If you are selling a home whose worth is measured in the millions, you can potentially look forward to high profits—but might also have questions or concerns. Luxury-home sellers frequently ask questions like these:
With the help of Rob Jensen (Broker/Owner at Rob Jensen Company and a longtime adviser on Nolo's real estate books), we'll take a closer look at these and other aspects of marketing and selling a high-end, luxury home.
If you're like many owners of high-end properties, you are the opposite of desperate to sell—and you want to make sure the property is not scooped up for less than it's worth. Some forces at play will be the same as in any real estate transaction: The economy and overall demand will affect how many buyers make offers on your home and for how much, as will the amounts that homes in the same neighborhood recently sold for. But there are steps you can take to make sure your property fetches top price, as we will lay out next.
Potential buyers at this level will have plenty of purchasing power. They are accustomed to being able to pick and choose, and this probably isn't the first home they've bought. In fact, they might own multiple homes or plan to purchase your property as an investment. The timing of the purchase might be less important than to them finding the ideal home. That puts you in a different position than, say, someone selling a starter home, with eager buyers lining up. Your marketing plan will need to be tailored to attract the attention of this cohort.
Of course, prospective buyers will likely view images of the property before seeing the real thing. "I like to tell home sellers, your first showing is online," says Rob Jensen.
Your real estate agent will thus need to prepare and present numerous high-quality images, both still and video. But there're more: Rob Jensen explains, "The written property description, in which you can tell the house's story, is an overlooked marketing fundamental. Even the best images (still and video) won't show things like how easy the walk to school will be for children or how much the solar panels you've installed lower the power bill. Such details might not matter for every buyer, but could upsell the home for the right one."
Your agent will help you ensure that you do more than just present a list of your home's best features to prospective buyers. The idea is to combine the facts, images, and statistics into a theme or story about the home so that buyers can imagine the wonderful life they'll live in their "retreat by the sea," "family-friendly estate," or "gourmet food-lovers' delight," for example.
There's no need to wait until you have hired a listing agent to reflect on what specific features compelled you to choose this home, plus the additions or upgrades you've invested in. The agent you hire will personally view the property, but it's up to you to provide behind-the-scenes information and insights.
Your property description should be widely publicized, including on your real estate agent's website, on other websites like Realtor.com, and within any brochure your agent creates for the property (discussed below).
You'll want to list your property for an amount that neither scares people away nor undervalues it. Your agent can help you analyze the market, by evaluating the amounts that comparable homes have recently been listed for and comparing that to how much they ultimately sold for. See Listing Your House: What List Price Should You Set? for more information on home pricing.
"Don't be afraid to adjust course, either," says Rob Jensen. "The fact that you're not desperate to sell shouldn't lead you to stubbornly wait, unless the market is appreciating and prices are going up. If you find that your listing isn't bringing in many visitors or offers, it's probably time to reevaluate your list price, marketing strategy, and how well the house shows. (We solicit feedback from potential buyers to guide us in this process.)"
Living in a house that's being shown is less than ideal. When prospective buyers visit you'll be expected to keep the dog at a distance, ensure that counters are crumb-free, and hide the toothbrushes (and diamond earrings). A clean and empty house is far easier to prep and stage for showings. If it's financially and logistically possible for you to move out before preparing and listing your house for sale, things will be smoother for all concerned. Your real estate agent can handle the rest.
Rob Jensen notes, "I understand why people who can't afford to buy a home before selling don't want to move twice—for example, first into a rental, then into another home. It's sometimes possible for the seller to negotiate to stay in the house for a extra few weeks after the deal closes. But under any circumstances, the timing can get uncomfortably tight. As soon as you accept a purchase offer, you'll have to find your next home and negotiate a deal within a few weeks, if not days."
In legal terms, a home seller is expected to leave behind only "fixtures," or things that are essentially attached to the property. Common examples include trees, built-in bookcases and appliances, and window shades. But if you purchased other items for the home that you have no reason to take with you, which buyers might appreciate keeping—a large sculpture that's perfect for the entryway, for example—you might offer this as part of the sale agreement, to entice buyers.
