Web-based Real Estate Marketing

Web-based Real Estate Marketing
By Marilyn Bowden - Bankrate.com

These days, anyone in the market for a new home or a beachfront condo can get a better idea of what's available by browsing the Internet instead of the Sunday paper. According to the National Association of Realtors, there are now some half-million Web sites in cyberspace hawking dream homes.

The Internet has been an important selling tool for the real-estate industry, for nearly a decade. But during the recent residential boom, some have taken it to a new level, using the Web as the primary marketing tool to snare buyers for preconstruction projects which exist only in the developer's imagination. For this class of sellers, the Web has replaced the sales center; the virtual tour has nosed out the model unit.

Consumers need to exercise caution, experts say, before leaping into an investment in a property that, as the market softens and some projects inevitably fall by the wayside, might never be anything more than a computer-generated fantasy.

oject gets a lot more play than it would have three or four years ago, when preconstruction was still sold primarily through advertising and person-to-person contact. We can e-mail tens of thousands of users, and the cost is minimal compared to direct mail."

An attractive, well-designed Web site is now a must for large projects, says Liam Sullivan, spokesperson for Cotton & Co., one of the country's largest real estate marketing firms. The company currently has more than 60 Web sites up and running for real estate projects all over the U.S. and the Caribbean. Examples include Live Lucaya in the Bahamas, Wight Canyon near Lake Geneva, Wis., Grey Oaks Country Club in Naples, Fla., and Grande Dunes in Myrtle Beach, S.C.

"It's a tool that people have come to expect," Sullivan says. "People want to shop from their living rooms. Eventually they might visit the project site, but some of them buy just off the Web."

Sullivan says virtual tours using sophisticated technology can convey a much better idea of what a project will look like than a visit to a construction site.

"Some projects may be years away from completion," he says. "There's no other way to get an accurate sense of what it's going to look like when all phases are complete. With technology, we can even take the dimensions of the golf course and virtually re-create it."

An integrated approach
All this doesn't mean that all developers are ready to forsake tried-and-true methods. Many prefer an integrated approach.

"Every development needs a great Web site because it makes a great statement about the project," says Pamela Liebman, CEO of The Corcoran Group, a New York City-based residential developer and marketer with more than 30 years of experience in the U.S. and offshore markets. Interactive Web sites, she says, also make possible a dialogue between a developer and potential buyers, who can register a wish for bigger units or more greenery.

"We have had success in the past with no sales office, just relying on Internet advertising," Liebman says. "We sold out over 100 units in one project that way. But that's quite unusual. People want to touch and feel what they're going to buy. While we use the Internet to expose our product, we rarely consummate a sale that way. So we're not doing away with bricks and mortar."

Jim Cohen, vice president of sales at Turnberry Associates, which builds high-rises in Las Vegas, Virginia and Florida, says the sales office remains a vital selling tool.

"We go all out on our sales offices, because they're going to be there for a long time," he says. "We're not looking to sell out the project in a day."

No matter how quickly a project "sells out," a sale isn't really a sale until the unit is delivered and the contract closed, says Edgardo Defortuna, president of Fortune International, a Miami-based real estate and development firm that has marketed more than 100 new properties across South Florida.

"Even if we are mostly sold out, we still build a sales office and models," he says. "There has to be something to keep the buyer excited during the two or three years the project may be under construction."

Another thing the Internet will never be able to replace, Defortuna says, is the relationship between seller and buyer.

"There is no substitute for personal contact," he says. "End users especially need to know who the developer is and have a relationship with the salesperson."

The industry online
Industry statistics make it clear that the real-estate profession is not in danger of losing ground to Internet sales.

"Bill Gates predicted in 1995 that because of the Internet, our membership would drop," says National Association of Realtors spokesman Walter Molony. "Then we had 720,000 members. Today we are at 1.3 million. So that prediction has not panned out."

Citing a recent survey of 135,000 home buyers by his organization, Molony says that though 77 percent used the Internet to search for properties, 81 percent used an agent to consummate the sale. Back in '95 when Gates made his forecast, only 2 percent of home buyers shopped by computer.

"The Internet is the norm today," Molony says. "About 95 percent of all listings are available online, and consumers are going to go where the listings are. But people still want a Realtor to explain the contract and handle the paperwork."

Statisticians for The National Association of Realtors deal only with resale properties, which are documented on multiple listing services. Tracking the preconstruction market is more difficult because there hasn't been any coordinated catalog of what's available at what price -- at least until recently. Dean Isenberg, a Florida Realtor and entrepreneur, has introduced sell-your-preconstruction.com, a nationwide listing service he hopes will become "the ebay of preconstruction properties."

Real-estate professionals with hundreds of units to sell can upload floor plans, photos or renderings to the site, he says -- and avoid paying cooperating broker commissions by reaching potential buyers directly.

For a real-estate professional representing a buyer, says Isenberg, the site provides an easy reference to all pre-construction properties available in the area a client is interested in.

Let the buyer beware
Seasoned brokers agree that Internet usage is probably higher among investors, who drive the preconstruction market. They say anyone buying a product that doesn't yet exist needs to be careful.

"It's relatively easy to sell preconstruction over the Internet," says The Corcoran Group's Liebman. "People think they're getting a bargain, and getting it easily. But in exchange, they have to go by the word of the developer and the offering document, without actually seeing what they're getting."

Internet buyers, she says, "need to read those offering documents very carefully, and have an attorney read them as well."

Recent changes in the market should also raise red flags for would-be investors. As construction costs continue to go through the roof, many condo developers are rethinking projects not already under way.

"I believe that any modestly priced project that has not yet started construction runs a very high risk of not being built at all, because the cost of construction is soaring," Zilbert says. "So my advice to anyone looking to buy preconstruction is, if there is no visible evidence that the project has started, be very wary -- especially if the developer is unknown and has no track record."

To get an honest evaluation in such cases, he suggests working with independent agents rather than the developers' sales team.

Although resale prices are holding steady in most markets, condos are not appreciating at the rate they did even a year ago. Many speculative investors who bought units at preconstruction prices in the hope of flipping them once the project is finished will find that increased costs for auxiliary expenses such as insurance, taxes and condo fees have devoured their anticipated profits, Zilbert says. And because rental rates have not kept pace with appreciation, renting their units will not cover the cost of ownership. Many will need to sell their units almost immediately.

Speculative investors have virtually disappeared from the condo market, says Defortuna -- a sign that the boom days of recent years are giving way to more normal times, with more moderate appreciation.

Flipping properties?
For those would-be flippers left in the lurch, Zilbert has created a customized form of Internet marketing -- a Web site called www.condoflip.com.

"Someone who paid $500 a square foot for a unit can put it on the market for $700," he says. "There's another option for the buyer who just wants to unload an apartment and step away. They can find a replacement buyer at a slightly higher price, so they can cover the broker commission and get their original investment back."

For the flipper in serious distress, Zilbert says, there's also "a severe panic button that says 'I can't close, I am desperate, and I need to get out.' In that case, the seller agrees to give up half their deposit -- usually 20 percent of the contract price."

Zilbert's innovative Condoflip.com illustrates the Internet's often-remarked ability to respond quickly to changing conditions. There's no question that the Internet's impact on the real estate market is here to stay. For buyers who take a few basic precautions, the advantages include a much broader selection to choose from and virtual previews of the neighborhood.

"The days of big billboards and a guy in a blue blazer who walks you around the model home are gone," says Cotton & Co.'s Sullivan.

"Certainly," says Fortune's Defortuna, "electronic tools are very effective as a support for more traditional marketing methods. But they can never replace them."