Archive for the ‘The Luxury Insider’ Category

« Older Entries

Luxury Insider: Facebook vs. Greece

By Alain Pinel | May 23rd, 2012 0 Comments

Do you believe in Santa Claus? I do. I did not when I was a kid, but now I do. I have to. I am so sick and tired of the dull-to-bleak-to-depressing news about the economy that I am now looking to Santa for help. He might as well do something for the adults for a change. Kids cannot have everything. Not in my house anyway.

Today, Santa looks a bit like Mark Zuckerberg. Forget about the beard and the red stuff. Don’t personally know the guy –although he lives a few minutes away-, but I like what he can do for the grown-ups. He can make us believe that people can still make the difference, no matter how badly our political leaders can mess up our affairs. He can bring back the invigorating will of success, the excitement of creating and winning. We used to call that the American spirit.

I know that the stock has been heckled a bit since Day 1, “morning after” syndrome I guess. So what? This IPO thing is still giant and should be celebrated as such, rather than described by some blasé and hard to please commentators as a dud. Everything is relative, to say the least. Are we losing our common sense? As we say in my old country: “Let’s not be more royalist than the king!”

If I were to write a serious book today, I would title it “Facebook vs. Greece”. That’s the 2012 version of “Ambition vs. Complacency”, or “Standing up vs. Laying down”, or “Making money for others vs. Burning other people’s money”. I don’t know what’s going to happen to Greece (or I am afraid to tell) but I was trained to always propose a solution whenever confronted with a problem. Here is my recommendation and my silent prayer to Santa Zuckerberg: “Mark, listen to me, buy Greece, make it a resort for the employees or something like that, today the price is good, you don’t have to say I am the one who told you.”

I have been preparing for the big IPO. I am now waiting for the Facebook lottery winners to buy some nice homes over the next few months. A Realtor friend of mine, someone who is nearly always right when he agrees with me, tried to temper my enthusiasm (should I say my expectations?), suggesting that many new techie millionaires were the subdued type and might not buy a bunch of pricey homes when they finally clear their cash. Well, I’m not sure I buy that.

When a guy wakes up with, say, $50M in his back pocket, I don’t care how subdued he is, he buys real estate. He might put half, that is $25M aside to create another Facebook, but I guarantee that he will put much of the left over on a nice pad with a roof on top….$25M can still buy a decent home in the US!

  • Get new posts via email
  • Subscribe

The Luxury Insider: East Meets West

By Alain Pinel | May 9th, 2012 0 Comments

The Chinese are coming!…Or should I say a lot more are coming, and contrary to those who came over to the US in the 19th century, the new wave of Chinese immigrants are coming with lots of money and are eager to spend it. They are changing the real estate landscape and setting new real estate values in many states and regions.

The first Chinese immigrants, laborers for the most part, arrived in the mid 1800’s, “escaping” from the poor Southern provinces of the old country to look for job opportunities on our West Coast.  Life, for a while, was hardly better than the one they left behind. The attractive mirage that the Gold Rush represented absorbed most of them. From mining for gold, they eventually gravitated to railroad labor. They became low wage workers for a booming industry busy with the construction of the Transcontinental Railroad.

According to Wikipedia, the Chinese accounted for over a tenth of the population of California in 1880. Today, the percentage is down to roughly 3.5% (about 1,300,000), but we are not talking about the same curriculum. Today’s Chinese Americans represent a huge economic power and their appetite for real estate will not be satisfied anytime soon. They want a lot and can afford the best.

This is especially true in California’s Silicon Valley, home of the brightest and most ambitious new Chinese Americans. Many of them, young top guns in the fields of engineering & sciences, came in the mid 1980’s, screened with a fine comb by their government which paid dearly for their scholarships in leading universities. One of them was Minhua Jin, now a star real estate agent for Intero Real Estate in Cupertino. She routinely works with Chinese American clients.

