With Supply Chain Issues Causing Delays, Buyers Are Willing to Pay a Premium for Fully Furnished Homes
Demand remains strong for real estate in the U.S., with an October report from Redfin showing that during the four-week period ending on October 10, one-third of homes are selling within one or two weeks of being listed, up from 30% during the same period in 2020.
Move-in ready homes are particularly appealing to buyers now, especially those in the higher end of the market. And with pandemic-induced supply chain issues causing massive delays in the shipping of building materials and home furnishings, and builders in short supply, more buyers are going a step further and seeking out homes they can purchase fully furnished.
“For many luxury buyers, they have the funds readily available, they’re doing cash transactions, and they want to buy what they see,” said Alex Martinez, a broker with The Agency in Washington, D.C. “People are interested in the personality of the house, and they’re buying the whole experience of the property. They end up falling in love with how it’s furnished.”
This is particularly the case for buyers of vacation homes, he added, who may be planning to rent out the property and don’t want to wait for furnishings to be delivered.
And in new developments, more buyers are now willing to pay a premium on units that come both fully finished and furnished.
“We have several units in the same lines, and the ones that are furnished with all the details are selling for 15% to 30% more than the unfurnished ones,” said Edgardo Defortuna, CEO and founder of Fortune International Group in Miami, developer of the Brickell City Centre development. “Even though prices significantly increase when the units are furnished, people are buying them.”
Sellers of fully-furnished, luxury homes may have an edge over sellers of properties that require more effort, but they must consider whether it pays for them to include furniture and other decor in the sales transaction.
For sellers prepared to part with their belongings and start fresh, selling their homes furnished can be a smart way to avoid the hassle of trying to sell decor to a third party. Their best bet is to keep the furniture sale a separate transaction from the sale of their home, as trying to sell everything together can cause complications for listing the home, as well as for buyers using financing.
“It tends to muddy the waters—we’re not selling furniture, we’re selling real estate. But this is coming up with buyers more and more,” said Michael J. Franco, a broker with Compass in New York.
The Appeal of Furnished Homes
The pandemic has played a major role in the appeal of furnished homes to luxury buyers, who today are increasingly seeking out properties that provide “instant gratification” and don’t require extensive work.
Buyers of vacation properties in particular want homes they can start enjoying immediately, without having to deal with finishing units and hiring designers themselves.
“Move-in ready conditions help us to sell our inventory much quicker,” said Manuel Grosskopf, CEO of the Chateau Group, a real estate development company in South Florida. “Buyers don’t want the headache of dealing with all the contractual issues—they want to buy the unit and start enjoying it the next day.”
Meanwhile, supply chain delays are discouraging buyers from furnishing new property investments from scratch, and making fully furnished homes all the more appealing.
“Today you’re looking to wait eight to 12 weeks at least—if you’re lucky—to get the furniture you want,” Mr. Grosskopf said.
At the high end, there are also aesthetic reasons that sellers may be inclined to negotiate the sale of a fully-furnished property.
“In the luxury market, a lot of sellers have used interior designers and architects, and everything has been designed to be specific to the house, so they’re not going to take [furnishings and decor] with them,” said Nurit Coombe, a broker with The Agency in Washington, D.C. “They’re excited to go through the process again with a designer on a new house, and mentally they love the idea of keeping their home the way they created it. It’s an art piece.”
Including furnishings and decor in the sale of a home can certainly complicate the transaction, but reluctant sellers may find there is financial incentive to do so.
“I explain to sellers that if they’re not planning to take these things with them, the chances of selling to a third party are slim to none, and it’s very hard to even donate to charities right now,” Mr. Franco said. “They may want to strike a deal with the buyers instead.”
That said, Mr. Franco advised keeping the negotiations for furnishings separate from the negotiation for the home itself. Sellers should discuss with buyers precisely what level of move-in ready they’re seeking.
“There are people who want the home as it is down to every fork and knife, others want it with furniture, and others want it move-in ready but able to customize themselves,” said Christine Martinez de Castro, director of sales and marketing for the Miami luxury developer CMC Group. “There are different tiers in terms of selling a furnished unit.”
Strategies for Sellers
Luxury buyers today are well-informed when it comes to quality, so sellers of furnished homes should be sure to highlight the types of products and decor they’re offering as part of their home sale.
“The domestic buyer is very educated and looking closely at details—they want the highest level in terms of quality,” Ms. Martinez de Castro said.
For today’s high-end buyers, this tends to mean sophistication and simplicity in finishings, furnishings and decor.
“It’s a lot less about being flashy, and more about great quality and attention to detail,” Mr. Defortuna said. “Buyers aren’t looking for very elaborate or intricate designs. They want high-quality lighting, materials and furniture, and colors adaptable to whatever accents they want to place in units.”
Sellers of fully furnished homes should keep the negotiations for the sale of their furnishings and other decor separate from the sale of their home itself, real estate experts say, in order to ensure both transactions go smoothly. Plus, trying to include the estimated cost of the furnishings in a home’s asking price can drive that price up too high, scaring off potential buyers.
“Often if they’re including the furniture the sellers want to increase the price too much, and it becomes prohibitive to list the home with the furniture,” Ms. Coombe said. “I tell the seller we can include a remark on the listing that furniture can be offered as a separate discussion.”
Including furniture in the asking price can also pose a major hurdle for buyers using financing, as many lenders will have guidelines that don’t allow furnishings to be part of sales contracts.
“It’s best left outside the transaction, and handled as a separate negotiation between the two parties or through a broker,” Mr. Franco said.