So, you are looking into buying a high-end home, most likely priced above $1 Million. You ask your buyer’s agent to pull some recent sold data and find homes which to compare against the listing you love. You think this is going to be an easy process – just pull solds from the last six months with the same square footage and whalah, you’re done!
Whoa there Nelly! Not so fast. This is not a $300,000 listing in which every home on the block is a good sold comparable. Most likely, this million dollar home only has a handful of homes similar to it, and of those, maybe one or two have sold in the last six months. You might even have to go back a few years and look at those sold figures.
What? Go back to over a year ago? You can’t do that! Everyone knows that the most an appraiser will go back for a comparable is a year. You don’t know what you are talking about!
Well, if we were talking about a home under, let’s say, $800,000, then you would be correct. But once you breach that million dollar mark, the “rules” go out the window. In some areas, there are so little high-end sales that finding something similar can prove difficult. One of the biggest problems with appraising a luxury home is working with an agent that doesn’t understand the new rules.
I ran into one such agent this weekend. She doesn’t sell luxury homes, but happens to have a “luxury” buyer. The agent presented me with some “comparables” to justify the low offer presented by her clients. Unfortunately for her and her client, these comparables didn’t compare at all to this home. Here were a few mistakes made:
- Some were built 12 years ago or more
- Some were on much smaller lots
- All were of lower quality construction
- Most were in the wrong school district
- Some had unfinished basements
- None had any luxury amenities, and lastly,
- she was sticking to homes sold in the last year
The problem? None of these homes are comparable. To find equivalent high end homes, you have to go back 12-22 months ago. You need to compare apples to apples, not apples to prunes. Of course I was told that this wasn’t possible. When I heard this, I knew right away the agent wasn’t familiar with how luxury home sales work. Sadly, she convinced her buyers to go the wrong direction with faulty data and they are losing a wonderful home because of it.
Luxury Home Appraisal 101
- Sometimes you have to go way back to find a good comp
- Don’t force the CMA by using homes of lesser stature
- Stay in the same school district
- Look for homes with similar acreage and lot features
- If in doubt, hire an appraiser that has experience in high-end homes
- Market conditions don’t affect the luxury market as much as it does lower priced homes
- Choose an agent that specializes in luxury homes
