Dear Friends,

Lessons Learned - Maine Real Estate

Who would have thought that a little over 5 years ago when we founded Legacy Properties Sotheby's International Realty, that we were entering into the worst real estate and economic cycle in contemporary history. Had we an inkling that the business climate we were facing was going to be so incredibly challenging for so long, we likely would have modified our strategy. Although many leading indicators were suggesting the period leading up to 2006 was overheated by loose credit standards and wild speculation, it seemed Maine was largely immune from such radical swings both to the upside and presumably to the downside. Our crystal ball was clouded by our love for Maine, its gorgeous coastline, its warm and welcoming communities and its rich cultural attractions.  Needless to say, there were many lessons learned about Maine real estate, Maine business and the impact of the global economy on our little microcosm. We could probably (and may well do when time permits) write a pretty entertaining book highlighting our "battlefield" education. For the purposes of this newsletter we will keep it brief. 

Growing under Adverse Conditions

We opened our Portland office on January 3, 2006 with six of the most experienced and knowledgeable Brokers in Greater Portland. There were a number of seemingly big decisions which needed immediate attention such as target markets, advertising, technology, branding, recruiting and growth. We had to make several educated guesses while relying on the guidance of our ever-cloudy crystal ball. Yet, within 3 years, Legacy Properties Sotheby's International Realty grew to 4 offices (Kennebunk, Portland, Brunswick and Camden), more than 50 agents, several hundred of the most beautiful property listings in Maine and a growing market share in 6 counties (York, Cumberland, Sagadahoc, Lincoln, Knox and Waldo).  In year 4, we became the largest luxury property company in Maine by unit volume and dollar volume. We extended our lead in year 5 on both counts. 

We learned several things about growing in a challenging market.  First and foremost, we learned that it is clearly the best time to grow.  It did not always feel that way, but we found opportunities for mergers, acquisitions (Brunswick Realty Group and Trimble Private Brokerage), and our growing company became a recruiting magnet for top agents in several key markets. Without growth comes stagnation which is typically followed by demise.  The adverse market conditions offered the perfect opportunity to grow  into one of the largest real estate companies in all of Maine.  Most recently, we have expanded our coverage into the Mount Desert Island market including Blue Hill, Northeast Harbor, Bar Harbor.

Maine Coastal Real Estate is Immune from Economic Activity?

We should be so lucky?! Maine is a very small real estate market with only 1000 +/- homes selling statewide each month. There was a school of thought that because Maine did not  see a meteoric rise in prices, it should not decline. The fact is that the market did improve significantly from 2001 through 2006 and has since retreated back to prices consistent with 2003/2004 levels. The Maine real estate market was relatively unscathed through 2007 and most of 2008, but the harsh reality of economic collapse, reduced liquidity, and tightened credit terms had a material impact on Maine real estate as we entered 2009.  Maybe the waterfront homes would not be impacted? Possibly the vacation home market? Or the middle market?  Or the condo market?  What we learned is that Maine is tied more closely to the global economic fabric than we may have believed.  Today's prospective sellers need to reacquaint themselves with these new pricing levels as buyers have clearly made the adjustment. 

Cut Expenses, Staff and Advertising to Survive

Wrong!!  While we have seen many businesses, real estate companies included, aggressively shrink their expense line, the real answer is to capitalize on the market dislocation to increase market share.  Legacy Properties Sotheby's International Realty has maintained a steady course, consistent with our client focus, to ensure that all of our clients receive the professional service they deserve.  We continue to provide Professional Photography, Glossy Print Publications, local, regional, national and international marketing venues consistent with the quality of our beautiful portfolio of listings.   In large part, this consistent commitment to quality and service has been the driver of our ascension to one of the largest and most successful real estate companies in the Maine. 

Invest and Innovate

We have learned that the primary change in information, technology and delivery systems is the "rate" of change. Which is to say, change is inevitable, but the rate at which things are changing is getting faster as well. There is not a day that passes in which we do not consider (and often adopt) a new way to communicate, share, present, combine and deliver our message. We see an inverse corrolation between poor economic conditions and the necessity to innovate. Complacency breeds mediocrity and mediocrity is just  not going to cut it in this competitive and demanding marketplace for real estate services.

Maine Real Estate Suffers along with Wall Street?

We were surprised to learn that Maine real estate actually improves when the stock market moderates or even declines a bit. This phenomenon seems particularly true for the second home and vacation home markets.  Maybe it should not have been so surprising that when money stops flowing into stocks or starts flowing out of stocks that it needs a place to go. Real estate is still considered one of those places.  Common sense tells us that if the stock market is on a one-way trip higher, everyone would invest every penny in stocks. What was less intuitive was that Maine would get a nice boost from the outflows as we experienced.   

Maine Real Estate has posted a very strong performance in recent months compared to last year. The July figures showed an increase of 23% in terms of unit volume while August posted a 15% improvement when compared to the same period last year.  Under contract properties, as our leading indicator for sales, posted the highest activity in more than a year increasing by 10%. Even more compelling is the 24% increase in Under Contract properties listed at $1 million or higher. The luxury and second home market is enjoying a bit of seasonal momentum combined with a tumultuous financial market backdrop.  

Suffice to say we have learned a great deal in the past 5 years, but there is much more learning to do. We are more than ready for the task ahead.