There is a common misconception amongst many property buyers that the higher the budget, the easier it is to find a property. But Buyer’s Agent Henny Stier from OH Property says she has learned in her career that no one’s budget is ever enough!
Those with a budget of $800,000 wish they had $850,000. Likewise, those with $3 million seem to love homes which are $4 million. To desire properties slightly beyond reach seems to be human nature. Buying a prestige property (north of $4-$5 million on the North Shore for the purpose of this article) can be quite challenging and frustrating for many reasons.
- There are usually very few prestige properties on the market at any given time, as compared with moderately priced ones.
- Many prestige properties are not publicly advertised and a lot of sales happen silently. This is largely due to vendors wanting to maintain privacy and to avoid ‘losing face’ amongst their social circle if their property does not sell quickly or sell for a good price. In this respect, having a Buyers’ Agent who is well networked can be the key to finding the right property. We receive access to dozens of off-market properties each month and it is not uncommon for 90% of properties we inspect for our prestige clients to be entirely off-market and not advertised to the public.
- Higher-end properties tend to only be opened to view by appointment. To maintain the privacy and security of the vendors and their homes, very few have weekly Open for Inspection times. This is quite inconvenient for property buyers who need to make lots of calls to schedule appointments, trying to line them up to minimise a lot of wasted time.
- The more expensive the properties, usually the wider the price range quoted by the selling agents. To some extent, this is due to the fact that there are usually fewer comparable sales to benchmark against. This is quite unlike an apartment building for example, where there are lots of comparable sales data and prices essentially fall within a narrow range. In some circumstances, the selling agents themselves are unsure of what the price should be and they resort to using Expressions of Interest to gauge the price or merely going by what the vendors want.
- Properties in the premium price bracket tend to be quite unique one way or another (often due to a difference in outlook/view or level of finishes for example). This makes it very difficult to compare sales data.
- Obviously at the higher end, just about all the properties I inspect are very nice in their own way. The difficulty is in finding one which meets the exact needs/wants of my clients. A higher budget does not mean that the ideal property is available at the time that you want it. An example is the difficulty of finding premium priced free-standing properties which are not too big (i.e. too many un-necessary bedrooms) but has other elements which are sought after (such as a particular architectural style, spectacular views, a championship size tennis court, level entry, private mooring, etc.).
- Many vendors (irrespective of the value of the home) can be fixated on achieving a particular price for one reason or another. Owners of premium properties are no different and can sometimes be stuck on an unrealistic price. Quite often when sales agents call to inform me of silent listings, the first thing I ask is how the price has been determined. Very often they openly admit that it has been hard to set the price and ultimately it has been dictated by the vendors. In these instances, it can take a long time to condition the vendors to accept a significantly lower price than they originally hoped for.
- Many vendors of premium homes are not very motivated to sell simply because they don’t need to redeploy the money to purchase another property. Many are happy to wait around for a year or more if it means they can achieve an extra $500,000 for example. Particularly if it is during a bullish time in the real estate cycle.
- Selling agents know that people who buy high end properties tend to have a higher disposable income and expendable budget. Therefore is it not uncommon for the better sales agents to get buyers to part with more of their money than they should. This is particularly so when the buyers are highly emotional or want to buy in a particular enclave. Hiring a Buyers’ Agent can definitely help to minimise the risk of over-paying. Usually the cost of hiring a Buyers’ Agent is minimal compared to the savings that can be attained through savvy representation and negotiation.
Many challenges also confront vendors who are looking to sell their premium-priced properties:
- Finding a trustworthy, experienced and motivated agent who has a track record of selling prestige properties is not always easy. The skills involved in selling prestige properties can often be different to selling to first time homebuyers for example. The clientele is different. Therefore the style of selling and negotiation also has to be adapted accordingly.
- During the pitch process, many selling agents typically provide a comparative market appraisal with an indicative price for the property. However, the usefulness of this is questionable when it comes to prestige properties as some agents will quote a very huge range to cover the lack of comparable data available.
- It is common practice for many home sellers to inspect competing properties on the market and attend neighbourhood Auctions to gauge the soundness of their own expectations. In the case of vendors of prestige properties, this is very difficult to do as there are few Opens and Auctions at the higher price range. As a result, many vendors don’t have the opportunity to get educated about the true worth of their own properties. The reality is most vendors think their home is better than their neighbours!
- Homes for sale by the Auction method typically undergo a four week marketing campaign. With prestige properties, the sale process is a little more discreet and usually takes a lot more time.
- During economic downturn, it can be hard for vendors of prestige properties to find the right buyer because of the excess stock that becomes available and the limited pool of buyers at the higher end.
- The higher the budget, the more particular and uncompromising buyers can be. This can be difficult for vendors because many things are beyond their control. No matter how attractive and well presented the properties are, buyers of prestige properties are usually looking for very specific features. They will either love it and be willing to pay a premium for it, or simply walk away. This is quite unlike buyers in the lower price bracket who are often aware that their budget is limited and therefore they need to make certain compromises in order to buy something.