Do you hanker to trade your modest home for a majestic manse with a regal entrance, tall ceilings, a gourmet kitchen, five bedrooms and a circular driveway out front?
If so, real-estate experts say you shouldn’t expect the kind of discount you might have obtained just a year or two ago. But you can still do well on an upper-end home purchase in 2013.
Granted, many sumptuous properties are no longer available at the fire-sale prices of a few years ago. But buyers of high-end real estate can still get plenty for their money, says Karl E. Case, an economics professor emeritus at Wellesley College and co-founder of the Standard & Poor’s/Case-Shiller indices, which track home price trends throughout the country.
“Interest rates are wonderfully low now, which means you can get a lot for your monthly mortgage payments. And if you buy a house you love, one real return on investment comes from the pleasure of living there,” he says.
Case says that inventories are becoming very tight in many popular communities in the upper end of the price spectrum.
Why are grand houses currently in short supply in some areas? Case says one reason is that a large segment of the baby boomers have yet to downsize.
“Rather than sell during the recession, many redid their big houses. Because they improved for the long haul, they’re staying put and not selling, at least in the near term,” Case says.
Another factor limiting the supply of trade-up properties is that relatively few new houses were constructed during the economic downturn, Case says.
The growing shortage of high-end homes means that interested buyers may not be able to command the same level of leverage they did during the recession. But as a move-up buyer, you’ll still fare well if you take a strategic approach.
Here are a few tips:
Seek out highly motivated sellers.
Though it may come as a surprise to some, the owners of upscale homes are no different from any other sellers — some are a lot more driven than others, says Dorcas Helfant, a real estate broker and former president of the National Association of Realtors.
Hurried sellers, who may be moving due to a major lifestyle change such as a career shift or a divorce, are much more likely to negotiate in earnest.
“With inventories starting to shrink, sellers are more confident. Some are getting multiple offers. But even in these neighborhoods, you still have better odds of negotiating with sellers who are motivated to move,” Helfant says.
If you politely question sellers on their reasons for moving, many will give you or your agent candid answers.
Helfant says it’s often pointless trying to negotiate with sellers who convey a carefree attitude about their timing. You’re much more likely to strike a favorable deal with people who must move.
Don’t rule out properties that have gone “stale.”
On occasion, genuinely motivated sellers hold out longer than they should, reducing their overly high list price only after desperation sets in.
“Even in premium neighborhoods, people who overshoot on price and then fail to sell for many months can be forced to drop their price below market value after buyer interest drops off,” Helfant says.
Their problem is that homes that linger too long on the market become stigmatized.
“It can take a while for some otherwise motivated homeowners to realize they’ve been asking way too much. But if you’re willing to wait, you might be rewarded for your patience,” Helfant says.
Make your offer as clean as is possible.
Helfant tells the true story of some clients who traded up from a mid-sized bungalow to an impressive colonial. They were successful in obtaining $50,000 off the price for a fairly valued property because they wrote a “clean contract” on the place. They offered cash and promised to close in 30 days.
Why was the offer so appealing to the owners? Because they were under deadline pressure to move across the country for a job transfer and needed a sure-bet sale in a hurry.
“Motivated sellers are sometimes highly responsive to a bid that makes it easy and quick to close,” Helfant says.
Consider making a counteroffer if the market warrants it.
Multiple offers are now more common than they were a year or two ago. But there are still neighborhoods, including high-end ones, where buyers continue to rule. Helfant says you can usually be more aggressive when negotiating with sellers in an area with lots of homes for sale.
Obviously, those seeking to buy a large or luxurious home have the most to gain on a percentage basis from tough negotiating.
Keep your eye on your ultimate goal.
Among those hoping to take advantage of low mortgage rates are older people who want what Helfant calls their “last-hurrah house.” Such buyers often want such luxury features as elaborate gardens, at-home fitness centers and large, customized garages to house motorcycles and sports cars.
Getting a good deal is always a plus for homebuyers. But for older buyers, acquiring the exact place they want — whether a country estate or a downtown loft — can be even more important.
“Remember when you trade up, you’re buying for lifestyle. You’re looking for that perfect location, that perfect view or that perfect refuge from the world where you can find peace. So it’s more than just the price that counts,” Helfant says.
Ellen James Martin, a former real estate editor at The Baltimore Sun, gives advice for anyone buying, selling or financing a home.