Most people dream of living like celebrities, because of the fantastic houses they have. Luxury houses have anything you could imagine, from pools to movie theatres to full-size basketball courts. While it is fun to imagine yourself in one, there are some tricky things to deal with that are different from conventional homes.
There are different definitions of luxury homes
For a long time, the Institute for Luxury Home Marketing defined the threshold of a luxury home as $1 million. However, as inflation has risen over many years, the dividing line has changed according to home values. Also, the cost of real estate changes by area. As most people know, a 1million dollar home in Los Angeles is going to have a different value than a 1 million dollar house in Kansas City. As the real estate saying goes, it is all about location. To make sure you are defining luxury the right way in your area make sure to talk to a real estate professional in your area.
Luxury homes take longer to sell
Luxury homes take longer to sell. There are probably several reasons why. First, the loans on luxury homes will usually require a jumbo loan. Jumbo loans have stricter requirements than conventional loans and take more to qualify. Second, luxury buyers are often pickier and can afford to be more patient. Also, the market is smaller because fewer people can afford them, so the pool of buyers are more scarce.
Luxury homes are more likely to cut their prices
A luxury home seller is more likely to be able to leave a house on the market longer because it is often a second home. If a luxury home seller wants to get a home off the market faster, they are usually forced to lower the price more quickly, deeper and more often.
Luxury homes have less of a shortage than conventional dwellings
Because of the higher price and the lower demand for higher priced home, there is usually not a shortage of luxury homes in most areas. Builders like luxury homes, because there is more profit in the market, so more builders like to build luxury homes.
Luxury home listings are harder to find
The nature of luxury listings precludes many people being able to find luxury listings. Many people who have luxury listings are famous and like to protect their privacy. They don’t want to make their home address public, so they like to list their homes on private lists that market others that can afford their homes. They market their property differently, by using brokers that can hold open houses for certain people on exclusive lists, or by pocket or “off-market” listings.
Just as with any other investment, realtors and sellers like to handle luxury houses differently than regular homes. As the loans for the homes are under different rules, they create a separate market of serious buyers and not just an open forum for people to get a look at the houses.