Appraisal in the Luxury Market
August 5, 2020
2019 Appraiser of the Year
Luxury real estate is one of the most exciting types of assignments for an appraiser. The craftsmanship and selection of the newest and best materials creates an exciting challenge for even the most experienced appraiser. The value of these properties has so many variables and the buyers are often just as unique as the properties, with many different motivations that drive their purchasing decisions. Quantifying all the different aspects of a luxury home into a single dollar amount is incredibly challenging.
The first place to start is with the most important thing in real estate, location. A luxury home must have a location that matches its high-end finishes and craftsmanship. This is the first thing the appraiser considers when dealing with a luxury home. If the location is wrong the buyers will never have that special feeling that comes with the price tag of luxurious home and no matter how nice it is on the inside, they will always consider a home in their desired location first.
Going along with the location is the market. A luxury home needs to be in an area with similar style homes. While each one is unique and may stand out from the homes around it, no one wants to have their luxury home surrounded by far superior or inferior properties. When valuing a property, one of the biggest red flags for an investor is if the property is noted as not conforming to the neighborhood as these properties are normally much harder to market.
After the location of the property has been thoroughly analyzed, we move onto the finishes including the materials used and the quality of installation. A luxury home buyer expects high end finishes that complement that layout and design of the home. These types of buyers are normally well versed in all the latest features and finishes and are looking for those features when making a purchase decision. As an appraiser the value can be significantly impacted if the home has lower quality finishes or a dated appeal.
After an appraiser is done analyzing the finishes of the property, the next thing we are looking at is the technology incorporated into the home. When you think about luxury the first things that come to mind are easy to use and comfortable. The technology incorporated into luxury homes through the use of mobile devices has been groundbreaking over the past several years. Owners can now control everything from the temperature to which window blinds are open and closed without ever having to leave their favorite chair. Technology has played a big role in the valuation of properties recently with many buyers being willing to pay a premium for smart home features being incorporated into their luxury homes.
After looking at all the different features of the property, the appraiser must compile this information and compare it to other luxury homes in the market. Each luxury home is unique but ultimately the market will decide what it is worth. The opinion of value will be based on all of the features the subject property has and how buyers have reacted to those features in other properties. It is a challenging task to say the least but also an exciting one that allows the appraiser to research the newest and hottest trends in the luxury real estate market.