Northwest Business Magazine

What Luxury Buyers Want in Today’s Market

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Whether you’re looking for a modest $1 million retreat in a prime subdivision or an $11.5 million lakeside estate, now is the time to find a unique property in our region’s top communities.

This magnificent double-staircase foyer is just the beginning of the plush amenities found inside this Lake Geneva, Wis., waterfront estate, listed by The Rauland Agency. Opposite page: The exterior of this fine home, which sits on more than 200 feet of prime lakefront.

This magnificent double-staircase foyer is just the beginning of the plush amenities found inside this Lake Geneva, Wis., waterfront estate, listed by The Rauland Agency. Opposite page: The exterior of this fine home, which sits on more than 200 feet of prime lakefront.

Talk about impressive. With seven bedroom suites, 13 bathrooms, 214 feet of lakefront, an elevator and five fireplaces, this lakefront estate is an idyllic family retreat. Complete with a grand staircase foyer, two kitchens, a swimming pool and a 2,300-square-foot guesthouse, this property is also an entertainment showcase. Did we mention the panoramic views and private pier on Geneva Lake? It’s yours for just $11.5 million.

“This home would be appropriate for entertaining heads of state,” says Bob Rauland, listing broker/owner of Rauland Agency, 118 Kenosha St., Walworth, Wis., and the Realtor who has listed this property.

Purchasing a lakeside estate with 3.2 acres and more than 18,000 square feet isn’t for the faint of heart, or the light of wallet. There’s a perfect buyer for elegant and unique homes like this one. Even in an economic recovery, high-end real estate is in demand.

But the sector hasn’t remained unscathed. Inventories of high-end estates are still unusually high, say local real estate agents; sales are still slow and foreclosures are still moving through the system. The good news, however, is that the market is gaining traction. Now is the time to buy, and no matter where you search in our region, some pretty impressive properties are on the market.

Who’s Buying?

High-end buyers vary by region, but in the northwest suburbs, they’re mostly professional athletes and businesspeople based in Chicago and the suburbs – the kind of people who live, work and play in the city, but desire a secondary retreat for weekends, holidays and family or business vacations.

“It’s people in manufacturing, professional people – attorneys, doctors – who are successful and own their own companies,” says Rauland. “They own computer-related firms, accounting firms, law firms, medical firms.”

What they seek in a secondary home is a matter of taste, but in general, these are spacious homes, with plenty of rooms for extended family members and guests. They come with ample entertainment rooms, such as home theaters, and grand dining rooms. And, they’re equipped with outdoor living spaces, such as patios, pools and, if set near water, piers and garages for storing water toys.

These are custom dwellings, designed by architects and interior designers, with the homeowner in mind.There’s nothing “cookie cutter” about these homes. Chances are, each owner has added something new, with personal tastes reflected in flooring, kitchens, bathrooms and social spaces. Determining the value of an exquisite home is really more of an art than a science.

“It’s not a subdivision, where you look at a similar model and what it sold for, and here’s how yours compares,” says Don Prigge, managing broker with Baird & Warner, 6330 Northwest Highway, Crystal Lake. “When you’re looking at an extraordinary property, with lots of open space, two-story ceilings, there’s really no comparison. You have to know what the market will bear.”

The market for luxury homes is largely a product of location, and it varies widely across Chicagoland. At the high end is Winnetka, on Chicago’s North Shore, where the median home price is $952,000. There, you’ll find more than 1,600 homes valued over $1 million, and nearly 3,000 more above the half-million mark, according to the U.S. Census. By comparison, all of McHenry County has less than 1,000 million-dollar homes, and a median home price of $233,000. In between, Barrington has about 100 homes over the million-dollar mark, and a median value around $460,000.

“We’ve got some listings up to $6 million,” says Prigge, whose office focuses primarily on McHenry County. “But, when you take a look at a wide array, anything over 3,000 square feet counts as high-end, and then you’ve got properties that are 20,000 square feet.”

No matter where you look, our area has some distinct hotspots for luxury homes.

Luxury Properties in Lake Geneva

Wisconsin’s Geneva Lake area has long been a haven for Chicago’s wealthy elites. Successful businesspeople, including Montgomery Ward, William Wrigley and Richard Sears, made their summer homes here. Today, leaders of industry still enjoy secondary homes at this lakeside retreat. Along these shores, you’ll spot tech entrepreneurs, business professionals, sports stars and many others who enjoy a family retreat by the water.

