How Is A Luxury Property Priced When It Is Incomparable?
When it comes to luxury real estate pricing, real estate brokers use comparables in most cases when pricing a property unless a property falls in the “incomparable” category.
For “one of a kind” properties brokers come up with an asking price based on analyzing data gathered by active listings or similar properties that sold many years ago. Brokers also will look at a property that is on the market that would rate close to the incomparable property and use that property as a base price and add on to it. Brokers often have to rely on their gut instincts sharpened from their many years of experience to ” guess” the current market value. The intellectual knowledge and experience of the luxury broker is critical in pricing incomparable luxury property.
If a broker is trying to price a $10 million or more home and there a lot of actives on the market in that range but no recent sales then using the actives as a guide to pricing is a poor idea. At the end of the day who knows what the sales prices for the actives will be.
Luxury Real Estate Pricing in Manhattan
Here in Manhattan for properties in the $10 million to $20 million range brokers use active and sold comparables going back a year if necessary. When you reach the $40 million range then each sale becomes more unique. It is analogous to selling art as each transaction at this price level comes down to what the market will pay for a unique one of a kind property. Often the sale is more about the buyer’s lifestyle or to own a trophy home.
In some cases, a, less expensive property may be difficult to price due to its one of a kind view or a design that can be replicated. Then pricing is more subjective.
New construction and spec homes present a different challenge regardless of the market. In new development condos in Manhattan all that seems to matter is what sold in the same building right before a buyer is ready to make the purchase. For that reason, it is difficult to price incomparable penthouses. It all depends on a feel for what buyers are in the market and who will compete for it.
Watching the Market
The market will let brokers know in due time if they have their luxury real estate pricing for an incomparable is too high. If the marketing fails to generate interest then the price set is too aggressive and needs to be adjusted. The average time on the market for all luxury listings in Manhattan that are $4 million and over is at 400 days. Sellers with uber luxury unique properties can take up a very long time to sell. A very aggressive creative marketing plan is required and the seller needs to be very patient.
Looking for more information on luxury real estate pricing and more when it comes to buying and selling in Manhattan? Read more in The Pulse.