Minhua explained to me that unlike most of the “typical” buyers and sellers, the Chinese buy but they very rarely sell, if ever.  They keep what they buy and, as long as they can, they buy more of the same. There are plenty of reasons for that:

  • New laws were enacted in Mainland China a few years ago limiting to 4 the number of residential units any person could buy. Now that money is flowing over there, there is only so much art or items of value people can put their hands on to protect their wealth and build equity.
  • In the main country, they cannot buy the land on which the real estate is built. It belongs to the government, which is leasing the pad for 70 years. Considering that there is no clue as to what may happen when that lease expires, a lot of homeowners and investors are obviously unsecured about their investment in China.
  • Government policies are changing often, further complicating the process, the pertinence of the investment and therefore reducing the appetite for local real estate.
  • Education is a very big deal in China these days, especially business & technology rather than just academics that they do well at home. Whenever possible, well to do families send their kids to the best schools in the US or Europe. Some go back; some stay.
  • Overall, the Chinese are not rich people. Perhaps only 1% of the population can dream of ever buying a home (or many) in the US…But you know what? 1% of 1.4Billion people is a lot of people, a lot of qualified and determined buyers!
  • Chinese real estate in key cities multiplied about twenty times in value over the last 15 years or so; those who bought made enough money to buy anything, anywhere, whether in San Francisco, or New York, or Paris, or London.
  • The Chinese currency is going up while the dollar is going the other way. Buying a multi-million dollar home here is getting to be very affordable.
  • The Chinese, as an old & dear tradition, believe in real estate. They aspire to own their home. You might call it the “Chinese Dream”.

It is clear that the impact of Chinese Americans and Mainland Chinese on US real estate is rapidly changing the rules of the game. It can only accelerate with a growing number of buyers and their growing purchase power. Chinese Americans are part of the new technologies, part of the new wealth. In the Silicon Valley, for example, 1 out of 5 high tech start ups are led by people from Chinese descent, according to a study done by Annalee Saxenian, a UC Berkeley professor.

Knowing how to work with the Chinese is no longer an interesting option for real estate agents, from one coast to the next. It is simply a mathematical necessity.

  • Get new posts via email
  • Subscribe

The Luxury Insider: The Truth About International Marketing of Luxury Homes

By Alain Pinel | April 18th, 2012 0 Comments

I am in a very good mood this morning, just reflecting on the facts & figures that I saw on a giant screen while attending the “Leading Companies of the World Conference” in Orlando a couple of weeks ago. ”LeadingRE,” as it is known in the professional circles, is Intero’s bridge to qualified high end buyers all over the globe. It is our partner in the ever important mission to successfully market luxury homes in 2012 and the years to come. Intero and LeadingRE, that’s a pretty formidable combination!

A few blogs back, I wrote about the need to open the marketing window to all states and all continents to optimize our chances of reaching out to all prospective high end buyers. At a time when the percentage of out-of-area, and especially foreign buyers, represents a huge and growing share of the demand for unique properties, global exposure is hardly an option. Doing without it may end up costing a seller over 50% of the likely buyers, possibly the highest bidders and probably cash buyers. It could also be the difference between selling and not selling.

To be honest, I am amazed that some sellers of pricey homes still defy the odds when they choose to list their property with a small brokerage with little or no access to the right buyers, here and there and everywhere. Who can afford to take that chance?

With this said, let me give you a better sense of the power of Leading RE and its upscale division: The Luxury Portfolio. First, their mission: give listing exposure to the largest sphere of international buyers & sellers. The way they do it is quite simple: associate and network with the finest, most reputable and powerful group of brokers in the industry, anywhere.

The results are spectacular. Judge for yourselves; In 2011, Luxury Portfolio won, again, the leading market share of all global high end residential properties, with 11,594 such properties. Behind us, we want to give credit to the usual competitors: Sotheby’s (10,072 properties), Christie’s (7,498) and Coldwell Banker Previews (4,671). Of course the list of brokers goes on with a host of other brands but I will save some ink since they hardly register on this radar.

Perhaps even more important to our sellers is the fact that Luxury Portfolio is the purveyor of the most relevant segment of upscale properties, which is what it’s all about. Look at these numbers:

• 84% of The Luxury Portfolio homes are listed above $1Million. This is to be compared to…
• 57% only of such properties (over $1M) for Coldwell Banker Previews
• 41% only of such properties for Sotheby’s.

