The luxury real estate market differs from the mainstream residential real estate market in several ways. We’ll cover the biggest differences between them aside from the price tag for the property. We’ll also discuss issues that affect both luxury and conventional real estate in different ways.

Financing

Most homes are purchased with a mortgage, and luxury real estate comes with a mega mortgage if it isn’t purchased with cash. It’s more difficult to get a loan that large, and down payment requirements are often greater.

Unfortunately, the half to three quarter million-dollar mark that differentiates luxury from standard real estate can hurt people in expensive real estate markets buying standard homes.

Manual underwriting is more likely necessary to get the loan approved, and you’re far less likely to be approved by the conventional bank. That’s especially true if you want to buy land and then build your million-dollar dream home on it. Luxury home lenders may have acreage limits in addition to loan limits. These loans vary from lender to lender, and this can cause problems if you want to buy 15 acres in the wilderness to build your dream home.

Primary Residences vs. Extra Homes

Luxury real estate buyers tend to include a far greater percentage of second, third, and so on home buyers. When you have the money, owning multiple homes is much more likely. Luxury real estate is a form of investment for some. They’re buying a home that they may visit on vacation, rent out on upscale versions of short-term rental sites, or sell at a later point after appreciation. Another issue with the higher end market is that you’re more likely to be dealing with retirees. They’re buying their dream home after a lifetime of saving and investing. They may be buying their perfect property (or building it) while remaining in their primary residence, and even retaining the family home. Whether that is sold to a family member or converted to a rental depends on them.

Appraisals

Luxury homes are more difficult to appraise due to the many unique features and upscale amenities they have. This causes banks to have multiple, independent appraisals done on these properties before they issue a loan.

Financing Renovations

Cash-out refinances to renovate the home are far more difficult, as well. This is because luxury upgrades to the home aren’t going to have the same impact on the home’s value as conventional upgrades like finishing a basement or installing a second bathroom. Putting a bowling alley in the basement, building a seven-car garage, or putting up a horse barn won’t have the 70 to 90 percent ROI that comes with a deck, low maintenance garden, or two additional bedrooms. Work with a real estate agent to find Calabasas luxury homes that already have the amenities and layout you want.

The Impact of Location

Luxury buyers may care about proximity to good schools and hospitals, though they are more likely than the average person to be empty nesters or paying for private school. They value proximity to these things because they know it affects the resale value of the property. The luxury real estate market is more likely to focus on highly desirable areas, and people want to live there simply to be surrounded by others who share their worldview and lifestyle.

A passionate blogger who has been around the blogging community for over 6+ years and still love all things Wordpress. I love to do building websites, writing content, and helping authors self-publish.

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