Searching and buying a luxury home is a great experience. You’re courted, given gifts and taken very well care of. Even better than buying, is living in a luxury home. But, selling one?
Oh man, is it work. When you put your home on the market, you’re selling to a small percentage of the population. This can make your realtor’s job hard. It requires them to have a very specific set of skills and knowledge — that most agents lack.
To sell a luxury home, your agent needs to understand how we want to be marketed to, how we prefer to buy, and our mindset. For example, average agents think we buy luxury homes because we want a bigger place to live, but that’s not true.
We do it to be part of a like-minded community. We do it as a reward for our hard work and accomplishments, like building a multi-million dollar business from scratch. We do it to show the world that we made it.
Unfortunately, most agents only know robotic, slimy sales scripts that make you feel like you need to take a shower after talking to them.
In this article, I’m going to share with you how we go about selling luxury homes so that you can use it as a marker to know if your agent is qualified to sell your home.
How We Define Luxury
Like beauty, luxury is in the eye of the beholder. Everyone has a different idea of what a luxury home means.
The average price point for a luxury home in the U.S. is about $2 million. But, we also realize that you’re barely entering the market in Beverly Hills, where the luxury price point is about $8 million.
For this article, we define luxury as the top 10% of homes in a given market. For example, if you live in Las Vegas, the luxury price point will be much higher than living the middle-of-nowhere, Ohio. I typically consider $3 million to be a good price point.
Price Right From the Start
Selling any home starts with the right pricing. Get the pricing wrong, you could seriously reduce the probability of your home selling. It’s just simple economics — the law of supply and demand.
The higher the price, the less demand. Over price, demand will drop because the value isn’t there. Even though people can afford it, they won’t want it.
Typical industry standard is to start with a comparative market analysis (CMA), which sets the price by looking at past sold homes in the last six months that are similar to yours. The problem is that most luxury homes don’t have any good comparables.
Agents are forced to add and subtract features, which can create a huge subjectivity in the price. A CMA is a good start, but a premier agent will take it a step further.
Here are some other pricing strategies that we use:
- Replacement Value: Set the price based on what it would cost to build your exact home with today’s prices. Alternatively, you can take the price you paid to build your home, then account for inflation and age of the home.
- Discounted Cash Flow Value: More of ballpark estimation rather than an exact value. As a result, I’m not going to dive into. But the idea is to find the profit left if you rented the home and divide by alternative investment rates.
Pricing a home is best left up to an expert agent who understands the value of your home based on their knowledge of what buyers want. Then, they use the other three methods to support your home’s value.
Broker Only Open Houses
I have very, very strong opinions about open houses. It’s an old practice used by many real estate agents to drum up buyer leads, not get your home sold.
There is a less than 4% chance that a home will sell from an open house. As you move up in price point, that probably decreases. By the time you reach a $3 million price point, there is almost a 0% chance of selling from an open house.
Most people who attend open houses for luxury homes are only going there to see how the rich live. I know this because it’s what I did. Before I got into real estate, and when I was living outside of Charlotte, NC, I would go to open houses just to see the home and how people lived.
I wanted to dream. I knew I couldn’t afford these homes, but that didn’t stop me. I loved going to homes that were on the same lake as Michael Jordan’s home. It made me feel really important and cool.
The only open house that you should do for a luxury home is a broker-only open house. This is where only brokers, and agents, are allowed to attend. These can be useful since agents are going to look at home their buyer might be interested in.
If you have an agent who suggests a general open house for your luxury home, you should fire them.
Positioning Your Home for Success
This is an advanced strategy that 99% of real estate agents don’t know about, but it’s the one skill agents must-have if they want to sell a luxury home.
Positioning is all about creating a specific story about the house. Luxury homes aren’t bought for functionality. They are bought for the story they tell. When we buy luxury we want to tell the world and family a story.
As an agent, it’s my job to capture and tell that story that potential buyers might want. It’s done by staging the home in a specific way. For example, having a leather sofa in the living rooms tells a completely different story than a used-torn sofa.
Your positioning will impact how the description of your home is written. It could even influence pricing. It influences the quality of your images.
Find a good agent to sell your luxury home. The best way to do this is to ask people who have sold or bought a home similar to yours. Finding someone who has the skills to sell a luxury home can be difficult.
Bio: Alexis Craig, along with her Lansing real estate team, is setting out to establish a new standard in the real estate industry. She is published all over the web. Her content has been seen by millions of investors, homeowners, home-buyers, and real estate agents. You can learn more at Mocha Homes.