Luxury home buyers face low inventory, respond competitively
By Lisa Lee
Island-wide, home prices are rising and inventory is shrinking, increasing competition among buyers.
While many new buyers are experiencing sticker-shock and disappointment at declined offers, this is not news to today’s luxury home buyer, says Glen Fujihara, a Fine Homes Premier Specialist and partner at Prudential Locations.
“The luxury home buyer is more sophisticated,” he says. “These buyers are well-informed and understand the dynamics of the market. Good properties are getting harder to find and they receive offers right away. Today’s luxury buyers realize the need to submit higher offers that are more competitive.”
Luxury buyers are looking for the “right” property and for most, says Fujihara, this means similar criteria. With today’s low inventory and market demand, when a property with desired specifications hits the market and is priced correctly, it is receiving multiple bids.
Fujihara, who has been a REALTOR® on Oahu for over 34 years, explains: “This has happened every time we’ve experienced these market dynamics.
Market cycles are repetitive. We saw similar dynamics in the market in 1977, ’78, ’87 and ‘88 when there was a strong seller’s market and inventory levels were very low.”
While the market may be more competitive overall, Fujihara says that the home-buying process is much less complicated for luxury buyers than others, because they are usually savvy home buyers with either cash offers or established, long-term relationships with their financial institutions.
The level of sophistication of the buyer helps the luxury home buying process go smoothly, as well. As an example, Fujihara describes a recent client’s situation:
“When he decided to purchase, everything was mapped out and very clear: He knew the type of property he wanted and was realistic about his budget. He was closing the sales of two properties, so he knew the exact amount of cash (he would use). He had established bank relationships and all his paperwork was in place.” As a result, they were able to quickly identify the right property and close the deal smoothly.
In the competitive market, there are a few variables that can give luxury home buyers an edge. Fujihara says that it always helps to be a cash buyer: “In a rising market like today’s, appraisals come in short because they look at historical sales data rather than what the market will bear.” A cash offer makes for a cleaner transaction.
The velocity of the sale also makes a difference to most sellers. “A 30-day sale is more attractive in situations that benefit from a quicker closing,” says Fujihara.
At the end of the day, however, the greatest advantage a luxury buyer may have is their agent. A real estate agent’s experience, knowledge and professional relationships can mean the difference between winning or losing a bid.
Fujihara offers this advice: “If you’re a luxury buyer, be sure you’re selecting the best agent to represent you. Having a collaborative agent that has good, long-term relationships with other luxury agents is paramount. The selling agent needs to know that your agent can follow through, that they can complete the transaction and do it smoothly and quickly. The two agents need to work in concert to bring their clients together to close the transaction.”
He notes that most agents have assistants who also play a critical role, and their knowledge and efficiency can affect the transaction as well.