Pricing luxury homes is oft-cited as both an art and a science. The art is pricing the unique features of each luxury home. But one man's indoor gym is another man's storage space.
Following are three features luxury homeowners covet, but may overvalue and discover they add little to the resale value.
A Celebrity Owner
Tom Cruise's 298-acre Teluride, Colorado luxury home has been on the market for $59 million since 2014. Cruise has the super star panache to ask for a large premium. But if buyers do not foresee being able to resell for more, they will want to bargain.
Keep in mind that when you go to sell the home, unless it belonged to a legend like John Lennon or Tom Cruise, a previous celebrity owner may no longer add value. A famous architect, on the other hand, will add sustainable value to the home price. More than a century after the construction of homes made by Frank Lloyd Wright, people still pass by and admire them.
Indoor Gyms, Theaters, And Pools
Oh, how the rich love to work to play. But should you pay millions of dollars for an indoor theater, pool, or gym? Moving into a luxury home with indoor squash courts is indeed a nice amenity, but how much should you pay for it? Home theater prices range from $18,000 for a nice, big screen to shy of a million for a realistic move theatre room with cathedral ceilings.
If you decide to install these features yourself, you may have problems getting a construction permit for an underground indoor pool or squash court. Even with permission, the neighbors could complain. Your home could be in disarray for months, or a year. Having these amenities already installed could be worth a premium. If you take the time to price each amenity and the opportunity cost of not having it, you can avoid paying several million dollars more for an $18,000 projection screen.
Smart Home Security Features
When Bill Gates completed his $127 million Xanadu 2.0 smart home around 1995, it was a marvel of advanced technology. But today, largely owing to Microsoft, many standard and luxury homes for sale offer smart home features. Automated lighting and climate control can be added with a $100 smart home system. You may place a very high value, though, on a custom-built, smart security system with advanced features that protect your new luxury home. When buying a luxury home, by assessing the replacement value of amenities, you can separate the Van Goghs from the cheap imitations.
When you are faced with a down market, there are a lot of things that can run through your mind as a homeowner. If you had to sell, would you be able to make your money back? What will you do if you have to sell your property at a loss? Do you think you are ready to buy a new home?
Although there are a lot of things that are important to think about, the fact of the matter is that understanding real estate challenges is instrumental to making money with your property. From moving forward with new ideas about real estate to working with the right professionals, it pays to read up on the market. Learn more today!