who sell units at the project. From Memorial Day to Labor Day, brokers who sell a unit at the property receive either a VIP three-night stay in a suite at the Ritz-Carlton in Toronto or $10,000 in cash. The number goes up to $20,000 for the third sale, or offers the option of a seven-night trip to Hong Kong.
The property has seen a surge in sales since taking on the Ritz name.
The Premier Sales Group’s Carolyn Ellert said part of the drive for incentives was the typically-slow summer season in the Palm Beach area.
“Summertime is a bit slower, so we’re always looking to make sure that brokers are thinking of us,” she said.
The Ritz’s owner, Ophir Sternberg, said that with sales performing well, it was important to maintain the strong rate.
“I think the idea behind all of this is that we just came off a great selling season, and we wanted to continue the momentum,” he said. “We didn’t just want to thank them with cash bonuses, but wanted to give them an experience — to experience the luxurious lifestyle that they were helping us to sell.”
Incentives are typically offered when developers need to fill buildings during a tough economy.
The motivation for offering these kinds of rewards come from two places — increased demand for units, but also pricing that is not consistent with market conditions, said Peter Zalewski, founder of brokerage and consultancy Condo Vultures.
“We’ve seen everything from iPads to automobiles [being offered to agents],” he said. “No question there are incentives being thrown out to agents if they can push a certain property. What you’ll find out is that the pricing is probably a little bit out of whack for that project, and because the pricing is out of whack, the seller is looking for a way to convince the broker to push the project when maybe the market conditions don’t necessarily substantiate it.”
He also said that the climate was also leading to several major firms selling properties, and brokerages are trying to attract new hires with incentives of their own.
“A lot of these smaller brokerages are making a push to try to attract agents,” he said. “There’s a whole shakeup occurring in the brokerage industry in South Florida.”
Some smaller brokerages are even offering new brokers the chance to get 100 percent of their commissions, as opposed to a split with the company, he said.
For example, Miami-based More Realty is offering brokers the opportunity to keep their entire commission.
While the broker market is extremely competitive, the dynamics of inventory mean that most of these incentives will not be permanent, Spiegelman cautioned.
“This is very temporary,” he said. “I mean that sincerely. With the level of inventory that we’ve watched over the last two years, it’s very likely that inventory will be completely gone within the next 12 to 18 months. At that point, we’ll start getting into the new construction business.”