Pricing a luxury property is not always a simple endeavor. In the “traditional” real estate market, pricing a home is pretty straight-forward. You run some comps on the neighborhood. Then, you determine a “dollar per square foot,” amount. Finally, you calculate the ideal list price of the home with those factors in mind.
In the luxury home market, however, things are rarely so cut-and-dry. Instead, high-end homes often have features that are completely unique. Therefore, it is difficult to compare them with other properties in the area. Still, pricing a luxury property correctly is extremely important. This is a skill that all luxury real estate professionals must have.
With all this in mind, pricing properties in the luxury market is really more of an art than a science. There are a lot of things real estate professionals need to keep in mind throughout the process.
Factors That Impact the Value of a Luxury Home
Many factors can influence the value of a luxury home. For starters, there may be unique and over-the-top features that you might not find in a traditional home. Prime locations, indoor sports courts, bowling alleys, car showrooms, and even observatories may be found on a luxury property.
These features can affect the value and desirability of the home. However, it’s important for luxury real estate professionals to realize that not all features are created equal.
For some luxury buyers, for example, an indoor bowling alley may be considered a huge bonus and selling point.
However, another affluent buyer may have no interest in maintaining a bowling alley and may thus consider it a costly drawback.
How to Factor Unique Features into Pricing a Luxury Property
So, with these unique features being a selling point to some buyers and a problem for others, how do luxury real estate agents factor these kinds of features into the value of a home?
This is especially challenging when you consider that there are often no comparable houses to look at in luxury real estate—and without comparables, a market analysis may not be feasible.
Instead, a list price must often reflect what the seller wants to get from the property. This must include careful consideration to what the “typical” buyer would be willing to pay.
Pricing a luxury property with these considerations in mind is truly an art. As a result, this will take a lot of practice even for the most experienced of luxury real estate professionals.
What Luxury Buyers Need to Know About Home Appraisals
Another important thing to keep in mind is that home appraisals in luxury real estate aren’t as straight-forward as they are in the non-luxury market. For one homebuyer, a basketball court is a lifelong dream that adds huge value. Yet, to another buyer, a basketball court may add nothing.
The unique features of a luxury home often do not appraise in a formal appraisal. In the luxury market, however, an appraisal that comes back lower than the agreed-upon sale price isn’t the be-all-end-all that it is in traditional real estate.
If a buyer truly wants to purchase a home, they will likely find a way to make it happen. There are many solutions regardless of whether the appraisal came back on-point.
The Bottom Line on Pricing a Luxury Property
With so many nuances to keep in mind when pricing a luxury property, this is often one of the most difficult aspects of a luxury real estate professional’s job.
Over time, however, you’ll develop the skill and intuition to more confidently price these properties.
For more information on mastering the art of pricing a luxury property, check out our Estate of Mind podcast episode with Tami Simms and Jack Miller.
Here, you’ll find some valuable insights on the factors that impact a luxury home’s value and tips for coming up with a practical price. Meanwhile, if you’re not already part of our professional network, be sure to head over to the Institute for Luxury Home Marketing website and join!
Choosing a Luxury Real Estate Agent
When you are choosing a luxury real estate agent, be sure to check their qualifications, experience, and marketing expertise. Agents should have luxury home marketing certifications such as the Certified Luxury Home Marketing Specialist.
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Courtesy of the Institute for Luxury Home Marketing.