Luxury homes command high prices, which often means high profits when flipping a house for sale. Luxury homes naturally have a smaller market than homes overall, and setting the right price for a flipped house is all the more important due to market size. If you ask for too much, the home might not sell. Learn six signs your luxury flip is overpriced and what you can do about it.
1. Lack of Buyer Interest
If you list it, will they come? If you hear the sound of crickets in your new luxury flip, it’s a strong signal that people are not interested in what you’re offering. Buyers generally don’t go to showings on a whim; they review listings online first and only go if they feel serious about an opportunity. A too-high price tag can scare them away from a visit, lest they fall for a home they can’t afford.
2. Direct Feedback
Buyers that do tour the house and decide the home is not for them may pass along feedback to their real estate agent. While some might state directly that the price is too high, others will make veiled critical comments. If you’re hearing that the location is not desirable enough for the asking price or a particular feature needs an update, it could suggest pricing problems.
3. You Used What You Paid to Set the Price
The real estate market is always changing, and the best indicator of what your flip will sell for is what a comparable house sold for – not what you paid for it six months earlier. Always vet a listing price against what the market will bear. If the market is bad, it might be better to rent out the home and list it when market conditions change than sell and lose money.
4. You Factored Upgrades into the Asking Price
You may have put $50,000 worth of work into the home, but you won’t always get it back out in a dollar-for-dollar exchange. If the home is far fancier than others in the neighborhood, buyers may be reluctant to bite, because they know homes in the area aren’t worth the inflated price. Let return on investment guide you when selecting what upgrades to make. When you go with projects that add the most value, you’re likelier to recoup your expenses.
5. Algorithms Set the Price
Websites like Redfin or Zillow can suggest a market value, but it’s not accurate or complete. Algorithms don’t know what upgrades you’ve made or the nuances of the local market. A real estate agent is a far better tool for pricing a flipped home.
6. Real Estate Agent Strategy
Going without a real estate agent is a mistake when pricing a flip. Agents know the market and they have proven sales strategies. Work with one and you’re less likely to overprice a luxury flip.
While it’s smarter to work with a real estate agent than try to sell a luxury home yourself, you’ve got to find the right real estate agent. Some agents pitch high selling prices in the hopes of winning your business. If the home has no interest, they’ll drop the price later on.
With the right upgrades, a flipped luxury home has the potential to deliver big profit, but only if you can get the pricing right. When you’re seeking financing for your next project, look to Sherman Bridge for a loan to complete your real estate flip. We know that lower rates bring a higher ROI for real estate investors, which is why our rates stop where competitor rates begin.