Planning to buy your first luxury home? Best be prepared by following these seven expert tips!
1. Build your dream team of experts.
When buying a luxury house, it is highly recommended that you employ the help of an excellent real estate agent, a trusted financial advisor and accountant, and a lawyer who will be ready to walk you through local tax and property law.
Choose a real estate agent that has a solid track record in the luxury housing market. While it is fine to call your trusted agent, your first luxury home purchase may need the expertise of someone who has already had success in dealing with this unique sector. The right real estate agent will have gleaming testimonials and reviews from satisfied luxury home buyers, preferably from the area where you are planning to purchase your luxury home.
Look for a trusted financial advisor and accountant who will truly have your best interests at heart. Hiring a lawyer who is familiar with local tax and property law will also save you a lot of time and headache down the line.
When you successfully put together a great team that will guide you through this luxury home-buying process, you can expect to have the keys to your dream luxury home in the quickest possible time.
2. Make sure your dream luxury home is also in a dream location.
Research the entire vicinity of the home you are eyeing. If you're planning to purchase a luxury home to retire in, you may want to choose one that is located in a sparsely populated area, or one that will offer you a stunning view of the city that surrounds it.
Since location has a significant impact on taxes, travel time, schooling, and other areas of your lifestyle - you may want to take your time researching which luxury home location suits your purposes best. If you're planning to add more features to your home such as a large veranda, pool, or a massive garden, you have to make sure that the house you're going to buy is not in a densely populated area. Which is to say that you can't rely on online listings alone; getting a feel of the house itself, as well as its surrounding community is the best way to gauge the quality of a home's location.
3. Familiarize yourself with the pre-approval process.
The process of applying for a mortgage to buy a luxury home is entirely different from getting a conventional mortgage. Lenders may require a credit score of 680 or better - and the better your credit score is, the lower your interest rate will be. Your team of experts will know about this so do not hesitate to talk to them about your concerns. Being knowledgeable of the differences between getting standard mortgages and luxury home mortgages will better prepare you for the home buying process.
4. Keep an eye on "pocket listings"
A lot of high net worth individuals do not market their listings publicly. Their listings are only shown to pre-screened, qualified buyers who can show proof of financial capacity to make a multi-million dollar purchase. As you won't find their homes listed in the MLS, it is best to make sure that your realtor is in contact with other luxury agents who can help show you pocket listings that may suit your standards.
5. Take note of the resale value of the luxury home you're planning to buy.
While your decision to purchase a luxury home must align with your unique tastes, you must always consider how a particular home will appeal to future buyers should you decide to resell. If you think you'll be having resale challenges due to the unique nature of a luxury home, it is best to negotiate an excellent price to offset said challenges.
6. Have a checklist of your priority features.
When looking for the perfect luxury home, it is best to know exactly what you want. Having a checklist of features you want to have in a home will keep your priorities in check, and will prevent you from making an emotional purchase (i.e., when you get lured into buying a house with a massive pool that you don't need). Is your privacy the most valuable thing to you? Make sure your potential home isn't located in an area where passersby can't easily take a peek into your home. Do you spend most of your free time cooking? You may want a house with a beautiful, Tuscan-style kitchen. Knowing what you want from the get-go will make it easier for you to narrow down your options.
7. Consider foreclosure listings.
If you want to purchase a luxury home that is being sold considerably below its actual value, checking out foreclosed properties can be your best bet. Roughly 60% of foreclosed homes can be financed through your lender of choice, so you don't have to worry about buying with cash. Consult with a home mortgage consultant to determine whether it would serve you better to use financing or to buy with cash.
Keep in mind though, that buying foreclosed homes means that you're buying it at its current state, and no upgrades will be made available to you before the big purchase. While you'll be able to save money by buying a foreclosed home, you have to factor in the amount you'll be spending on repairs and upgrades. Hire a trusted home inspector to check whether you're overspending by purchasing a foreclosure.
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Counseling Session Activities
- Prepare the buyer for executing a buyer representation agreement
- Explain agency relationships to the buyer and get state required legal consent to represent, if needed
- Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
Building a Relationship
- Learn the buyer’s wants and non-negotiable needs
- Understand the buyer’s budget and what will be needed financially
- Help the buyer understand what property their chosen budget will buy
- Consider having the buyer fill out a homebuyer’s checklist
- Assist the buyer in examining how much they can afford to spend
- Provide quality lender resources
- Partner with the buyer to locate suitable properties for consideration
- Match the buyer’s needs with available property
- Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs
- After ensuring the buyer understands what is done for them, how it is done,and the benefit to them, obtain signatures on the buyer representation agreement
- Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it
Educating the Buyer
- Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
- Explain Federal and State Fair Housing laws
- Explain what to look for in applicable property disclosures
- Reassure the buyer that their personal information will remain confidential
- Inform the buyer that you will always disclose all known material defects
- In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood
- Discuss available resources that the buyer can check to learn more about prospective neighborhoods
Preparing the Buyer
- Explain the timeline for house hunting, mortgage approval, and closing
- Explain the local market and how it impacts the buyer
- Show statistics on what percentage of list price sellers in the area are currentlyreceiving
- Inform the buyer on what home features are popular
- Identify current average days on market
- Share the dangers of using the price per square foot to figure home values
- Explain the concept of absorption rate and how it impacts the buying process
- Indicate current listing months of market inventory
- Share estimated potential out-of-pocket costs to complete the transaction
- Assist the buyer in analyzing the loan estimates
- Qualify the buyer for financial ability to purchase
- Help the buyer account for the complete costs of homeownership
- Prepare lender for listing agent calls
- Assist in comparing different financing options
- Help the buyer select for viewing only those homes that fit their needs
- Proceed in showing homes that fit the buyer’s must-haves
- Caution the buyer on posting information to social media
- Review the sample sales contract so the buyer is prepared when it comes time to make an offer
Showing Properties
- Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces
- Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites
- Collaborate with the buyer on properties they may have learned about through their sphere contacts
- Research and assist on all unlisted properties the buyer wishes to see
- Preview properties prior to showing if needed
- Network with other agents to source properties not yet in their local MLS broker marketplaces
- Contact homeowners in focus areas to see if they are considering selling
- Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements
- Arrange a tour of areas, schools, and key points of interest
- Provide resources containing neighborhood information on municipal services,schools, etc.
- Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value
- Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times
- Check applicable zoning and building restrictions
- Help the buyer decipher public property and tax information
- Collect and share pertinent data on values, taxes, utility costs, etc.
- Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for
- Help the buyer narrow the search until the buyer identifies top choices
Negotiating Offers
- Assist the buyer in getting the best property at the best price
- Suggest that the buyer learn more about the neighborhood prior to makingan offer
- Prepare a comparative market analysis (CMA) in advance of making an offer
- Prepare the buyer to have the most attractive offer in the current marketplace
- Explain common contract contingencies and include approved protective clauses in the purchase offer
- Ensure that the buyer receives and understands all state and federally-required disclosure forms
- Prioritize contract negotiation goals with the buyer
- Help create a negotiating strategy
- Use strategies such as an escalation clause to maintain a competitive offer
- Prepare the buyer for a multiple offer situation and develop negotiation strategies
- Write an offer that has a reasonable chance of being accepted
- Recommend optional contingencies and explain the pros and cons of using them
- Provide information on purchasing incentives that may be available
- Discuss financing alternatives
- Negotiate the buyer’s offers to arrive at the best price and terms
- Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer
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