Property

THE POWER OF PRESENT - GIVING

Gifts may be good business for brokers, but even expensive goodies are no substitute for a good real estate agent.

words by > D. Heimpel

“Everybody loves a blue box,” says Coco Clayman-Cook, a real estate agent for Prudential Beverly Hills. She’s talking about a blue Tiff any’s box, just one of the many lavish gift s she and other fellow real estate agents across LA’s West Side give aft er they have closed escrow.

Items ranging from fruit baskets to refrigerated wine cellars, feng shui consultants and fi ne crystalware are all part of the game among sellers of high-end properties. A changing buyer and a soft er market have made client fi delity more important than ever. And while agents would never say that a gift is a calculated part of their work, not giving one would be plain stupid.

The buyer’s philosophy is much different than it was a decade ago. Buyers are holding on to luxury properties for two to fi ve years, according to Jeff rey Hobgood of Sotheby’s. To help maintain a good relationship with fast-selling clients, Hobgood says he has given his fair share of blue boxes.

“It’s not a one-hit, wham-bam-thank-you-ma’am, never-talk-to-the-client-again type of situation,” explains Clayman-Cook. She says she maintains relationships with her clients for years, “like a marriage.” Once she created a website to sell one client’s $12 million home. When it sold, she spent a thousand dollars turning the website into a coff ee-table book, and the client was ecstatic.

But the gift isn’t everything. “If you give a nice gift , and you are horrible through escrow, nobody cares about the gift .”

Market changes

On top of faster moving clients, the market is not what it once was. Sales of existing homes dropped 29.9% in California from July 2005 to July 2006, according to the California Association of Realtors.

Two major factors have been attributed to a “soft market.”

One is rising interest rates, up a national average of one percentage point since summer 2005. Buyers who bought into negative amortized loans that off ered low “teaser” variable rates are fi nding their balloon payments due, and they can’t pay the bill.

Th is pattern has left more houses on the market longer—some up to 60 days, double what it was a year ago, according to Anthony Marguleas, owner of Amalfi Estates in the swank Pacifi c Palisades. Marguleas has been known to send in personal chefs, give fi ne wines or make reservations at LA’s top restaurants for clients.

And secondly, while appreciation of homes has slowed down by fi ve percent in California from the summer of 2005 to 2006, they are still priced way ahead of income.

During the heady days of real estate hyperactivity, a whole army of regular Joes became agents. “We have given out 5,000 licenses a month for years,” says Tom Pool, spokesman for the California Department of Real Estate. “At some point, that will taper off .” In California, one out of every 52 adults has a license.

“Th ere are lots of agents, and there is lots of competition,” says Frank Cook, industry insider and publisher of the Real Estate Intelligence Report, a newsletter for agents. “Lots of those who will be driven out of business want to stay there and survive.”

Marguleas of Amalfi Estates says that many have been pushed out already. “Th at’s good,” he says. “It’s healthy.” He likens the situation to a forest fi re that cleans out the underbrush.

Th at is why in a fever to stay in the game, some agents have turned to off ering potential clients extravagant gift s in exchange for the right to sell a home, dancing the “gray line” of both integrity and legality.

If a real estate agent sells your lavish home, would you expect to receive a fancy gift post-escrow?

Is it really worth it?

“Imagine you’re being sued for millions of dollars and you have to choose from two attorneys,” Marguleas says. “Do you take the one with the experience or the one who says, ‘I’ll send you to Hawaii?’ Come on. It’s embarrassing to our profession.” “Federal law prohibits brokers from buying business,” Cook emphasizes. Th e idea is that business should be won with up-front competition, not kickbacks. But, in California, the law is less clear and open to some interpretation.

As long as the gift is given aft er escrow, there is no problem. “You need to take it case by case,” points out Pool, of the California Department of Real Estate.

But it takes a lot more than a great gift to acquire and keep clients. Real estate developer Abe Kamara sits on the buyer’s end of the table. “I’d rather get a rebate than a present,” he says with a laugh. “Nobody buys a $3 million home because they get a three-day trip to Hawaii. No way.”