Updated July 23rd, 2019
Maybe you're just curious about what it'd be like to sell a million-dollar luxury home or maybe you're lucky enough to own one. Either way, the luxury housing market is its own beast. Everything from how homes are marketed to the commission listing agents receive differs from selling a normal home.
If you want to sell your million-dollar house — hypothetically or not — you need to know how much the process will cost you, ways to save money, and how to get top dollar for your luxury home. The first step is connecting with a top-rated real estate agent who knows the luxury market and will truly earn the commission you pay.
Here's what you need to know about listing an expensive home, selling it for top dollar, and how much you'll pay in commissions.
How are luxury real estate commissions traditionally structured?
It's not always clear to sellers how much their listing agents pocket from the sale of their house.
Here's how it works:
A broker typically employs a group of individual real estate agents, who compete for your and other sellers' business. The listing agreement sellers sign, which puts a house on the market, usually stipulates that only a broker can collect fees and pay out commissions on the pending sale.
So your money goes to the listing broker, who divides the money between their listing agent, the buyer's broker, and the buyer's agent. With a typical home sale, total commission will be around 6% of the sales price and be split down the middle between listing and buyer's agents. However, that adds up quickly when a home costs over a million dollars.
For example, if your house costs $2,000,000, you'll pay $120,000 with the 6% structure. Luckily, most luxury real estate agents understand how extreme that cost is, even for millionaires. Many will offer slightly reduced rates for sellers with high-value homes — but chances are you'll still be on the hook for a hefty chunk of change.
Who pays the agents (and how much)?
In most cases, sellers cover the commission fees for both the listing and buyer's agent. Depending on the selling route a homeowner takes, they could be saddled with a higher cost at closing than they expect.
Let's say three million-dollar homes on the same block are up for sale for exactly $1 million each. The first seller, Arnold hires a luxury agent who asks for 5% commission, 2.5% for the listing agent, and 2.5% to the buyer's agent. Assuming Arnold receives an offer for asking, he'll pay $50,000 in total to the agents. Ignoring smaller closing costs, he'll walk away with a profit of $950,000.
Now let's look at the second seller, Betty. To save money on commissions, Betty decides to list her home For Sale By Owner. However, according to the National Association of Realtors, FSBO homes only sell for about 75% of their value. Betty will get frustrated and eventually accept an offer of $750,000. While she doesn't have to pay a listing agent, she still must cover the buyer's agent 2.5% commission ($18,750) giving Betty an overall profit of $731,250.
The third home seller, Charles uses a full-service, low-commission agent, like a Clever Partner Agent. For homes over $350,000, Charles's agent charges a 1% listing fee. Combined with the buyer's agent commission, Charles pays 4.5% in commission, or $45,000 on her million dollar listing. When the deal closes, Charles has $955,000 for the sale of her house.
How can I save money selling my home?
Even if you're not a millionaire, Clever can help you sell your home for a larger profit. The agents we partner with offer full service for a flat $3,000 listing fee, or just 1% if the home sells for more than $350,000.
What a Million Dollar Home Looks Like in 5 Major Cities
Across the United States, a million dollars will buy homes of different sizes and with a variety of upgrades. To understand what price tag to give your home, here's a look at what types of homes are listed at a million in different real estate markets.
According to July data from Zillow, the median home value in Los Angeles is $688,700. So even though L.A. is known to be an expensive market, home buyers still expect to get something special for $1,000,000. Within the city limits, most houses in this price range are three-bedrooms with at least two bathrooms.
New York City
Another notoriously expensive real estate market, NYC has a median home value of $674,100. Most of these are condos or single-family homes that are under 2,000 sq.ft. Most are at least two-bedrooms and have two to three baths.
A million dollars will go a lot farther in Dallas. Despite being a major metropolitan area, real estate prices are reasonable compared to national standards. The median home value in Dallas is $212,200. It's not uncommon for million-dollar homes to be new construction, four-bedroom homes with a swimming pool.
Despite having a reputation for opulence and extravagance, as a whole, Miami's median home value is a reasonable $335,100. Proximity to water determines just what a million dollars gets home buyers. Properties on the water are mostly condos around 2,000 sq.ft. These buildings offer access to amenities like tennis courts and pools and hot tubs. Going a few blocks away from the water, million-dollar homes are five-bedrooms over 3,000 sq.ft.
Not known as a wealthy city, Wichita, Kansas provides a good look at what a million dollars will get buyers in Middle America. In less expensive markets, homes in this price range are at least 5,000 sq.ft., five-bedrooms with four to six bathrooms. They also have one- to two-car garages.
