When a luxury home goes on the market the selling procedure is somewhat different than it is for the typical house. For one thing, real estate agents don’t put out balloons and stage an open house. They put out wine and cheese and reach out to their fellow agents.
High end homeowners generally don’t want a lot of looky loos—people who just want to see what a multimillion dollar mansion looks like and aren’t interested in making serious offers. Many of these homeowners have their safety and privacy to think about as well. A celebrity or famous businessperson has added incentive for keeping their real estate transactions as private as possible.
For these reasons, what is usually a fairly mundane step in a typical real estate purchase process, can become a difficult hurdle for luxury home transactions—the appraisal. Mortgage lenders require the value of the home being purchased to be assessed to ensure it is worth the amount of the loan and much of this value is determined by what comparable homes in the area sold for within the same time period.
The problem resides in the fact that in most areas of the country, luxury homes—valued anywhere from $1,000,000 to multimillions—don’t go up for sale very often. If other comps in the area are for homes that only sold for $500,000, it makes appraised value difficult to determine.
Another factor in determining an appraisal amount is the quality of materials involved in its construction, and this presents a problem for the same reason. If there are no similar materials used in neighboring homes that sold recently, the appraisers can be in the dark as to the home’s actual value. This can cost homebuyers hundreds of thousands of dollars.
Most lenders of so-called “jumbo” mortgages—those above $625,500—require two appraisals on properties over $2 million. When the appraisals come in too far apart the lender will either have the appraisers comment on their results or take the lowest of the two values.
Unless the buyer is able to pay cash, appraisal disparities are a very real issue. In this situation the best thing the seller and buyer can do is come together and negotiate a price that’s fair for both parties while making up the difference in the appraisal.
Fortunately, Florida homebuyers and sellers have an additional option, the Rabideau Klein law firm’s new service, Cloaked Closing®. It provides additional safeguards that potentially helps protect against unfair appraisals, conceals ownership identity, and can potentially save tens of thousands of dollars in real estate property taxes. Located in Palm Beach, the firm now offers a luxury home closing methodology, complete with trademarked contract documents, that was created as a result of collaboration with some of the savviest real estate investors in the world. Basically, they found that by keeping their transactions invisible, they gained a significant fiscal advantage.
Contact Florida Bar Board-Certified Attorneys David E. Klein, Esq. and Guy Rabideau at Rabideauklein.com for more information about Cloaked Closing® or any upcoming Florida closing. The firm has been advising home owners in their luxury real estate transactions in the Town of Palm Beach, across the Palm Beaches and throughout Florida for over twenty years. Contact Rabideau Klein to discuss the legal implications of your next property transaction.