The Challenges of luxury homes

Why Selling Luxury Homes is Challenging

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Working in the luxury real estate market is both fruitful and challenging.

It requires a significant amount of work compared to general sales and can be more daunting to get started in.

While I love luxury real estate, and most people in the luxury space would agree that it’s amazing. Most of us are willing to admit that it can be quite a challenge.

But why?

Getting Started is Difficult

If you go from not being a real estate agent to being a luxury real estate agent, you’re essentially jumping over an entire lake.

While I’m someone who entered the luxury market right off the bat, I can’t say I’d recommend it.

It’s hard to get started.

But it goes beyond simply not knowing what you’re doing, there’s a ton of variables at play.

The Inner Circles of Luxury Clientele are Hard to Penetrate

A traditional method of acquiring real estate clients is to simply have connections.

When an agent leaves real estate school and joins a brokerage, they’re immediately told to “call everyone you know” and tell them that you’re in real estate.

If we’re going by simple statistics, I’m going to assume that most agents have spheres of influence that are connected to an average member of the population.

This means if they contact their friends and family that are homeowners, they’re contacting owners of $250,000-$300,000 homes.

This is not the luxury market.

You must “break into” the luxury sphere. But how do you do this when the average individual in a higher-end market is very close-knit and only work with people they trust?

Well, there are a few options.

You can work charity events, join the local chamber of commerce, go to business networking events, or create content like I do to attract and work with luxury clients.

If you work really hard, it can be done. It doesn’t hurt to get lucky either.

But overall, a huge hurdle is simply penetrating the inner circles of luxury clientele. Once you’re in, you’re in, as long as you provide amazing service.

Different Style of Client Acquisition

The next challenge of luxury real estate is one that most real estate agents may resonate with.

It’s actually getting clients.

The only thing is, in luxury sales, cold calling is not very common and door knocking is often considered illegal soliciting in high-end neighborhoods.

So, what do you do?

I’ve taken the digital media and content marketing route, but most Realtors aren’t doing that.

The best way is referrals. 41% of clients got their real estate agents from a referral.

By providing exceptional service to clients, you almost guarantee more business down the line. Due to the nature of luxury sales and how much agents get paid from them, that can secure you upwards of $30,000 per sale.

The truth is, if you operate in the luxury market and make four $1 million sales over the course of a single year, you’ve grossed over six-figures in total professional fees.

This can all be done by referrals.

Slower Market

Most luxury homes are slow-moving once they go on the market. Only in very special markets are the luxury homes selling extremely quickly (In Raleigh, NC, the median days on market was 3 days as of Dec. 2019).

But for everywhere else, sales usually take a couple of months or so.

asheville luxury homes
Luxury Market Absorption Report for Buncombe County (Dec. 2019)

Above, you’ll find the Buncombe County (Asheville, NC) absorption report for December 2019. The green highlights denote the median days on market (DOM) for luxury homes. The yellow highlight below is the median DOM for the entire real estate market.

Clearly, luxury homes take more than double the amount of time to sell in Asheville.

The blue highlights denote the sell-through percentage. For homes listed at $2 million+, about 7% of them won’t sell compared to 3% for the whole market.

This is a challenge for luxury real estate agents. It takes careful business planning and marketing in order to sell faster. You’ll also need to maintain a solid financial plan to remain profitable as a business over time.

Luxury Homes Require More Effort

I don’t say this to make it seem like general sales aren’t as important, but the larger the home and the larger the price tag, the harder it is to sell.

More work will be required.

Marketing

Luxury real estate agents need to have well thought and systemized marketing plans that truly sell homes.

The base of the plan relies on forming and marketing a lifestyle that a buyer can resonate with.

After identifying the lifestyle, agents should include some sort of video property tour, targeted social media advertisements that are actually good, email blasts to agents in their network and marketplace, and constant promotion, whether online or in-person.

I’ve written about how luxury sales are easier, but the caveat is that it must be done right.

To jump over the hurdle and start making sales faster at higher price points, marketing is the key, and it has to be systematized so that it can be implemented over and over.

Higher Costs

It costs more money to sell luxury homes because of how much you have to spend on marketing.

The first expense might be staging the home, which I recommend you do anyway since you need to capture a particular lifestyle.

But then you need to pay for the marketing plan.

Facebook Ads, while having a relatively low cost per click (CPC), is still going to cost something.

facebook cost per click in real estate
A Segment of Berri Properties’ Facebook Ads

Google Ads, on the other hand, are going to be a little more expensive but are more targeted and have higher user intent.

Then you should factor in whether you’re going to conduct a print mailing campaign, which can run a large budget.

There’s just so much to do that you could wind up spending thousands of dollars marketing a home. But if done right, you’ll be making a tremendous return on your investment.

Not Every Luxury Market is Good

Sometimes, it just comes down to location.

Asheville’s luxury market isn’t as good as Charlotte’s, and Charlotte’s isn’t as good as Miami’s, and so on.

Odds are that if you live in an extremely rural area and sell luxury real estate. You may have a lower ceiling than if you were in a larger market.

But this can go both ways because once you take on a larger market, you have more competition, which can be a headache.

But in the end, I would rather the tougher competition over a smaller inventory.

Final Thoughts

I love luxury real estate, but that doesn’t mean I’m not challenged every day by it.

It’s truly the pinnacle of real estate.

Therefore, it should be tough to make the climb. But it’s certainly possible and I would highly recommend reaching for it.

It’s not a disappointing experience.

Stay Classy.

Matthew Myre

Matthew Myre

Matthew is a North Carolina real estate agent and the CEO of Berri Properties. Matthew brought his passion for writing to his career by creating the Berri Properties Blog, which now ranks as one of the Top 50 Best Real Estate Blogs in the world. His favorite things are basketball, history, politics, and popcorn. Feel free to contact him at matthew@berriluxuryproperties.com

Matthew Myre

Matthew is a North Carolina real estate agent and the CEO of Berri Properties. Matthew brought his passion for writing to his career by creating the Berri Properties Blog, which now ranks as one of the Top 50 Best Real Estate Blogs in the world. His favorite things are basketball, history, politics, and popcorn. Feel free to contact him at matthew@berriluxuryproperties.com
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