Looking to buy a home in, in any price range, can seem like a scary, daunting, never-ending trek uphill. But, with the proper understanding and guidance these fears can be elevated. So, today let's look at a few of the unique challenges faced when looking to buy luxury real estate. When looking to buy a high-end home one may think the last thing a high net worth individual may need to worry about is finances, this couldn't be further from reality. But, more on that later. Let's first find out what is luxury real estate.
LUXURY DEFINED
What exactly is considered luxury real estate? Ask different "experts" and you'll get differing opinions, for sure. For our purposes here, this "expert" is going to use the general definition of property priced in the top 5%-10% of a given real estate market and/or a home with a unique quality or special features that would have it stand out in the luxury market. In most markets we are looking at just north of one million dollars. I know, I know, but this is Los Angeles, Sherman Oaks baby! Yes, we are higher than the average. In Los Angeles, the average luxury home is $1.96 million (First Republic Bank's Prestige Home Index Q1 2012). Not to shabby.
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WORK WITH A SPECIALIST
One of the number one things you can do, when looking to purchase high end property, is to work with a luxury home specialist. With the ease of access to information on the internet these days, many buyers take it upon themselves to tackle the task of finding a home themselves. In my opinion, that is a mistake. The home seller has an agent fighting for them, why shouldn't you? In California, it costs you nothing to have a qualified agent on your side! See, the seller of the property has agreed on a commission percentage (typically 5% of the purchase price) to pay when the property is sold, then that is split amongst the agents involved. It's a no brainer -get an agent on your side before your home search begins.
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In addition, with many high end properties it can be harder to gain access to these homes. They typically have fewer, if any, open houses. This means you will need an agent to set an appointment to see them. Also, some homes do not even get listed on the MLS, to help protect the sellers privacy. This can be especially true here in Sherman Oaks, Studio City, Beverly Hills, Bel Air and the surrounding areas, with the many celebrity residents.
FINANCING
As I eluded to at the beginning of this article, financing of luxury home is not always an easy venture. Since many luxury sellers will only show their homes to qualified buyers, it is imperative that would be luxury home buyers (and really any buyer) get their mortgage approval earlier in the buying process. This may take some work. The days of easy financing are behind us and with today’s stricture standards proper financial documentation is imperative. This is not always the easiest thing for high net worth individuals who, typically, have money managers and the like maneuver and shelter holdings and finances making it difficult to assess income. Another thing to plan on is the loan financing taking longer, from 45 to 60 days. Do yourself a favor and take care of the financing in the very earlier stages of your home search.
IN CONCLUSION
Buying a luxury home presents some unique challenges that is for sure. But, taking care of the few basic steps, being prepared and working with a qualified real estate agent, can make it a smoother and more successful transaction. If you have any questions or comments, I would love to hear from you. If you are thinking about or actively searching to buy or sell a home I am hear to help...contact me today.
By: David Violi