Just a few more bullets to add to the above show of power and effectiveness:

• The Luxury Portfolio has a total inventory of….$40Billion
• The average price of a home is….$2,535,000. That’s a lot considering that in many countries you can buy better than a hand full of luxury homes with a check of this size.
• Luxury Portfolio has listings in 27 countries and 45 US states.
• We market to buyers all over the world. The advertising program reached over 47million targeted luxury consumers. Visitors came from 22 different countries.

As I said in a previous blog: real estate firms may be created equal but they sure don’t evolve the same way and at the same speed. Given the choice, it is obviously safer and more meaningful to trust your listing with a company that can deliver on the promises.

PS. Quick heads up to our franchisees and friends out there in the US and abroad: if you have reliable info/data about the high end real estate market in your major city, region, state or country, please forward. We want to be as relevant as possible in terms of the topics we choose to write about and the accuracy of the information that you want to read in order to list, buy or sell exceptional real estate. I cannot promise we will use your info, but we certainly thank you in advance for whatever precious input you may provide.

  • Get new posts via email
  • Subscribe

The Luxury Insider: The Best of the Best are Doing Well…..

By Alain Pinel | April 4th, 2012 0 Comments

The results are in for the most successful real estate agents in 2011. The Wall Street Journal and REAL Trends just published the summary they compiled of the best professionals in the US. If you think that last year was a miserable year in the residential real estate business, you are right…If you think that it was bad for all Realtors, you are mistaken. Judging by the astronomical numbers they put on the books (not to mention their checking account), the top guns did OK.

There is something like 1,000,000 Realtors in the country. Big business. Believe it or not, the roster shrank 25% since the high mark of 2007, the year when the slide began. Somehow, the best agents adjust, adapt, survive and often thrive in the worst years. They did it again in 2011.

Consider this: Last year, according to the study, the top 250 agents managed to sell an aggregate of over $15 billion. Numero Uno in 2011, the king of the place, sold an astonishing $279,841,487! A top gun from New York. He is good! Agent #250 on this select list sold a comfortable $35 million +. In between the two, we note that 5 agents sold over $200M, 28 sold over $100M and 129 sold in excess of $50M. Who said it was a bad year? Grant me the pleasure to note also that 5 Intero top guns made the list of the best of the best (only commercial in the text…).

As usual, the vast majority of the winners are high end specialists, listing and selling multi-million dollar luxury homes to the few citizens of the world who can afford them. It is no surprise then that they work in the priciest areas in the country, on the West Coast and the East Coast.

Two states alone account for 60% of the top 250 agents in the country, the usual suspects you might say: California and New York. 150 of the 250 work there for a living. California ranks number 1 as a state with 99 super heroes, distributed almost equally between Southern California (51) and Northern California (48), home of the hot Silicon Valley. New York follows with 51 of the best pros in the business.

With 2012 shaping up to be a vintage year in the residential industry, particularly at the top end of the market, I can guarantee that the numbers are going to go through the roof. I also would bet that, with the exception of a handful, the winners this year will be the same agents who claimed top honors last year. That’s how it goes in the real estate business: the best are getting better. Places are expensive at the top. Newcomers can earn their ticket to the top but they will have to associate with the top firms and work their tails off. What’s new?

  • Get new posts via email
  • Subscribe

Luxury Insider: Open House in the High End?

By Alain Pinel | March 28th, 2012 0 Comments

I often hear from both home sellers and real estate agents that it is neither appropriate nor recommended to hold an open house for the public if the subject property is a multi-million dollar luxury home. In fact I heard the comment so much over the years that I almost got to the point of believing it! Well, I still don’t, generally speaking.

Before I dig deep into the arguments which may be used to validate one side or the other, let me state clearly that I understand the difference between an estate-quality property and a more standard home. I made a good living understanding and leveraging such difference. The marketing strategy and scope are indeed altogether different because we are not dealing with the same buyers, in terms of means and needs. That’s why Intero has a “Prestigio” Division, by the way.

