The Chicago-area luxury home market has remained largely immune to the dramatic market shifts in other segments of residential real estate. Demand is high, while supply is low. Buyers are getting back to basics, taking the time to find the right home to suit their wants and needs — regardless of how long it takes to locate it.

Agents who specialize in luxury must be resourceful and creative to cater to the nuances of this market segment. That may mean sniffing out off-market listings or navigating complex bidding wars. Unlike most traditional property transactions, price and interest rates are often secondary factors to things like high-end finishes, the architect who designed the home or amenities such as putting greens or department store-sized closets.

On the North Shore, luxury homes are selling within 60 days, compared to six months or more before the pandemic, said Mona Hellinga and Flor Hasselbring, luxury sales specialists with Berkshire Hathaway HomeServices Chicago. There’s a lot of buyer interest in their North Shore territory and not enough inventory to satisfy demand, they said.

Just a few years ago, the “luxurious home that someone could buy for $2 million or $3 million on multiple acres was staggering,” Hellinga said. “People were getting very good buys on the North Shore. Now, there’s more competition for that same product, and prices have gone up with it.”

State of the luxury market

Lack of inventory doesn’t paint the full picture of the market, according to Ryan Preuett, global real estate advisor with Jameson Sotheby’s International Realty in Chicago. His clients fall under the ultra-luxury category, the $5 million-to-$30 million price range. The question of inventory, he said, comes down to perspective.

“If you have 25 options that you’re not excited about, you’ll say there’s no inventory — even though there’s 25 options,” he said. “If you had four options and really loved two of them, you’d look at it differently.”

Almost every listing Hellinga and Hasselbring had last year attracted multiple offers, and it wasn’t always the first week of the marketing period, they said. “If a home was on the market for 30 to 60 days, we still saw multiple contracts, and that has not stopped in our business,” Hasselbring said. “If something is priced appropriately, it usually sells relatively quickly.”

It also helps if the home is clean and organized, has neutral colors on the walls, and has hardwood floors and a current aesthetic. They have a mantra, “clean sells,” because it’s true.

Although every situation is different, Hasselbring said homes are typically selling at a high percentage of asking price or above. Year-over-year, she noted the average sale price of homes listed at over $2 million has increased 29%.

In the city, Anne Fan, senior broker with Compass Chicago, has seen a noticeable increase in demand with workers returning to the office and wanting to live closer to their jobs. However, she said sellers are less motivated to list their properties, because they know it’s no longer a seller’s market. Plus, with low inventory, they might not find something they want to purchase.

Fan’s clients are typically looking for luxury condos just under $1 million. Unlike buyers of ultra-luxury properties, some of the buyers in this market segment are concerned about rising interest rates. Fan noted they’re taking a wait-and-see approach to watch where the rates land before they make a commitment.

“With the lower inventory that we’re seeing, I think the right-priced homes will continue to move,” Fan said.

Features luxury buyers seek

Fan said she is witnessing a lot of active buyers. They want condos with lots of open space, outdoor living areas, smart technology and high-end appliances and finishes, as well as the convenience of having fantastic restaurants, shopping and entertainment within walking distance. “Buyers are interested in lifestyle amenities, buildings that have coordinated events,” she said. “They’re more focused on lifestyle these days.”

On the ultra-luxury side, the scale of features buyers want in a home has broadened, Preuett said. He has seen closets in primary suites that resemble department stores on Oak Street and cost more than a high-end kitchen. He sees buyers looking for home gyms similar to those in a boutique hotel, or home offices reminiscent of high-end libraries, with ornate woodwork, indoor golf simulators and outdoor putting greens that, in some cases, are replicas of the owner’s preferred country club.

“In general, the things people do outside of home, they’ve created the equivalent substitute within it,” Preuett said. “That escalated during the pandemic, when people were spending a lot of time at home. In the back of their minds, they were wondering, ‘Could this happen again in the future, and if so, are we prepared for that?’”

Hellinga and Hasselbring have seen it, too. They said the pandemic put a focus on recreational lifestyles. They’ve had buyers seeking homes with pools, media rooms, workout rooms and spas in separate areas of the home. In addition, they said buyers want multiple offices and kitchens, highly customized closets, heated bathroom floors and intricate millwork.

Hidden gems

Before searching for properties, Preuett gets an idea of a client’s taste by asking, “What’s the most interesting place you’ve ever seen here or anywhere?” Some of the ways he combats low inventory are by letting owners of off-market properties know his clients will pay a premium for their home, browsing the Private Listing Network for exclusive opportunities, and networking with other brokers and developers to learn about one-of-a-kind luxury residences that may be under the radar.

“Sometimes you’ll find raw space in a spectacular building someone bought and never got around to developing,” he said. “It’s not marketed, because there’s nothing to market. It’s not going to look good in a listing. It might take getting an architect or designer to do napkin math in terms of showing a buyer what this space could be in construction or design.”

Preuett’s also seeing buyers purchase neighboring properties in areas like Lincoln Park to build one large home where two or more used to be. Lately he’s been tasked with finding second, third and fourth homes for clients expanding their portfolios. They want vacation properties in other cities where the entire family can meet and spend time together.

“They’re valuing the memories they’re going to create above finding the best deal that they’ve ever had on a real estate transaction,” he said. Their main considerations when choosing a vacation property are how many friends and family members they can host, how easy it is to get to and what time of year they’ll want to be there.

Market trends

Hellinga and Hasselbring said “as-is” clauses on contracts are becoming more common. In other words, the seller is not going to correct any defects in the home. However, the buyer can still do an inspection, Hellinga said, and if it reveals major defects in the home, the buyer can choose not to move forward.

They are also noticing that more sellers want privacy — something Preuett has seen, too. Over the past two years, Hellinga and Hasselbring have sold several upper-bracket homes through the PLN for sellers who choose to be discreet. They might be going through difficult times or personal matters, and they don’t want everyone to know that their home is for sale, Hellinga said. The property gets exposure and sells, while the seller maintains their privacy.

That is not the only benefit of the PLN, though.

“Sometimes when the home is getting ready to be listed, it gives buyers the heads-up that it’s coming on the market and can drive interest, create premarketing intrigue and demand in the home,” Hellinga said.

When a luxury property draws a lot of interest, Hellinga and Hasselbring are seeing buyers do two things to make their bids attractive and win a potential bidding war. One is paying cash so the seller doesn’t have to wait for the mortgage to become approved, and the other is providing the seller with their desired closing date.

“In some cases, we’re going to contract but not closing until four to six months later,” Hellinga said. “In some cases, the sellers have a major family event like a wedding or graduation to get through. They want to take advantage of the strong market and get their home sold and that process over with and know they’re still closing when it’s best for their family.”

Expert sources:

Anne Fan, senior broker with Compass Chicago

Flor Hasselbring, luxury sales specialist with Berkshire Hathaway HomeServices Chicago

Mona Hellinga, luxury sales specialist with Berkshire Hathaway HomeServices Chicago

Ryan Preuett, global real estate advisor with Jameson Sotheby’s International Realty in Chicago