When selling a luxury home, it’s critical that sellers know what to expect. Upper-bracket properties require specific marketing strategies and often behave differently on the market than homes at lower price points.
While there are many explanations for the high-end market behavior, the simplest explanation is that fewer people qualify for luxury properties, so the buyer pool reduces as home prices increase. Because luxury home sellers have unique properties, the process of selling them is unique, too. Here are four insights that every high-end seller should know before they list their home.
1. What qualifies as a luxury home, and how common are they?
Across Minnesota and western Wisconsin, homes priced above $500,000 are marked (and marketed) as luxury homes. In July 2015, there were about 16,600 total homes for sale in the 13-county Twin Cities metro and 18 percent of them were priced above $500,000. Only 4.4 percent of local homes were priced above $1 million.1
The market statistics analyzed on the nightly news are almost always discussing median-priced homes in the area. In July, our metro’s median home sales price was $215,000.2 While median-priced homes set the tone for the housing market as a whole, there are significant differences between how median-priced homes and luxury homes are marketed and sold.
2. How long does it take to sell a high-end home?
For the last few years, low inventory has given local sellers an advantage. When there are fewer homes for sale, buyers compete over a shortage of quality homes and sellers may close more quickly on their home. However, it’s important to remember that luxury homes have a smaller pool of buyers, so there is likely to be less competition among them. As a result, upper-bracket homes may take longer to sell
Let’s look at the hard numbers of days on market. Homes in our 13-county metro are selling in a median 44 cumulative days on market (CDOM), while homes between $500,000 and $750,000 have a median CDOM of 64 days. Homeowners with properties priced above $1 million are waiting a bit longer — their median CDOM is 108 days3, but nearly a third report market times of 10 months or longer depending on price, condition, location and more.
If you own a home in this upper bracket, it’s important to understand that showing activity relates directly to the number of buyers qualified to purchase your property.
3. Will my luxury home get multiple offers, too?
If you follow the local market, you’ve likely heard about the phenomenon of multiple offers. This occurs when a home is so desirable that multiple buyers bid on the property. When buyers compete, the seller can earn a higher amount than if only one buyer is interested — and in some cases, the seller may net even more than their original asking price.
Think back to that smaller pool of buyers that will be able to purchase your luxury home once it is for sale. While it’s possible that some high quality listings in trendy areas may glean multiple offers, luxury home sellers should not expect a multiple offer to occur in their sale.
4. A local specialist goes a long way
Even as we break down luxury market trends, it’s important to remember that this smaller segment varies widely in size, location and price. A home priced at $580,000 near Lake Harriet in south Minneapolis will likely have more potential buyers than a $3 million listing just a few miles away on Lake of the Isles.
In short, while it’s important to understand luxury trends when selling your home, it’s also critical not to over-generalize the high-end market. To sell your home at a competitive rate in the shortest amount of time possible, you should work with a REALTOR® who is familiar with similar homes in your area. At Edina Realty, we have more than 2,300 local specialists and we would be happy to put you in touch with the agent who best suits your needs; around 600 of those agents even specialize in marketing luxury homes as members of our Exceptional Properties division.
Call, email or chat today to get connected with a Realtor, or if you’d prefer to start by understanding your home value, request a free home value assessment. There’s never any obligation to use our agents when you have an assessment — sometimes it’s just nice to take the first step and know where you stand.
Source for 1, 2, 3: Regional Multiple Listing Service