However, if we agree to keep things simple, we will probably agree that, irrespective of means and needs, buyers, in all price ranges, are…buyers. They share the same emotions and desires. The same thing can be said of sellers. Principals, on either side, always appreciate when we make their objective easily achievable.

If they wish to sell, their chances of winning largely depend on the number of prospective buyers who get to see the house. If they wish to buy, their chances of finding the right home largely depend on the opportunities they have to access and visit any given property. That is of course the value of the open house option.  It is easy: buyers can look at various homes, with or without the family, whenever they have a little time and when they are in the mood.

Of course Realtors are best to guide buyers through the maze of options and explain the pros & cons of each location and property. Still, sometimes it is fine to stroll around town, relaxed, and do home shopping as we do window shopping in a mall. My wife loves to do both!

So what’s wrong, if anything, about an open house in the high end?

Here is a list of the legitimate arguments being presented by the critics or the skeptics, followed by the counter-arguments, whether legitimate or not:

  • “It makes no sense to have an open house in my price range” – Maybe it does not but we should not disqualify the option. The open house could very well be attended by…wealthy people too.
  • “My house is way too large to be held open” – If it is too big for one agent, it might not be for two agents. If pertinent, we can plan for three agents to be present.
  • “I would rather have my agent welcome visitors and show them the house” – Sure, and this is exactly what is likely to happen, but this preference should not necessarily eliminate the open house option.
  • “I don’t want undesirable people to see my house” – This one is a little tougher since we cannot judge people on a quick look. A wealthy friend of mine was prevented one day from  entering The Ritz (where he had a room for the week) in Paris because he wore jeans! .. He canceled his reservation…  Of course, on the seller’s advice and his consent, we can demand name, contact info and even proof of identity to visitors whenever needed.
  • “I have too many valuables” – When a house is for sale, whether open or not over the weekend, there are elementary precautions to take to reduce or avoid altogether the risk of a visitor stealing pricey objects.  Anything small and of great value, such as jewelry or art should not be offered to the eyes, they should be under lock or in a different place.

The open house option adds a new dimension to the marketing of a property. Many homes, regardless of price, sell on open house or as a direct result of an open house. This option needs to be discussed with the agent on a case by case basis and never arbitrarily be discarded. Good luck.

  • Get new posts via email
  • Subscribe

The Luxury Insider: Pricing Tactics…Or the Art of Juggling with a Grenade

By Alain Pinel | March 21st, 2012 0 Comments

One of the oldest and still challenging question both home sellers and their listing agents dread the most (aside from the commission issue…) is “What price should we put on the listing to produce the best price in the end?” You all have been there before, right? Most of you did fine; many did not and wished they had used a very different approach, if only they had known; if only they were given another chance.

The choices have always been and will always be the same:

  • Overprice
  • Underprice
  • Price at what is perceived to be “market value”

The problem with this question is that there is no magic recipe that works every time. It depends on the market, it depends on the property and it depends on the marketing. Let’s look at the three options and briefly analyze the pros & cons of each one.

