When it comes to buying or selling luxury real estate, it helps to have expertise, market knowhow, and a litany of sagacious tactics at one’s disposal.
There is an interesting strategy that some realtors have incorporated to sell real estate in New York and Miami. They are using record-breaking prices to grab headlines and build buzz around multi-million dollar luxury properties. Every smart buyer knows that just because a penthouse is listed at $100 million dollars in New York City doesn’t mean that it is actually worth that price tag. But it’s on their radar all the same.
It is a strategy of hype. It builds buzz around the property. Suddenly, the home has become famous. A few weeks later, all eyes are on the listing as it sells for $88 million in a bidding war. Does this tactic work? Absolutely. Fame affects value. And when it sells again, the inflated price may actually satisfy a self-fulfilling prophecy. A savvy investor can learn to read between the lines, as well as maximize such press for their own benefit.
Recently, an 8,000 square foot, three-floored, Midtown apartment was put on the market. The asking price was $100 million, the most expensive listing ever for a New York apartment dwelling. The property had three floors, a personal elevator, nine bathrooms, a 360-degree view of New York City and wraparound terraces, but the $100 million price tag was not in alignment with anything close to that on the market. The owner had bought the Manhattan residence in 1993 for $4.5 million and claimed to have put $5 million dollars in renovations into the private home during the last 19 years.
So how does $5 million in renovations, plus roughly two decades of inflation turn a $4.5 million dollar home into a $100 million dollar home? It doesn’t. This isn’t an ultra-luxury building like One 57 or the soon to be released 432 Park Avenue, which will be arguably the best in the world. But it gets people talking. Beyond the free press, it also incorporates a sales tactic known as the door in the face technique, when a high price seems reasonable after asking an outrageous one.
The Manhattan luxury real estate market is built with an understanding of media marketing strategies. Will the sellers end up with their asking price? Probably not. But from now, until it’s sold, Manhattan luxury real estate investors around the country will be talking about it, building the hype and making the price all that more reasonable.
Down south, the same tactic is being employed to sell luxury Miami real estate. In Indian Creek, a multi-million dollar home set records last spring when it sold for an astonishing $47 million. When still in development, the home had been priced at $60 million. It was widely acknowledged that hyping the property in the news was a part of the sales strategy. With the inflated price perched at the top of the list for private residences, buyers speculated the worth of the property months before construction was completed.
Attention was drawn to the fingerprint entry wine cellar, 3-D movie theater, a hidden art vault and a personal beach made of sand imported from the Bahamas. With personal touches like these, $60 million, while still inflated, seemed somewhat reasonable, and the $47 million it eventually demanded, a bargain.
For those buying real estate in Manhattan or Miami, it is important to think like the seller. Knowing some of the strategies they use will help you make a more informed buyer.
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