Pricing a Luxury Property
Pricing a Luxury Property
The price point at which a property starts to be considered "luxury" is different depending on the location in the world, nation and state. Luxury in one state can start at $600,000 and $1,300,000 in another. In certain places, a property might not be considered true luxury until it's around $10,000,000.
Agents who more often deal with luxury properties might have a slight edge on other agents who mostly deal in the middle echelon of property sales. Yet, an experienced agent who doesn't regularly sell luxury properties can still properly price one. Whoever is pricing the property, the margin of error can be higher as the price points go higher. This is when a seller definitely needs to work in conjunction with an agent as much as possible to find the right price.
Sellers often desire to price their properties higher than market value. When this happens in the luxury zone, the margins of error can be in the hundreds of thousands to millions of dollars in the top percentile. It is not uncommon to see very large price adjustments as luxury properties stay on the market a while. Regular properties have price adjustments all the time, but It is even more crucial to hit the right price point with a luxury property since there is already a small pool of buyers who can afford them.
As a seller, if your agent is pushing for a price that sounds like it is on the lower side of the scale, please be open to the suggestion. Remember, the agent listing the property gets paid more based on a higher sales price. So, if they are pushing for a lower price, you know they are trying to do the right thing for you rather than themselves. Agents want the property to sell, as does the owner, so it is still in their best interest to attach the right price so the property sells. Zero percent of no sale is Zero commission.
So, how does one properly price a luxury property? The same as a regular property, but the agent will probably have to cast a wider net for the comps as the price point gets higher. This is because the bigger and more extravagant a property gets, the more it differentiates itself from any property in its area. Some properties are all alone on a ton of acreage and multiple dwelling and outbuildings. Many times, even experienced agents ask for help from other agents in their office in narrowing down the price point. This is a good approach because the more minds on the case, the better. Also, an agent can enlist the help of an appraiser who might do a "one-pager" write-up on the property, giving their opinion of market value. This is not as comprehensive as a full-fledged appraisal, but it also puts another professional mind on the case.
There is another issue which can be a challenge with luxury properties - the furniture. This might include artwork or yard items as well. When a buyer experiences a luxury property, part of the experience that sells the house can be the existing furniture, or at least some of it. This can be worked out by allowing the furniture or other items to convey with the property as part of the purchase contract, or the items can be purchased by the buyer between a separate sales contract with them and the seller.
If the property stays on the market for a certain time with no offers, one way to help narrow down the price to the proper zone is to ask all agents from any office who have previewed the property to give their opinion of a price. Often the right price will be found out through this means since somewhere along the line, some of the agents have sold a property that is very comparable.
We have to remember, in the end, the price a property started at before it sells was never the real market value. Sellers sometimes feel they have already come down on their price enough or have lost enough money by reducing the price over time. This can be even bothersome when the adjustments are huge with a large luxury property. There really is no losing money with a price adjustment, since the property was never going to garner the former price. Again, everyone wants the property to sell sooner than later, and for the best value. This can take a little while to work out, especially when small adjustments in the market can be big adjustments in the price of a luxury property.
Overall, I believe being conservative with the price in the first place is the best approach. This tends to make the property available to a broader spectrum of the market and is better for evoking competition for the property. If the property is priced well, gets multiple offers; the seller gets an acceptable price and the buyer perceives good value as well, everyone wins.