You might also want to leave some furniture or related items behind temporarily, for "staging" the home (discussed below).
Selling a home "as is" rarely nets the highest sale price or return on your investment. Buyers want a house that's move-in ready or in sufficiently good shape to make an excellent investment. As Rob Jensen says, "I hear buyers say things like, ‘We remodeled our first home and aren't interested in doing that again,' or, ‘Where are we going to live and eat if we need to do major renovations?" or "We're moving from out of state, we don't even know which contractors to call!' And if they're taking out a loan for the purchase, they might prefer to get a bigger mortgage instead of putting cash into renovating (which they might not have)."
At an absolute minimum, you'll want to fix anything on your property that's broken or in bad shape, particularly if there's water damage. If you have limited financial resources for renovation, repairs are where you might have to stop. A fresh coat of interior paint can be appealing, as well. If your budget allows, exterior paint heightens curb appeal.
If you can afford to invest more, it's often worth it, in measurable ways. Rob Jensen suggests, "Try going through home listings for recent comparable sales and observing the range of prices. If, for example, all the homes that sold for the highest amounts were renovated and sparkly, and they sold for $80 a square foot more the unrenovated homes, then your investment of roughly $20 per square foot would clearly net you a higher sale price."
Even if you don't have ready cash, your real estate agent might be able to assist with a loan, for purposes of upgrading the home. Some will do so in the high-end market, knowing that a high sale price will significantly raise their commission. Be prepared to pay interest on the loan, and to have a lien placed on the home to secure repayment.
Unless you just recently remodeled, it's likely your house has features that are outdated or might appeal to only a limited audience. These are obvious candidates for change. Kitchen and bathroom updates tend to yield the highest bang for the buck. (See Do Home Improvements Add Value?)
Fortunately, a seasoned real estate agent will have experts to call upon for consultation. Some real estate agents will even oversee home improvements and other preparations after the homeowner has moved out.
You might want to consult an interior designer if you don't yet have an agent; some offer free consultations.
A home stager is a professional who can take an empty home and fill it with furnishings and other household and decorative items that highlight its best features (and draw the eye away from the worst). They not only suggest or oversee how to fix and spruce the property up, but decorate it for sale in a way that appears both comfortable and appealing. Good staging allows buyers to imagine the life they'll live there. Some stagers will use or incorporate the seller's furniture into the mix, while others prefer to start with a clean slate.
Few buyers have an artistic vision for how an empty or cluttered house can look. Multiple studies show they'll pay more for a well-staged home. You can ask a home stager to provide you with general recommendations, for a modest fee. If you hire the stager to actually prepare your home for showing, the fees can quickly mount, into the thousands of dollars. Nevertheless, an experienced stager should be able to work within your budget.
Carefully read the stager's contract to see exactly what's included. For example, if your house doesn't sell right away (say, within the first month), you might need to pay monthly rental fees for the stager's furniture and the like. See Hiring a Home Stager? Key Clauses to Understand in Your Contract.
If every real estate agent you meet says the house looks great and no more work is needed, terrific. But be wary of agents telling you what you want to hear. Some could be eager to land you as a client and get the place sold in order to quickly claim the commission. Or they might not have a robust team of people who can help manage the prep work, and thus be downplaying or ignoring its importance. In short, they might not be giving you all your options.
"Homes can sell in whatever condition they're in," says Rob Jensen, "but a good agent should at least lay out your options, helping you calculate your possible return on investment."
Real estate agents specialize in various ways, including in luxury home sales. You'll want to find one who leads a team of professionals with relevant experience in the marketing, transactional, and other aspects of a real estate deal. If you're in a geographical area that attracts international buyers, find an agent familiar with the relevant issues, such as the risks of accepting offers from countries from which currency is not easily transferred. (Ask prospective agents about this when interviewing.)
Assuming you want the property to be marketed widely, the listing agent you choose should have a track record of (with the help of the aforementioned team) creating high-quality, unique marketing materials, organizing parties or special events at sellers' homes, fixing up and staging homes for showings, and more.
