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You’ve thumbed the glossary magazines, scanned the listings pics, binge-watched all the residential real estate shows. And still, you’re not sure what counts as luxury real estate, exactly. Is it a property priced at $1 million-plus? A home with more than 3,500 square feet? A mansion made of marble and exotic woods with hand-blown glass windows and a diamond-paved driveway?
Mostly, it’s the money: Sales price is the main determinant of a luxury property, says Realtor Mike McCann, head of The Mike McCann Team, Keller Williams Philly. But there’s no one number. If you want a price tag, luxury properties typically cost $2 million to $40 million, says Richard Haddad, Managing Editor, Seller Resource Center at HomeLight, a real estate agents’ network.
But some shy away from figures, preferring percentages: i.e., luxury properties are the top 10 percent of the listed homes in any given market, Haddad suggests. For example, the RE/MAX Collection, the luxury division of RE/MAX, requires each of its listings to be twice the average sold price of local properties, says Amber Bonasoro, executive director, luxury at RE/MAX.
So, in truth, “the definition of luxury real estate might differ based on the market and overall location,” as Haddad puts it. Read on for a more detailed look at the rarified world of high-end real estate — all the better to understand what “luxury” means if you are looking to buy a home or to sell one.
What does a luxury home cost?
Well, if you have to ask, you probably can’t afford it…
Seriously, in dollar terms, seven figures for a single-family home seems to be a generally accepted figure around the U.S. for defining what’s luxe. In terms of real estate nationwide, the median luxury home sales price as of July 2022 was $1.31 million, according to the August report of the Institute for Luxury Home Marketing, a credential-awarding and research group for real estate agents specializing in high-end residential properties. (The Institute sets a median threshold price of $912,500 for luxury homes).
Coming up with a similar figure is Redfin, which defines luxury real estate as the top 5 percent of properties, based on market value, in a region. The real estate brokerage’s analysis of luxury sales in early 2022 found that the national median sales price for this segment was $1.15 million.
But as Redfin and RE/MAX Collection’s criteria suggest, luxury can be relative: “It all depends on what your average sales price is in your marketplace,” says McCann. Since this varies dramatically nationwide, so too does the threshold per region – or even zip code. For example, in his area, Philadelphia, the average home sales price is $350,000, so the luxury market in the city really begins around $700,000, he explains. However, on the Philadelphia Main Line — the historically tony suburbs west of the city — the luxury market starts around the $1 million price point.
What features define a luxury home?
Of course, high prices reflect certain features in a home. But which features? “Luxury means different things to different people,” says McCann. “For some it means the home is filled with high-class modern amenities, for others it might be all about the location, and some people would define luxury real estate as a unique product filled with character and charm.”
“Like art, there are factors other than price that can truly make a home extraordinary and deemed a ‘luxury property,’” says Natalie Hamrick, executive vice president, Americas at Christie’s International Real Estate. “For example, if a notable architect is used, the property has a unique history or famous previous owners, or there are unique land features.”
Plus, the specific characteristics wealthy buyers prefer can change over time, as they did during the pandemic. Here’s a look at some of the features the luxe property experts agree are currently in demand.
Ever since the pandemic, luxury buyers have been prioritizing not just the suburbs but exurbs, according to HomeLight’s quarterly agent surveys — anyplace far from the madding crowds. Coldwell Banker’s 2021 Global Luxury Market Insights report also noted the trend of vacating dense cities for or areas with more single-family homes, and all the delights of detached dwellings. In fact, 37.5 percent of the luxury property specialists Coldwell Banker surveyed reported a large yard as the number one residential amenity.
With more Americans remote-working due to the pandemic, a home office has become a must-have for many luxury buyers. Home offices are the second-most in-demand feature of luxury real estate, with 25 percent of those surveyed vouching for their importance, says the Coldwell Banker report.
Pools are tied for second place with home offices, according to the Coldwell Banker data. Twenty-two percent of HomeLight agents rated private amenities, like a pool, gym, or outdoor rec space, as key features.
“Homes that are near beaches, lakes, golf courses, ski resorts, and more may be considered a luxury due to their close proximity to one’s lifestyle interests,” says Tammy Fahmi, senior vice president of global serving and strategy, Sotheby’s International Realty. “Additionally, if the property is conveniently located to entertainment, schools, and transportation, that might be a luxury for many buyers.”
Before the pandemic, demand for mansions had been declining. However, this trend has reversed, with the highest-end buyers now craving more room. In fact, nearly 55 percent of luxury property specialists deemed (more) square footage the number one amenity that flipped from 2019 to 2020, according to the Coldwell Banker report. And there has been a rapid rise in the purchase of second homes, too, according to the Coldwell Banker “Global Luxury Report 2022.”
Sustainability and smart tech
“Another facet of luxury real estate is a renewed focus on sustainability and wellness,” says Fahmi. “Eco-conscious consumers are considering how they can apply their existing habits to their living situations.” She adds that luxury buyers are also seeking out smart home features that make it easy for them to entertain and adjust the home temperature, lights or security systems.
Finding luxury listings
In listings, “the term ‘luxury’ is often used, but in my opinion, it is thrown around too much and loses its weight,” says McCann. So how do you tell that a property qualifies as luxe?
“Typically, there are several tells for a luxury listing,” says Haddad. “The agent may use a dedicated listing website, extremely high-quality photos, videos and 3D walkthroughs of the home. They may also include aerial or drone photography of the property — and some lifestyle videos that help potential buyers imagine their full life in the home, town, and area, rather than simply showcasing the home itself.”
Of course, you want to be swimming in the right waters. Focus on listings sites or brokerages that are earmarked for the elite, such as MansionGlobal.com, Christie’s or Sotheby’s International Realty. Many real estate firms have discreetly named luxury divisions as well.
How to buy luxury real estate
In terms of payment, “cash is best,” says Roger Pettingell, who sells luxury waterfront real estate in Sarasota and Longboat Key, Florida. “If you are financing, most luxury sellers will not accept loan contingencies. Many luxury buyers pay cash or borrow against their own portfolios.”
If you do plan to borrow money, you might need a jumbo loan, or a mortgage for an amount exceeding the limits set by the government-sponsored agencies, Fannie Mae and Freddie Mac. To qualify for these loans, you’ll generally need a high credit score, low-debt-to-income (DTI) ratio and extensive cash reserves or assets. Also be aware that “some sellers might request sufficient proof-of-funds prior to even letting a potential buyer view a property, so it’s important to have that information available,” says Hamrick.
A real estate agent or Realtor who specializes in luxury properties can help steer your search. Look for the initials indicating credentials in this rarefied arena, such as the Institute for Luxury Home Marketing’s Certified Luxury Home Marketing Specialist (CLHMS) designation or the National Association of Realtors’ Luxury Homes Certification (LHC). Of course, these are industry certifications, not state ones. But they often signal expertise in the world of luxury real estate.