Don’t be fooled – access to the water is increasingly difficult, as old, rambling estates are subdivided to create new ones with just a touch of lake access. Typically located along Snake Road or Basswood Drive, a sprawling estate may be as large as 30 acres, while a lakefront property is probably less than five. There are also lakefront associations, in which groups of neighbors collectively own and share lakefront and piers.

“The lakefront estates are truly estates as we’d think of them, with lake frontage that could be 200, 300 or even 1,000 feet,” says Rauland, who’s represented buyers and sellers of real estate for 54 years. “And then, you have properties that are in lake associations, and have maybe 50 feet, 75 feet, even 100 feet. Buena Vista, one of the oldest on the lake, owns lake frontage, and residents of Buena Vista Club may have their own pier.”

Prices largely depend upon your proximity to the water. A luxury lakefront home may start around $2.5 million, says Rauland. High-end lakefront property here tends to begin at $5 million. Currently, the highest lakefront listing is $12 million. Land itself goes for a premium, although prices have dipped from their highs in the mid-2000s.

“In 1956, the average price of lakefront property per foot was $159,” says Rauland. “Then it rose, and by 1985, it was $2,500 per foot. Ten years later, by 1995, it was about $20,000 per foot. It hit a high around $30,000 per foot in 2005.”

These properties are alluring for their waterfront amenities, especially in the summer. Because many of these homes are secondary residences, their owners seek amenities that are family- and guest-friendly. Above the $5 million list price, buyers often require 7,500 square feet or more.

“Generally, it would have a minimum of five bedrooms, with six baths,” says Rauland. “Recreational areas, especially on the lower level, might have a theater, soda fountains or electronic gaming systems – especially if you have children or grandchildren. They’re looking for someplace they can keep their boats, sailboats, ski boats, other watercraft, and the total ability to entertain their family and guests.”

Take, for example, the $11.5 million home recently listed by Rauland. The estate encompasses 214 feet of lakefront, a 2,300 square-foot guesthouse and an 18,000-plus-square-foot home.

Inside are seven bedroom suites, 13 bathrooms, a grand double-stairway foyer, two elevators, five fireplaces and many custom finishes, such as Gracie silk-screened and handpainted wallpaper, black granite and marble floors, stained and leaded glass windows, and more than 10 miles of hand-cut moldings. Its architecture features loggias, rotundas and multiple balconies. The downstairs entertainment space appeals to the whole family and includes a commercial soda fountain.

“If you wanted to have people over for an elegant dinner party, this grand entryway would take their breath away,” says Rauland. “Everything is deluxe, and the entertaining spaces of the home open to the poolside patio, affording you even more options for truly legendary affairs.”

Those shopping for premium lakefront real estate are rarely deterred from buying an ideal property. If you can’t find what you want, there are ways to build it – given the right location.

Country Estates in McHenry County

Unlike Lake Geneva, where development has claimed most of the prime property, McHenry County has many places to build a quiet country retreat. High-end buyers tend to flock toward Bull Valley or the subdivision around Turnberry Country Club, in Lakewood. Outside suburban developments, there’s ample open space and farmland, too.

“The huge advantage we have is that it’s a lot cheaper here than it is on the North Shore,” says Prigge, whose agency serves luxury buyers around Chicagoland. “The acreage is larger, by far, than in many other areas, and we have accessibility to the train. That’s alluring to many buyers.”

Of the properties currently on the market here, about 90 cost $750,000 or more. The highest costs $6 million.

“Of these available properties, 11 are over $2 million,” says Prigge. “Generally, your sweet spot is $750,000 to $2 million, most around $1.3 million. We’ve also had a lot of activity in the $400s to $500s range.”

Pricing strategies differ in various markets, as do attitudes of the buying clientele. For example, in McHenry County, many buyers like the feeling of a nice home in an upscale subdivision.

“When you compare this area to Barrington and the North Shore, it’s a different game,” says Prigge. “You don’t get into the biggies out here. We don’t have a lot of extravagant properties like they do in the North Shore.”

Buyers in the Barrington area tend to be corporate types, Chicago-area business executives seeking secondary homes. They want open space, but they also want entertainment areas, such as home theaters, pools and gourmet kitchens for guests. Just remember, says Prigge, that a $6 million home and a $750,000 home are very different.

