How to Define Luxury Real Estate in Today's Market
Tips on identifying high-end properties in a world where the term "luxury" has become cliche.
If you say a word enough times, it starts to lose its meaning. And in real estate, where the right description can draw buyers to a home on the market, using the right terms is crucial.
So when half the homes on the market are suddenly marketed as “luxury,” the definition of the word starts to melt away.
“It’s entirely overused,” says Michelle Farber Ross, real estate broker and managing partner of MMD Realty in Fort Lauderdale, Florida.
Luxury real estate is defined differently across different markets, as property values, median resident income and area development varies widely depending on the metro area. For example, the Los Angeles area has a significantly higher top end of the market and a higher cutoff point for buyers to afford these properties compared to smaller markets like Oklahoma City.
But the term luxury has been used to describe everything from the ultra-luxury homes of the world's wealthiest 1 percent to a modest kitchen with new appliances. How can you interpret how luxury is defined in your area, and how can you leverage that information to better express your expectations as a homebuyer?
Whether or not you fall into the real estate definition of luxury living, knowing how your market defines high-end properties will allow you to better understand the qualities you need and want in a home.
Where Does Luxury Begin?
In many large U.S. cities and metro areas, the typical luxury price point is $1 million and above. But in a city like New York, which attracts a high number of foreign investors seeking property in a global trading hub, $4 million typically becomes the cutoff point, Farber Ross says.
The Institute for Luxury Home Marketing, which specializes in training real estate professionals in high-end home sales, defines luxury agents as those performing in the top 10 percent of their given market. “It’s a way to flatten the country” and make markets more comparable to each other, says Diane Hartley, general manager of the Institute for Luxury Home Marketing.
And in many smaller cities across the country, that top 10 percent can easily be below $1 million because real estate sales are relative to what is selling nearby. But regardless of whether the property is $1.1 million or $11 million, the purchasing process for these high-priced homes is different from the majority of property sales – and they also differ among each other.
What Makes a Home Luxury?
There’s no checklist for labeling a property as luxury, although many features are common among upscale properties in major U.S. cities. Prime location, high-end interior finishes such as marble countertops, professional-quality kitchen appliances and customized closets and hotel-like amenities such as concierge services, a top-of-the-line fitness center and spa center are often staples of a luxury building.
But not every high-end home is the same. Often it’s the unique features that separate luxury real estate from the rest, explains Jeremy Swillinger, a licensed real estate salesperson at Level Group Inc. in New York City.
In major cities such as Los Angeles, San Francisco and Chicago, owning a condo in a building designed by a renowned architect – or “starchitect” – can set a property apart from others as luxury, Swillinger says.
“Prestige is one of the top two priorities [buyers] are looking for,” he says. The other priority is often based on the individual's own priorities, whether it's services at the ready to make managing the property from abroad easier, having enough space to entertain or a state-of-the-art kitchen design.
Translating that idea of prestige into a suburban or rural setting, luxury may be defined by being in a gated community or as part of an association that gives you access to an exclusive country club within the neighborhood.
Of course, that’s all in addition to a home that goes above and beyond what’s typical for the market. In New York City, where doormen are common and studio and one-bedroom condos in Manhattan typically start above $1 million, rooms are designed for the purpose of being unique compared to not only the other homes in the building, but also everything available in the city.
“It’s no longer just installing a Sub-Zero refrigerator [in the kitchen] – it’s a full room design, from the flooring to the cabinets and appliances to the lighting,” Swillinger says.
How to Interpret Luxury in a Real Estate Listing
Identifying a luxury home from a description – or a luxury buyer from an initial phone call – is all about reading into the details, Swillinger and Farber Ross agree.
“If there’s nothing else defining their use of the term ‘luxury’ in a description and my client is a discerning buyer … I would say that’s a red flag,” Farber Ross says. “That’s just an agent kind of aspiring for it to be luxury property versus the fact that it actually is. And in a couple days when they post the photos, you can tell in the way they furnish the property,” whether they include elite appliances and high-end finishes throughout each room.
If you’re questioning whether your home would be considered in the top 10 percent of your market, talk to an agent who is familiar with the area and high-end properties. An agent seasoned in both will ask questions to establish a feel for what the property offers. Rather than focusing on that vague idea of luxury, compile a list of the features your home has, along with details that set the property apart from the rest of the neighborhood and city.
It’s a similar process for buyers, Farber Ross says. In an initial conversation, she typically asks about the must-haves in a home, preferred activities and hobbies the potential client expects to be able to do with ease.
“As these questions are getting answered, you get a real feel for what kind of buyer they are,” she says.
But whether you’re buying or selling, it’s recommended to remove “luxury” from your expectations until you’re able to provide a clear-cut description of the property. New floors or top-of-the-line appliances should be described by name, Farber Ross says, noting luxury is truly defined in the details offered. "Be more specific in the amenities, in the finishes, or if it's a renowned architect for the building," she says.