When meeting with prospective agents (a minimum of two or three), ask questions like:
Perhaps marketing the home widely doesn't sound as exclusive as you were hoping for. You've probably heard of "pocket listings," in which the agent shows the property only to select clients. It's also known as an "office exclusive" or "private listing," meaning it would not be publicly marketed or listed on the Multiple Listing Service (MLS) or other real estate websites.
Rob Jensen says, "Not only does the MLS strongly discourage agents from holding pocket listings, but selling off-market means you won't get lots of eyeballs on the property, and likely won't create a bidding war. It rarely makes sense unless you're absolutely opposed to a public listing. Even if an agent tells you, ‘I have a list of eight people waiting for the right home,' what are the odds one of them will show sincere interest in your house, when they apparently haven't been seriously interested in any others up to that point? This tactic often lures sellers into signing with the wrong agent."
It's your house, and you get to set the rules. You could, for example, insist that your agent be present for any showings and bring along team members for added security during open houses. You can also ask that all prospective-buyer visitors be prescreened for financial capacity. You don't even need to hold an open house at all if you don't want to. However, that could affect your bottom line.
Your agent might also (depending on local custom) want to hold an open house that's attended exclusively by fellow brokers.
Regardless of who will be in your home, it's worth locking up your valuables and medications or putting them in a safe deposit box.
Another often-asked question by luxury home sellers is whether to post a "For Sale" sign. Some sellers don't want neighbors to ask questions or to know their business. A few worry that this will compromise their home's security. Rob Jensen says, "If your goal is to expose your home to the largest number of qualified buyers, ‘For Sale signs' do help. Even if it's an exclusive neighborhood and hardly anyone drives through, those who do might be friends or family of prospective purchasers, who will follow up or spread the word. Then there's the matter of letting prospective buyers know they've arrived. Even with navigation software, a house in an unfamiliar neighborhood can be hard to find—it's so much more pleasant to see the sign and know you're there."
Regardless of what you decide, you should maintain a security system and not open the door to any strangers who might come knocking. (Rare, but it happens.)
Given that the commission on your sale will likely be substantial, you should expect your agent to invest resources in marketing. The agent should pay for photography (including by drone, if appropriate), professional production of a video of the property (like a mini-movie-trailer, complete with background music), creation of a virtual 3-D tour and rendered floor plan of the home ("specifically by Matterport," Rob Jensen recommends), posting of ads, printing and sending of mailers, and drafting and printing property brochures.
Your agent might even create an invitation-only special event to show off your home's best features. This wouldn't be as casual as an open house, nor as organized as a home tour. Think of it as a chance to let people who are either in the market for a home or are well-connected to see your home up close. Rob Jensen says, "Something like a champagne tasting might draw in people who wouldn't have come to an open house. It lets them experience the home as if they were living there—which can create warmer feelings than just walking through a house and opening closets."
Some expenses will be the seller's responsibility, however, such as repairs, improvements, cleaning, and staging services.
Conventional wisdom is to put a home on the market in spring, or whenever the weather is most comfortable in your region and your garden will look its best—and that's still true with a luxury home.
But there's a possibly bigger issue to consider regarding timing, which is how this sale will impact you financially. Rob Jensen recommends talking to real estate agents first, to get a solid idea about the likely sales price, costs of sale, and estimated net profit. Then, he says, "Talk to your CPA or tax adviser about issues like whether you qualify for the $250,000/$500,000 capital gains tax exclusion for primary residences (which partly depends on length of residence), and whether you have hit the one-year mark for long-term capital gains." (See IRS Topic No. 409, Capital Gains and Losses, for more on the difference between long- and short-term capital gains.)
As for how quickly a luxury home will sell, it's true that your pool of potential buyers is smaller than with the average home. On the other hand, luxury home buyers could be waiting in the wings for just the right property. Your agent can help you understand the sales data on comparable properties and thus how quickly yours should sell. "Most buyer activity tends to occur soon after listing a property," Rob Jensen says. "If the listing doesn't garner showings or offers within the first few weeks (or whatever length of time is typical in your market), it's worth not only considering a price reduction but doubling down on your marketing efforts. That means new mailers, e-blasts, and so on, until you find that perfect buyer match."