There’s a habit in real estate reporting that I always find to be a little misleading. Of course, there a number of areas in the real estate business of which the same thing can often (unfortunately) be said. I don’t get it, because the reality of the business is that we deal in a very tangible product. What am I talking about? Watch this report from Global news, then keep reading.
First of all, there’s nothing misleading about the Global News report, but it reveals a weird truth.
According to the it, “Luxury real estate” is a matter of selling price, rather than the physical realities of the homes sold within the category. “Luxury” is about what you paid, rather than what you got for your money.
That’s just wrong. Not from a “you shouldn’t do it” point of view, but because it fails to match up with reality as buyers experience it. I could see some sellers becoming excited by the idea that, because the market has moved their property into the “Luxury” cost category, they will now be able to sell to a more affluent class of buyer. To me though, the house-hunter with “luxury” on his or her mind will have much more than price in mind.
In reality, luxury real estate is about the luxury lifestyle.
No price tag in the world will suddenly turn your single car garage into a double or triple. The listing category will not make your kitchen or bathrooms bigger. Years ago, farmers facing a shortage of larger sized eggs changed the definition of “large.” The result wasn’t people happily buying what were actually medium sized eggs. It was a lot of irritated consumers. Just as changing the name on the eggs did not change their size, “luxury” is not about price. It is about experience.
To me the relationship between what is paid for a house and what it’s worth is based on a combination of current market conditions and the specifics of the house itself. There are things sellers can do to make their homes more competitive in the current market, but they will not change the fundamental nature of the building or the property. The media, in reporting on trends and market conditions sometimes looses track of the boots-on-the-ground reality. The way I see it, people who are looking for houses are generally looking for a place to live. Sellers hope to maximize their price. Between the two, there’s a negotiation and an agreement. There is no room in there for mischaracterization.