  1. Overpricing: Hard to define what is an overpriced listing. As far as I am concerned, an overpriced listing is one that does not sell!  In other words, a property is not “overpriced” if a buyer buys it, even if we thought it was when we put the For Sale sign in the front lawn. The supply & demand dance can do strange things in a good market. Want an example? Look at what happened in the Silicon Valley over the last 3 months: very little inventory, huge pent up demand, cheap mortgage money, reassuring economic news, more stable job market, rich IPO’s on the horizon, etc. Results: in the mid range of the market, around $1M+, selling prices probably jumped 5 to 10%. It means that if a home was listed in January 5/7% over what we considered to be a “reasonable” price, it could have sold at full price in March. Now, before you get too carried away, let’s use a little wisdom that only experience can provide. In the real estate business, the past is not necessarily a good guide to predict the future. It is not because prices have jumped yesterday that we can count on the same thing tomorrow. What we can say, looking backwards, is that if a house in that region has been on the market more than a month and did not sell yet, chances are it is indeed overpriced. Overpricing, in any market, is a dangerous idea. In my book, it is a terrible idea and entirely counter productive. If and when the property sells, after repeated price drops, it almost always ends up selling for less than otherwise it would have, had the price been more realistic from the start. If the market is hot but the house does not move quickly, it will soon grow old and collect dust, as Realtors will always prefer showing new listings rather than those which have been aging on the shelves. So much for overpricing. Your choice.
  2. Underpricing: Talk about dangerous games!… You must have a strong heart to deal with this option. It can work to the sellers’ benefit, occasionally. It can hurt just as well. In the hot market we have been enjoying for a little while in the Silicon Valley and many other markets throughout  the US, underpricing is getting to be as popular (and risky) as bungee jumping. The idea is to tease anxious buyers with a price 5 to 10% lower than what we perceive to be the market price and manufacture a bidding war which will result in multiple offers and ultimately a sales price well over the asking and over what we thought the house would normally sell for. Some agents make a good living (for the time being) advising their clients to take a chance with such tactic. They may even draw some pride and good PR from the fact that their listings routinely sell at a higher price. That, of course, is a bit deceptive since it is a deliberate strategy designed to accomplish exactly that. Keep in mind that underpricing does not guarantee a higher price. It could go the other way. You might get stuck with a low price and no good offer. You could also have an appraisal problem, depending on the financing, because of the resulting inflated price. Do I favor this option? No. I just don’t like to play games. Your choice.
  3. Pricing at “market”: If you, as a home seller or as an agent, think you know at what price a buyer and a seller are likely to come to terms, in any market, because you have a bunch of reliable comps (recent local sales of similar properties, active listings…), I suggest you use that option rather than play with a grenade. You may put a tiny cushion on top of the price to allow for possible negotiation. If the price is too high, you will soon know and you will trim the excess fat right away. If the price is too low, well, you may benefit from an unintended buyers’ frenzy. If the price is right, you will likely obtain a quick & easy sale. A win-win. I like that scenario and I bet you do too. We all sleep better when we do it this way. Again, your choice.
  • Get new posts via email
  • Subscribe

The Luxury Insider: The Tale of Two Cities…

By Alain Pinel | March 14th, 2012 0 Comments

What about an easy multiple choice quiz to start the day? Here is the question: How is the real estate market at the high end today?

a)     very good
b)     good
c)      bad

OK, so maybe the quiz was a little bit unfair since it was one answer short: the right answer is “all of the above”.  How can this be? Well, the answer really depends on the famous “location”- “location”- “location”: the specific state, the specific region, the specific town, the specific district, perhaps the specific street or even which side of the street. It is that complicated.

Today, with all the uncertainty still reigning over the national economy, the job situation and the dark clouds blanketing much of Europe, people are looking for security for the money they can invest, because buying a home today is more than putting the family under a roof, it is indeed an investment. It can be good but it can also go bad.

With the sudden revival of the high end market, the pricey towns, the “money towns”, are very much wanted under the circumstances. Typically, real estate values there are more stable over time, because of a multitude of factors: school ratings, zoning homogeneity, setting desirability, not too far from the work hubs, etc…Not to forget the encompassing reason: that’s where people who have lots of money want to live. Period.

Palo Alto, in the heart of the San Francisco Peninsula, is a great example of the phenomenon. The median price there is about $2M. That market is hot, which corroborates our predictions. Listings don’t stay on the books more than a few days. Multiple offers are the norm.

Does it mean that the entire Peninsula is feeling the same heat? Not necessarily. Not yet in any case. It will happen though. The fever from the high end is progressively spreading into the surrounding areas like ink on blotting paper. How far and how long it will spread is still an open question. Looking at the map of the Bay Area, we see a significant difference between the hot Peninsula & South Bay, the warming up East Bay, and the North Bay which, aside from the buzzing traditional pockets of wealth, is mostly lukewarm. Some regions, where distressed properties represent the lion’s share of the market, are still a bit cold and may not catch the fever before next year.

The tempo at which it will spread is also an interesting point. For example, we see that in the select high end towns, a large percentage of the winning offers are over the asking price, while outside of the best zip codes, winning offers are still below asking even though multiple offers are becoming more common.

