If you say a word enough times, it starts to lose its meaning. And in real estate, where the right description can draw buyers to a home on the market, using the right terms is crucial.
So when half the homes on the market are suddenly marketed as “luxury,” the definition of the word starts to melt away.
“It’s entirely overused,” says Michelle Farber Ross, real estate broker and managing partner of MMD Realty in Fort Lauderdale, Florida.
Luxury real estate is defined differently across different markets, as property values, median resident income and area development varies widely depending on the metro area. For example, the Los Angeles area has a significantly higher top end of the market and a higher cutoff point for buyers to afford these properties compared to smaller markets like Oklahoma City.
But the term luxury has been used to describe everything from the ultra-luxury homes of the world’s wealthiest 1 percent to a modest kitchen with new appliances. How can you interpret how luxury is defined in your area, and how can you leverage that information to better express your expectations as a homebuyer?
Whether or not you fall into the real estate definition of luxury living, knowing how your market defines high-end properties will allow you to better understand the qualities you need and want in a home.
Where Does Luxury Begin?
In many large U.S. cities and metro areas, the typical luxury price point is $1 million and above. But in a city like New York, which attracts a high number of foreign investors seeking property in a global trading hub, $4 million typically becomes the cutoff point, Farber Ross says.
The Institute for Luxury Home Marketing, which specializes in training real estate professionals in high-end home sales, defines luxury agents as those performing in the top 10 percent of their given market. “It’s a way to flatten the country” and make markets more comparable to each other, says Diane Hartley, general manager of the Institute for Luxury Home Marketing.
And in many smaller cities across the country, that top 10 percent can easily be below $1 million because real estate sales are relative to what is selling nearby. But regardless of whether the property is $1.1 million or $11 million, the purchasing process for these high-priced homes is different from the majority of property sales – and they also differ among each other.
What Makes a Home Luxury?
There’s no checklist for labeling a property as luxury, although many features are common among upscale properties in major U.S. cities. Prime location, high-end interior finishes such as marble countertops, professional-quality kitchen appliances and customized closets and hotel-like amenities such as concierge services, a top-of-the-line fitness center and spa center are often staples of a luxury building.
But not every high-end home is the same. Often it’s the unique features that separate luxury real estate from the rest, explains Jeremy Swillinger, a licensed real estate salesperson at Level Group Inc. in New York City.
In major cities such as Los Angeles, San Francisco and Chicago, owning a condo in a building designed by a renowned architect – or “starchitect” – can set a property apart from others as luxury, Swillinger says.
“Prestige is one of the top two priorities [buyers] are looking for,” he says. The other priority is often based on the individual’s own priorities, whether it’s services at the ready to make managing the property from abroad easier, having enough space to entertain or a state-of-the-art kitchen design.
Translating that idea of prestige into a suburban or rural setting, luxury may be defined by being in a gated community or as part of an association that gives you access to an exclusive country club within the neighborhood.
Of course, that’s all in addition to a home that goes above and beyond what’s typical for the market. In New York City, where doormen are common and studio and one-bedroom condos in Manhattan typically start above $1 million, rooms are designed for the purpose of being unique compared to not only the other homes in the building, but also everything available in the city.
“It’s no longer just installing a Sub-Zero refrigerator [in the kitchen] – it’s a full room design, from the flooring to the cabinets and appliances to the lighting,” Swillinger says.
How to Interpret Luxury in a Real Estate Listing
If you’re questioning whether your home would be considered in the top 10 percent of your market, talk to an agent who is familiar with the area and high-end properties. An agent seasoned in both will ask questions to establish a feel for what the property offers. Rather than focusing on that vague idea of luxury, compile a list of the features your home has, along with details that set the property apart from the rest of the neighborhood and city.
But whether you’re buying or selling, it’s recommended to remove “luxury” from your expectations until you’re able to provide a clear-cut description of the property. New floors or top-of-the-line appliances should be described by name, Farber Ross says, noting luxury is truly defined in the details offered. “Be more specific in the amenities, in the finishes, or if it’s a renowned architect for the building,” she says.
Luxury Real Estate – Source – US News
What Is a Luxury Home, Anyway?
“It’s not a price point. It’s a set of finishes and amenities,’’ said Tim Marsh, principal broker of Marsh Properties. These amenities can usually be found in a set of tier-1 buildings, including the Four Seasons, The Carlton House, and Heritage on the Garden, he said.
But the term can be overused, Marsh admitted. “Some agents will use that term to create a perception of value instead of defining a value,’’ he said.
The National Association of Realtors, the largest trade association in the industry and is comprised of over 1 million members, doesn’t have a set definition for “luxury.’’
In its monthly and quarterly reports, NAR groups all sales $1 million and over in one category, but doesn’t denote the category as “luxury,’’ said Adam DeSanctis, an NAR spokesperson.
A lack of universal definition can prove problematic for sellers, buyers, or renters on the search. Depending on whom they ask, different agents and brokers may offer up different advice and varying ideas about how the market is performing, based on the definitions and data they ascribe to.
Tracy Campion, Massachusetts’s top selling residential real estate broker, said Boston’s luxury market is doing very well due to high demand and low inventory. Campion specializes in luxury locales like Back Bay and Beacon Hill.
The average sale price for Boston’s luxury condos was up 24 percent in 2014 from 2013, and the average days on market was 53, the lowest since before 2008, Campion said. The number of luxury condo sales was down 26 percent, which signals limited inventory, not decreased demand.
Her data comes from LINK, a local real estate listing and reporting service, which defines luxury as specific buildings in Boston, including Battery Wharf, The Carlton House, Ritz Tower I and II, and The Clarendon and are categorized by “luxe condominiums,’’ “hotel luxe,’’ and “luxe full service.’’
But O’Koniewski has a different data source and finds that the luxury market isn’t reaching its full potential due to homes being priced too highly and staying on the market too long.
“[Luxury home sellers] make a tragic error in not pricing it on the money and inciting competition,’’ she said.
O’Koniewski sees sale-to-list ratios and days on market as key indicators. She cited data from MLS listings from March 20, 2014 to March 20, 2015.
The average “luxury’’ condo in Back Bay over $1 million sold at 83 percent of its list price and stayed on the market for 152 days. Comparatively, condos under $1 million sold at 93 percent of their list price and stayed on the market for 86 days, on average.
Another report, this one by RE/MAX INTEGRA, praises the level of international investment in Boston’s luxury real estate.
“We are fortunate to have a large international community that believes real estate purchases in the greater Boston area make for an excellent investment,’’ said Dan Breault, executive vice president of RE/MAX INTEGRA.
The report handpicked 30 Boston neighborhoods and towns where luxury has taken off, and examined sales over $750,000 there, finding that sales increased 6.6 percent from 2013 to 2014.
Doug Miller, executive director of Consumer Advocates in American Real Estate, advises consumers to be wary of reports authored by agents. He argues agents will go to great lengths, including telling a homeowner his or her home is “luxury,’’ to obtain a listing.
Barry Zigas, director of housing policy for the Consumer Federation of America, said the term “luxury’’ is mainly a marketing tool, just like the oft-used “new and improved’’ and “more bang for your buck.’’
“Developers and real estate professionals can use the word ‘luxury’ to connote higher prices, marble countertops, fancy fixtures, which might or might not correlate with a much higher price,’’ Zigas said.
He advises home shoppers to place less weight on market reports and more on their own needs and values.
“Have a clear idea of what you can afford and what you’re looking for in a home,’’ Zigas said. “Consumers should shop for a home like they shop for any consumer durable. It’s one of the biggest purchases of their lives.’’
Source – Real Estate Boston