If this is the worst real estate market (for sellers) in recent history, then surely it creates some of the best buying opportunities of a lifetime as well.
We are seeing smart money aggressively buying in our San Diego real estate market, and hear reports of the same elsewhere. The properties are being bought as fix-and-flippers or are being held as longer term rentals.
We receive inquiries about these homes almost daily; but more recently, we are being consulted about strategies for buying luxury homes at bargain prices. These buyers may not have to sell their existing home to buy another, or are open to exchange possibilities.
Below are 7 strategies we use to help our luxury home buyers (and others) get some of the best luxury bargains on the market.
- Study Market Time: Luxury homes in general may take longer to sell because of pricing, custom features and a more limited pool of buyers. But that doesn’t mean sellers are any less motivated to move on with their lives. At one time, we thought little of $million-plus homes sitting on the market for 90 days or more. These days, we seek buying opportunities if a home has been on the market over 60 days and are seeing some heavy price discounting if days on market goes over 90 days.
- Check Tax Records and other Sources: Is there more debt on the home than what it is worth? Has a Notice of Default been filed that would indicate a looming foreclosure? If so and if this is a home of interest for our buyer, we submit an offer contingent on the successful negotiation of a short sale (where the lender sells the property for less than what is owed). In this case, either we or professional negotiators deal with the lender(s) to reach the best possible price for our buyer.
- Did Owners Pay Cash or Have They Owned Their Home for Longer than 10 Years? These sellers may be in a position to sell at a discount or may be motivated to do so due to life transitions or other investment opportunities. They may also be open to owner-financing for all or part of the home mortgage.
- Are You Open to Remodeling? Homes sold in as-is condition are more likely than others to sell at a substantial discount. Owners, especially when the home has been on the market for some time, are often overwhelmed with the thought of remodeling and updating–and fearful that their decor choices will not suit potential buyers. Especially in the uber luxury home market, older or outdated homes are sometimes sold at land value.
- Foreclosoure Sales: The f-word (foreclosure) is occurring even in the luxury home market. Highly leveraged homes purchased in the last few years are more frequently ending up on the courthouse steps. Foreclosure purchases, which require cash and carry no disclosures or guarantees, offer both great potential for profit–and dire dangers for the uninformed. Bidding should be non-emotional and it is best to have a professional bidding for you–but only after thorough-as-possible research has been done regarding the home’s condition, its history and resale potential. Cracked slabs, structural defects and boundary line encroachments are unwelcome surprises.
- Home Exchanges: This is a rather novel strategy for those trying to sell their luxury home in a bloody market. Life transitions encourage luxury homeowners to make moves. Empty-nesters may wish to relocate from their large estate to something equally posh but far less demanding in upkeep. Others may have expanding families that crave acreage, pools, tennis courts or equestrian facilities. In the Southern California market, Owner-Broker Bob Dyson and Villa Sotheby’s International Realty have set up a property exchange platform that allows homeowners to directly exchange properties and ownership. It is a tactic that helps to support neighborhood values and removes many of the pressures involved in having a home on the market for an extended period of time.
- If the property you want is listed, have your agent check the other real estate agent’s listing history. If that agent tends to have listings on the market for a long time, you may wish to lower your offer. On the other hand, if the agent prices properties aggressively and has short “days on market,” you may consider coming in near to or at list price. You will likely find the listing is already priced at or below market to attract multiple offers.
A combination of patience, perseverance and the ability to move quickly will serve all astute buyers of real estate these days, but the greatest potential of all may lie in the luxury real estate market where replacement value could far exceed the purchase price.