Last observation about this evolving market on the Peninsula: so far this year, the most active price bracket has been the bottom segment of the high end, between $1M and $1.5M. It is gradually moving to the next level, over $2M and up to $3.5M. We can realistically expect that the top end, from $3.5M to the moon will be sizzling by springtime.

If you are in the mood to buy, it would not be a bad idea to act on your desires now. If you are in the mood to sell, the time is ripe too: you may have buyers waiting to make you an offer you cannot refuse.

  • Get new posts via email
  • Subscribe

The Luxury Insider: The Top Guns are Back!

By Alain Pinel | March 7th, 2012 0 Comments

Can any agent sell a multi million dollar residential property? Theoretically Yes… Practically: not readily, aside from “accidental” business. It takes a very special person who can relate to the client and the subject property at that level. Not every agent can play the part and be a maestro at comfortably managing the entire transaction with the clients’ trust.

There are lots of Realtors, thousands of them just in the heart of the Silicon Valley. I feel fortunate knowing a good portion of them and I would not hesitate to say that most of them are very good at what they do, irrespective of the company affiliation. They are smart, knowledgeable and genuinely devoted to serving their clients and customers to the best of their ability. They do care about their fiduciary duties.

That, of course, does not mean that they are equal and interchangeable. Some are better than others. This is especially noticeable in the high end.

If I were to generalize a little, I would say that there are three classic levels of real estate professionals. Some gravitate from one to another during the course of their career, while some get stuck in the same box if they cannot or don’t care to change their profile. Here is the picture, painted with a very big brush to make the point:

  • The Average Agent: Sincere, friendly and committed to the principal’s satisfaction, but usually a train too late in a fast market to be truly effective and therefore successful. Typically, he/she waits too long to preview the new listings when they are fresh on the market. When they are finally ready to see them, at the weekly brokers’ tour or when they have an opportunity to show them to a customer, those listings are often already under contract.
  • The Better Agent: Energized, mobilized, he/she knows and keeps current with the inventory of active listings, understands market trends and the menu of mortgage options….But most of them are just waiting for the office phone to ring. They rely on what may fall from the sky rather than the business they could generate on their own. They don’t prospect much and they don’t promote themselves in the local media. The result is predictable: they don’t have listings and they have a hard time finding buyers.
  • The Great Agent: They are ready 24/7. When the phone rings, they answer. No time to listen to voicemail. They “own” the market. They know every street and nearly every house within their “farming” area. They know who bought what, when & how. They know the owners’ names and, most of the time, the people behind the names. They are the top guns. They are back. Not that they ever left; they just relish this challenging yet exciting market in the high end.  Who worries about a listings drought and tight credit when you know the people who would agree to sell their luxury property given the right price and the buyers who can pay cash to buy it?

There are only a few superstars in each marketplace, mostly in very affluent towns or districts. They know each other very well and like to work between themselves, in spite of the different company flags.  If a $25 million listing comes on the market, chances are it belongs to one of them, and chances are one of them will sell it. Often those upscale listings never hit the MLS. They sell within the “club”. The top guns know best how to leverage their company’s marketing & technology strengths to complement their own. They are so powerful that you would think they are “making the high end market” instead of merely adapting to it better than others. No, they are just smelling the market before anybody does and pricing properties based on their anticipation of the traditional tango of supply & demand. Want one example? While today most agents are waiting for the Facebook IPO around May to sell real estate to the new millionaires who will be good enough to stop by the office, the top guns have established contact with hundreds of them long ago. There is no substitute for preparation, organization, focus and ambition. That’s life in the fast lane.

  • Get new posts via email
  • Subscribe

The Luxury Insider: The New Magic Word in the High End: “Prestigio”

By Alain Pinel | February 29th, 2012 0 Comments

Today is a special day in the real estate industry. It is Day 1 for “Prestigio”, Intero’s brand new Estates Division and its exclusive menu of global marketing services. After many weeks of intense thinking, studying & selecting, we came up with a program which is second to none in our business, anywhere.