Located off U.S. Route 14, between Harvard and Woodstock, the county’s current top property – at $6 million – is a lavish retreat set on 20 acres. Within its 20,000 square feet are seven bedrooms, nine full bathrooms, three half-baths and a six-car garage. The custom amenities inside shine: a European gourmet kitchen, additional kitchens upstairs and downstairs, two elevators, a helipad option, built-in bureaus, a basement social hall. Outside, two patios and a built-in pool overlook a private pond that’s stocked with fish.

By comparison, a $1 million home in Crystal Lake feels modest, but its custom touches are no less a portrait of luxury. The 7,200-square-foot home contains five bedrooms and five full bathrooms, with a three-car garage. Premium surfaces include Brazilian cherry wood, marble, slate and Travertine. Downstairs, the wet bar contains a double oven, fridge and dishwasher; a custom wine cellar around the corner holds 1,500 bottles.

Buyer’s Market

By many accounts, real estate on the lower end is showing steady signs of improvement. But on the higher end of things, from $750,000 and up, the recovery is just beginning.

“I don’t want to say it’s negative, but to a certain degree, the high end is not yet eventful,” says Prigge. This past May, his office celebrated its best month in several years, and he says the entire company is on track to selling $6 billion for the year. But in high-end real estate around McHenry County, where about 90 homes are currently available, local agents have sold just 12 homes listed over $1 million in the past year. Only nine sold the year before.

The problem, says Prigge, has to do with absorption rate – a measure of how fast housing inventory moves. Right now, it’s still catching up from the recession, which bottomed out in McHenry County around 2011.

“If you sell one home a month, and you have 89 on the market, how long does it take to clear that market? That type of rate doesn’t indicate a seller’s market yet,” says Prigge. “Where we’re experiencing a seller’s market is in the $200,000 to $400,000 sweet spot. That’s just rocking and rolling.”

The same is true in Kane County, where about 2,800 properties in that range sold this past year, according to public data gathered by Metrostudy, a national group with an office in Elgin that compiles housing market data. About 60 properties above $700,000 sold last year.

In Lake Geneva, sales are more robust now than in the recent past, but they have not been immune to the economic downturn of the recent recession.

Foreclosures in Kane County are finally clearing the market. Last year, about 20 bank-owned properties valued over $500,000 were sold, according to Metrostudy. That’s just a fraction of all bank-owned properties sold last year.

In McHenry County, market dynamics have created opportunity for intrepid homeowners. Prigge says he’s seeing a noticeable jump in executive homes and rentals, which are ideal arrangements for temporary transplants.

“A transferee, whether it’s high-end or low-end, might come in for a year or two and then move,” he says. “They’re not comfortable with the appreciation factor. With the recession, for buyers in that upper-end, it’d be silly to invest in a home that you can’t unload easily.”

Around Lake Geneva, fewer executive home rentals are available, mostly because this is a summertime community, says Rauland. The best time to rent is also the best time to use the home. “If I’m planning on going there in June, I want it available for myself, not somebody else,” says Rauland. “It’s generally available to the owner, to the owner’s adult children and families, to very good friends or corporate relations.”

When it comes to selling and buying luxury properties, the rules of marketing are a bit different than they are for middle-class dwellings. The pool of people who can afford a million-dollar home is only so big.

“There’s an old adage, ‘For every home there is a buyer and for every buyer there is a home,’” says Rauland. “A lot of people are looking for that $2 million to $5 million lakefront property with a newer home and a minimum 100 feet of frontage. There are fewer buyers who are in the market for homes over $5 million.”

As a general rule, realtors show luxury homes by appointment and don’t hold open houses. Realtors follow the age-old rule of business: It’s all about who you know. One good referral may be all it takes to find the right buyer.

“What we look for is people who are already here, who have friends who say, ‘I’d like to be on Lake Geneva,’” says Rauland. “So, people who are here will refer us to someone who’s looking to buy. When we run an ad in the Wall Street Journal, we’re not just looking for you, the buyer. We’re looking for people in this area to know this property is available and to recruit the high-caliber buyer who’s a personal friend.

“They’ll say, ‘I really like your home on Lake Geneva, and I’d like to have something like that.”

But really, wouldn’t we all?

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