What is Luxury Real Estate?

You sifted through dictionary magazines, scanned listing pictures, watched entire residential real estate shows in a row. And yet, you’re not sure exactly what counts as luxury real estate. A property priced over $1 million? A house larger than 3,500 square feet? A mansion made of marble and exotic woods with hand-blown glass windows and a diamond-paved driveway?

Realtor Mike McCann, head of the Mike McCann Team in Keller Williams Philly, says it’s mostly money: The main determinant of a luxury property is the selling price. But there is no single number. If you want a price tag, luxury properties typically cost between $2 and $40 million, says Richard Haddad, Managing Editor of the Seller Resource Center at HomeLight, a network of real estate brokers.

But some shy away from numbers, preferring percentages: that is, luxury properties are in the top 10 percent of homes listed in any market, according to Haddad. For example, RE/MAX’s luxury division, the RE/MAX Collection, requires each of its listings to be twice the average selling price of local properties, says Amber Bonasoro, RE/MAX’s executive director of luxury.

As Haddad points out, in reality, “the definition of luxury real estate may differ by market and overall location”. Read on for a more in-depth look at the rare world of luxury real estate – better understand what “luxury” means if you’re looking to buy or sell a home.

How much does a luxury home cost?

Well, if you have to ask, you probably can’t afford it…

Seriously, in dollars, seven figures for a single-family home seems to be the generally accepted number in the US for describing luxury. In terms of real estate nationwide, the average luxury home sales price as of July 2022 was $1.31 million, according to the Institute of Luxury Home Marketing’s August report. Settlements. (The institute sets the median threshold price for luxury homes at $912,500).

Coming with a similar figure, Redfin defines luxury real estate as the top 5 percent of properties by market value in an area. The real estate broker’s analysis of luxury sales in early 2022 revealed the national median selling price for this segment was $1.15 million.

But luxury can be relative, as the Redfin and RE/MAX Collection criteria suggest: “It all depends on what your average selling price in the market is,” says McCann. Since this varies significantly across the country, so does the threshold per region and even the zip code. For example, the average home sale price in his hometown of Philadelphia is $350,000, so he explains that the luxury market in the city really starts around $700,000. However, on the Philadelphia Main Line – the historically toned suburbs west of the city – the luxury market starts around the $1 million price point.

What characteristics define a luxury home?

Of course, high prices reflect certain features in a home. But what features? “Luxury means different things to different people,” McCann says. “For some this means that the house is full of top-notch modern amenities, for others it can be all about location, and some people describe luxury real estate as a unique product full of character and charm.”

“Like art, there are factors other than price that make a home a truly extraordinary and ‘luxury property’,” says Natalie Hamrick, vice president of Americas at Christie’s International Real Estate. “For example, if a notable architect is used, the property has a unique history or famous previous owners, or has unique terrain features.”

Also, certain features favored by wealthy buyers may change over time, such as during the pandemic. Here’s a look at some of the properties that luxury real estate experts agree are currently in demand.

non-crowded environments

Since the pandemic, luxury buyers have prioritized not just the suburbs but the countryside—anywhere away from the infuriating crowds, according to HomeLight’s quarterly agency surveys. Coldwell Banker’s 2021 Global Luxury Market Forecasts report also highlighted the trend in busy cities with more single-family homes or districts to empty out all the pleasures of single-family homes. In fact, 37.5 percent of luxury real estate professionals polled by Coldwell Banker reported a large courtyard as their number one residential property.

home offices

With more Americans working remotely due to the pandemic, a home office has become a must-have for many luxury buyers. According to the Coldwell Banker report, 25 percent of respondents vouched for the importance of home offices, with luxury real estate being the second most in-demand property.

swimming pools

Pools are second only to home offices, according to Coldwell Banker data. Twenty-two percent of HomeLight representatives rated special amenities such as the pool, gym or outdoor recreation area as essential features.

primary position

“Homes close to beaches, lakes, golf courses, ski resorts and more can be considered luxury because of the lifestyle close to one’s interests,” says Tammy Fahmi, senior vice president of global service and strategy at Sotheby’s International Realty. “Also, if the property is conveniently located for entertainment, school, and transportation, it can be a luxury for many buyers.”

square footage

Before the pandemic, the demand for mansions was decreasing. However, this trend has reversed and top buyers now want more space. In fact, according to the Coldwell Banker report, nearly 55 percent (more) of luxury real estate professionals rank the square foot as the number one comfort change from 2019 to 2020. According to Coldwell Banker’s “Global Luxury Report 2022”, there was a rapid increase in second home purchases.

Sustainability and smart technology

“Another aspect of luxury real estate is refocusing on sustainability and health,” says Fahmi. “Eco-conscious consumers are thinking about how they can apply their current habits to their life situations.” He adds that luxury buyers are also looking for smart home features that make it easy to entertain and adjust their home temperature, lights or security systems.

Finding luxury listings

“The term ‘luxury’ is often used in listings, but I think it gets around too much and it loses its weight,” McCann says. So how do you know when a property qualifies as a luxury?

“Often, there are several explanations for a luxury listing,” Haddad says. “The agent can use a private listing website, extremely high-quality photos, videos, and 3D reviews of the home. It also includes aerial or drone photos of the property, which helps potential buyers imagine their entire life in the home, town, and area rather than showcasing the home itself. they may also include some lifestyle videos.

Of course you want to swim in the right waters. Focus on elite listing sites or brokerages like MansionGlobal.com, Christie’s or Sotheby’s International Realty. Many real estate firms have also cautiously named luxury sections.

how to buy luxury real estate

Roger Pettingell, who sells luxury waterfront property in Sarasota and Longboat Key, Florida, says “cash is best” in terms of payment. “If you’re financing, most luxury sellers will not accept credit terms. Many luxury buyers are cashing out or borrowing money against their portfolios.”

If you are planning to borrow money, you may need a huge loan or a mortgage that exceeds the limits set by the government-backed institutions Fannie Mae and Freddie Mac. You will generally need a high credit score, low debt-to-income (DTI) ratio, and extensive cash reserves or assets to qualify for these loans. Also, keep in mind that “some sellers may require sufficient proof of funding even before allowing a potential buyer to view a property, so it’s important to have this information ready,” Hamrick says.

A real estate agent or Realtor specializing in luxury properties can help direct your search. Look for initials denoting credentials in this rare arena, such as the Luxury Home Marketing Institute’s Certified Luxury Home Marketing Specialist (CLHMS) designation or the National Realtors’ Luxury Home Certification (LHC). Of course, these are industry certifications, not government certifications. But they often point to expertise in the luxury real estate world.

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