Anyone who says they don’t have an emotional attachment to their luxury homes is full of… Well, I don’t want to be accusatory. Let’s just say it’s difficult not to. Whether a primary residence or vacation home, the property likely holds many fond memories. Memories of children splashing in the pool, best friends knocking tennis balls on the court, and holiday meals around the dinner table with family and friends.
It’s natural to be emotional about the place where you spend the majority of your time and make your life, but when it comes time to sell your luxury home, you must remember that selling is business, not pleasure. Try to remove emotion from the transaction, particularly with very high-end, unique properties. Hire experts you know and trust — a real estate agent, attorney and financial advisor. Allow them to guide the process for you, with your interests at heart.
Your goal is to generate a sale and monetize the equity that you’ve built, so listen to the data. If the recent absorption rates say there is five years of inventory in your price range, and that a typical list-to-sell ratio is 80 percent, then the average home with your $5 million dollar list price will sell for $4 million in five years. Add in the typical carrying cost — in this example we’ll say 1% per month — over five years ($2.4 million), and the net-present-value of your home is $1.6 million.
Now, this is a very simplistic example, but the bottom line is that if you can sell your luxury home for more than that projected net-present-value today, then you should seriously consider it. If you can get $3 million for the home today, then that is the right decision — even if you bought the home for $3 million ten years ago and put $1 million into it.
The fact is that your luxury home is worth what the market bears today, not the market price ten years ago plus the updates to the property plus the emotional investment. Nor the price it would cost to reproduce. Buyers do not pay for emotional investments, and if the decision was theirs, they likely wouldn’t build your home exactly as it is. We see this especially with very high-end, boutique homes. Yes, your bowling alley is great, but maybe the buyer would prefer a racquetball court!
If you are a serious seller, find a disposition vehicle that can help you maximize the net-present-value and move on with your life. A luxury auction just might be the perfect way to achieve that goal.
How does emotion effect selling your luxury home or buying a new luxury property?