Some may think that it is pretty gutsy for a real estate company to create such a new extensive high end program just coming out of five years of a brutal downturn which severely affected the luxury market.  Yes, it is gutsy. For sure, it is more common these days to cut services to reduce expenses rather than launch an ambitious project with an arsenal of pricey print & online international advertising vehicles as well as impressive marketing tools and state of the art technology.

The reality is: we felt compelled to do it. Business has changed; real estate firms need to change as well to adapt to the migrations and the profiles of new buyers at the top end of the market, not to mention the new ways to do business to best leverage the technology at our disposal. Let’s express this in the following simple way: “we cannot do business as usual in an unusual market”. Yet, not a heck of a lot has happened in the way of significant marketing changes in our industry over the last many years. It was about time.

We, at Intero, want to be relevant and offer the best service possible to today’s homeowners who trust us with the marketing of their exceptional property. We have a no-nonsense approach to marketing and we actually put our advertising commitment black & white on the customized marketing plan we prepare for the sellers, covering each and every month of the listing duration. That includes looking for buyers all over the US & abroad.

Actions, not just words. That’s what sellers need today. They do understand that their opportunity to sell their home is predicated on the listing company’s ability to connect with a maximum of qualified prospective buyers, wherever they may reside or work. We created this new upscale marketing program to deliver on those expectations.

The need created the organ, as we say. Now we are excited at the chance of showing you how the organ will satisfy the needs.

  • Get new posts via email
  • Subscribe

The Luxury Insider: The Price Per Square Foot Fallacy

By Alain Pinel | February 22nd, 2012 0 Comments

I never ceased to be amazed at the fact that many Realtors are judging the value of a luxury home on the basis of its square footage. For a bank appraiser or a home builder to think that way, I can understand, it can indeed be part of the valuation methodology, but for Realtors?

In the high end, not two homes are the same, even when they are….or they appear to be. Take two identical penthouses in New York, both brand new; same top floor, same square footage, same layout, and same amenities. I guarantee that one is worth more than the other, often a lot more. Perhaps one has a better sun exposure, or a nicer view, or sits next to another beautiful residential building while the other one has a service station for a neighbor, or one is further away from a noisy school yard, etc. Are these two properties identical? Of course not.

I remember looking at fancy real estate while in the South of France, a few years back. One town got my interest, and yours too, probably, given the opportunity: Cannes, the site of the international film festival, stretching beautifully along the crystal blue Mediterranean sea. Right in the middle of “La Croisette”, Heaven’s local version of a boardwalk, there is a nice white building where, every so often, condos are “offered” for sale. I saw one I liked –of course I am easy to please. Third floor, bay windows and a balcony open to the ocean, the harbor full of the most amazing yachts, and a full view of the street action underneath, at the level of Cartier, Hermes, Prada…You see what I mean. That little pad was available for the taking at over $10,000 per square foot. No, I did not buy it. In the back of the building, another condo was unofficially on the market. Bigger and on a higher floor, but the asking price was not even half that of the first. The view was nice but who wants to overlook a pool, a garden and a bunch of rooftops when the alternative –for only twice as much- is a panoramic piece of the Mediterranean?

Square footage is largely irrelevant in the high end. Buyers buy benefits, real or perceived. Bigger is not necessarily better. Depends what you really want, or what you really need. It’s OK to want to live in a 20,000 square foot  home. It might even be pleasurable. But please understand that if & when you decide to sell it, it may fetch only what a nearby property of similar quality but smaller size will obtain in the open market. Size usually needs to serve a purpose to be worth the money it costs to build. For example, you can get your money back and sometimes make a little more if you put a home theater in your home, or a library, or a wine cellar, or an indoor pool, or a racket-ball court and perhaps even a ballroom, why not? However, if you have a huge house just to have huge rooms, square footage could be more a handicap than an added value.

Having said that, if you want a huge home because you like the feel, the space and have no concern about an eventual resale, don’t listen to me. What do I know, for the time being I live in a condo! A nice one though.

  • Get new posts via email
  • Subscribe

« Older Entries