Pricing luxury real estate is harder than pricing standard homes.
There are a few reasons for this.
For one, luxury homes are generally custom. It’s harder to come up with comparable sales in the area because the homes are all completely different.
Two, the price per square foot no longer matters, which takes away another indicator that real estate agents generally use.
Three, many luxury homes sell fully furnished, adding value on levels that a standard home fully furnished can’t compete with.
The main point driven here is that luxury real estate requires a different process of pricing than the rest of the industry.
Let’s talk about what luxury listing agents need to do to effectively identify and accurately price a luxury home.
The Local Market Matters to a Degree
Real estate agents investigate comparable sales in the area to price homes.
We use our MLS to zoom into a local area and pull sales data from the last six months within a certain radius of the home. We then find homes that share the most features and visuals, take their prices, and use them to come up with a price point for your home.
That’s an industry-wide practice.
The problem with using the same method in luxury real estate is that most of these homes are custom and carry their own stories that can sell for more or less than what comparable sales would allow them.
Luxury homes on a river designed by a famous architect will sell more than another house by a general building company on the same river.
That’s just one way to differentiate.
There are countless others like features, lifestyle, furnishings (if they convey), layout, and design.
Luxury homes aren’t cookie cutter. They aren’t placed in subdivisions with three different building models to choose from with slight variations between.
So What Comparable Data Can We Use?
I mentioned earlier that the price per square foot isn’t as important in the luxury real estate market.
Often, luxury homes are built for a lifestyle in mind, therefore, the value is placed in the lifestyle, not the size.
Especially in this decade, where environmental sustainability is important to luxury buyers, square footage matters even less.
So how what data can we use?
While the local market will always play a role, the overall luxury market of your metropolitan area is what should be used to justify the price.
This might not be the norm for real estate agents, but it’s a better service to our clients if we think outside the box a little and stop using the same old ideas to sell modern objects.
Let’s say I’m listing a home in Biltmore Forest, one of the prime luxury markets in Asheville. If I know I’ve sold a home with close comparable features in Beaver Lake at a higher price than the market in Biltmore Forest, then I might be so inclined to aim for that price point.
Of course, I’m not going to be irrational and list a home for $5 million in a market that’s never gone above $2 million.
However, due to the confidence I have in my marketing systems that are above and beyond the competition in Asheville, I’m more willing to list higher for my clients.
Which brings me to my next point.
How Marketing Can Help You Sell Anything, Including a Price Tag
Here at Berri Properties, we’ve built and refined our marketing systems to effectively sell homes.
We’re a lot more comfortable selling a home at a higher price because of these systems.
It all comes down to the way we approach the sale.
If we base our marketing plan on selling a lifestyle, as we should in luxury real estate, then we’ve won half the battle.
The next step is leveraging the lifestyle in a way that displays it cohesively enough to find and entice the correct buyer.
This is done by staging, video marketing, digital media, and content marketing. All of which we use at Berri Properties to create maximum exposure for homes.
If you’re interested in our marketing services, then check out our marketing services page.
That isn’t our whole shebang, but it gives a good overview. (If you meet with one of our agents though, you get the whole shebang).
Why Stories Sell
If you’ve read my guide to selling luxury real estate. You’d notice the section where I talk about how luxury real estate agents should ask for a story of the home and the prospect’s favorite features and memories in order to create a solid marketing plan.
By creating a refined marketing plan backed by a rich story, then the ability to market and sell the home becomes that much more powerful.
People are emotional. Buyers are emotional. They want a lifestyle they can connect with.
If you give them something to connect with. Then you are going to sell that home if your price is in the correct stratosphere.
Remember to note that I specifically said prices need to remain in the same grouping of the local market. $5 million won’t sell in a $2 million market.
However, $3 million can if done right.
Fluctuations are allowed if the price is in the correct range.
Listen to What the Market Tells You
At the end of the day, whenever we price homes, regardless of whether it’s on the low-end or the high-end. The market will let us know what it thinks.
If you have a luxury real estate agent that is marketing the home well and still not getting the volume of showings necessary to sell, then it’s an indication that your pricing strategy is not effective in that area and it needs to be reduced.
The whole idea behind my pricing strategy is to test how far I can go with a sale. How much can I get for my clients?
I’ll know quickly if I’m way off and I’ll tell my clients right when I know we’ve missed the mark and adjust accordingly.
There’s no harm in experimenting. Unless the sellers NEED to sell immediately. Then I won’t experiment.
Experimentation allows me to better serve clients and make myself more valuable than the competition.
As luxury real estate agents, pricing homes is one of the worst and best tasks for us.
It’s good in the luxury market because we have more leverage compared to general sales.
Bad, because it’s a high-pressure situation based on our expertise of the market that isn’t always guaranteed to work.
Nonetheless, I find it to be an enjoyable puzzle to work on and love the satisfaction of selling at a higher price than I could otherwise with a standard method of pricing.