5 Tips for Selling Your Million-Dollar Home Fast and for Top Dollar
With homes over a million dollars, losing even 1%-2% off your asking price means missing out on quite a bit of money. Here are some tips to make sure your home sells quickly and for more money
1. Understand the Local Market
Every real estate market has its own trends and idiosyncrasies. Buyers in your area might expect you to cover more closing costs than is typical. Perhaps million-dollar homes sit on the market longer because there are fewer buyers. Knowing the challenges of your area will help you find solutions.
2. Know the Right Time to Sell
There are ebbs and flows to every market. While most home buyers go house hunting in the spring and summer, that's not written in stone. If you can get 5% more by waiting to list your house a month, it will definitely be worth it.
3. Play Up the Amenities
From a killer master suite to a state-of-the-art game room to access to a golf course, luxury homes have some awesome amenities. Have a conversation with your realtor and compile a list of everything your house offers. Then come up with a plan to market those amenities and show a buyer it's their dream home.
4. Stage Your Home
When your home is in the million-dollar range, buyers expect to see a beautifully staged home. They want to feel glamorous the moment they step foot into the living room. Talk with your agent about the best way to stage your house for an upscale market.
5. Find a Knowledgeable, Luxury Real Estate Agent
Everything from how high-end homes are marketed to the buyers they attract is different than an average real estate transaction. You want a luxury agentwho knows how to appeal to buyers who are serious and have the funds to close the deal. They need to have creative ways to stand out in a market where buyers are used to being wowed.
With a Clever Partner Agent, you can save even more money selling your home. Our Partner Agents have the local knowledge you need to find a buyer who will pay top dollar for your luxury home. Plus, you'll receive their full services for a lower commission of 1%.
Contact Clever to find a Partner Agent in your area.
FAQs About Selling Million-Dollar Houses
There are always questions when selling a home, but million-dollar houses come with their own unique concerns. Here are the answers to common questions about selling a million-dollar home:
Is a 4,000 square foot home a mansion?
What's considered a mansion is subjective. In some markets, any house over 5,000 sq.ft. is a mansion, but in areas known for lavish properties, a home needs to be at least 10,000 sq.ft. to qualify.
Mansions also need to have expensive or uncommon amenities that set them apart with buyers. We're talking features more impressive than a swimming pool. Million-dollar mansions may have bowling alleys, elevators, or extensive gardens.
To give you a better idea of what square footage it takes to be a mansion, here's how big famous mansions are:
- Fallingwater (Frank Llyod Wright): 5,330 sq.ft (main house), 1,700 sq.ft. (guest house)
- Playboy Mansion: 21,987 sq.ft.
- Hearst Castle: 90,000 sq.ft.
- Mar-a-Lago: 62,500 sq.f.t
- Graceland: 17,552 sq.ft.
- Pabst Mansion: 20,000 sq.ft.
How much does a mansion cost?
Countless factors go into the price of a mansion. Aside from square footage, features, acreage, and even the notoriety (or infamy) of the property influences the overall cost. Since these homes are rarely sold, when they do find a new owner, it's not uncommon for the new sales price to be extremely higher or lower than the last sale.
Here are some recent mansion sales or listing prices:
- Playa Vista Isle: Sold at auction in 2018 for $42.5 million ($115 million below asking)
- Playboy Mansion: Sold for $100 million in 2016
- The Chartwell Estate (The Beverly Hillbillies Mansion): Listed at $195 million as of June 2019 (originally listed at $245 million)
Do I need a lawyer to sell my home privately?
It's common to hear a luxury home was sold through a private sale. With a private sale, the homeowner finds a buyer without the help of a realtor and completes the sale by themselves. They typically sell the home to someone they know or who's part of their extended network.
Even if you know the buyer, it's essential to have someone representing your interests during the transaction. A real estate lawyer can help you by drafting purchase contractsand making sure the buyer fulfills their side of the deal. When you're dealing with property work millions, having a professional on your side can mean the difference between making a profit or losing thousands.
In some states, you're required to complete your sale with an attorney. These include:
- Washington, D.C.
- New Hampshire
- New Jersey
- New York
- North Dakota
- Rhode Island
- South Carolina
- West Virginia
Don't overlook another key player: a real estate agent. While a lawyer understands the legal aspects of selling a home, a realtor understands the business side. They can negotiate the best deal for your house.