While the closing process is technically the same regardless of whether you purchase a tiny apartment or a sprawling estate, the reality is that luxury home buying is a totally different process than anything you’ve done before. And if you want to find the right deal, you need to be aware of how to proceed.
5 Luxury Home Buying Tips
Luxury real estate is a bit of an enigma. It’s not just super expensive – it also has an air of exclusivity. These homes are the best listings in their respective niches and command a sense of awe from the marketplace. Unique architecture, exquisite detail, state-of-the-art technology – you name it, and it has it.
But it’s not just the properties that are complex and multi-faceted – the actual process of buying luxury real estate is also unique and specific. From vetting and financing to negotiations and closings, there’s a lot more to luxury home buying than first meets the eye. To be successful, you’ll need to heed the following advice:
1. Figure Out Your Finances
Whether you’re in a situation to be an all-cash buyer or you plan on financing a percentage of the purchase, it’s important that you give some advance consideration to this part of the process.
The sheer value of these transactions makes them complex. Some sellers will prefer to work with cash buyers. Other sellers will want some indication of your financial situation before they’re even willing to show you the property.
Sellers may require a pre-qualification or pre-approval letter from your bank. Others will want to see a certified document proving you have enough cash available to make the purchase.
It’s important that you go ahead and think about the tax implications of a purchase and figure out how you’ll finance the transaction. The last thing you want is for there to be surprises later on.
2. Get a Head Start
Traditionally, the real estate process involves the buyer and buyer’s agent sifting through listings that are available online or through a database like the MLS. This is the standard way of doing things, and it doesn’t typically create any problems. But luxury real estate is different. Many of the listings in this space are never even listed.
At Hunter James, a leader in Australia’s luxury real estate space, 60 percent of the properties they buy are not publicly on the market. They’re circulated via tight-knit networks before they’re marketed to the general public. And the same is true here in the States.
If you want to be a competitive buyer in the luxury real estate niche, you need to get a head start by identifying listings before they go public. And to do this, you’ll likely need to work with an experienced real estate company that has the connections and is “in the know.”
3. Make a Determined Offer
Want to show a seller that you’re serious? Put in an offer with few restrictions and caveats. Show them that you mean business.
“Making an offer as straightforward and appealing as possible by offering a shorter window before home closing or fewer contingencies gives the seller a better understanding that you want to close the deal,” agent Hillary Hertzberg says.
You may also choose to put up a larger deposit when signing a contract, which is another sign that you’re serious about closing a deal.
4. Consider Foreclosures
Just because you’re buying luxury real estate, doesn’t mean you have to overpay. Because of the nature and expense of these homes, it’s not uncommon for luxury properties to enter into foreclosure. Being aware of this, you can often find homes 10 or 15 percent below market value.
Contrary to popular belief, you don’t always have to purchase a foreclosed home with cash. According to Wells Fargo, approximately 60 percent of foreclosed homes purchased are financed with a mortgage.
5. Run Expense Projections
Luxury real estate is typically expensive to maintain. Not only is there the expense of ongoing maintenance, utilities, and HOA fees (if applicable), but property taxes are astronomical. Depending on the city, county, and price of the home, you could easily pay $15,000 or more per year in taxes.
The cost of ownership is something you have to take seriously. Run expense projections ahead of time so there are no surprises after purchase.
Adding it All Up
At the end of the day, luxury real estate is still real estate. While there may be certain intricacies and unique steps involved in the process, you’ll also find plenty of the process familiar. The key is to do your research ahead of time and work with experienced professionals who know how to operate within this niche.