Reduced! (From $28 million to $22 million… Now it’s a steal!)

Suzanne Dranow“Reduced,” “New Lower Price,” “Now Priced at,” and “Priced to sell” are subjects lines that fill any agent’s email inbox. Usually the subject properties are listed below the  $5 million mark, so a reduction of $50,000, $500,000 or even a million dollars might tickle the fancy of a reluctant buyer by signaling that the seller is now “serious” or “more realistic” about getting the property under contract.
When it comes to ultra-luxury properties (let’s say $10,000,000 and up), one doesn’t usually see incremental reductions, I was amused by an email I received from a colleague announcing the reduction of a Bel Air estate from $28 million down to $22 million (21% reduction in price).  
To put this in perspective, when I have a client interested in a  $2.8 million property, and I see that the asking price is reduced to to $2.2 million, I’ll jump on the phone to tell them about this significant 21% reduction.  So I had to laugh when I realized I wasn’t jumping on the phone to call my client about the (now drastically reduced) Bel Air estate.

Now, to put things in perspective, for most people buying a $3 million property, every reduction brings more potential buyers into the bidding pool. People who weren’t even considering the property at $2.8 million are now receiving email alerts from their agents because the “alert” setting was set for “$2.5 million or below.”  So, what about the luxury buyer?
A colleague recently bought me in on a listing appointment for an $18 million property because he had never sold anything above $5 million and wanted to partner for my expertise. When we sat down to meet he brought out “comps,” saying that property could go for up to $20 million, adding, “I’m thinking we should list it for $16 million to bring in as many buyers as possible.” I smiled (very politely) and explained that though the paperwork and technical aspects of the sale of a $20 million showcase property is the same as a $2 million home, the buyer (and more importantly, the psychology of that buyer) might as well come from a parallel universe; we will not be dealing with a multiple offer bidding war.
To put this in perspective, the Playboy Mansion was listed at $150 million and sold for $85 million.  That said, a “Now Reduced to $90,000,000” email is not what spurred the buyer into action. As I’ve written previously, luxury properties are all about ego. The negotiations are about posturing, not justification, finances over macro-economics, and grinding more so than negotiation. So, when I saw the email showing this reduction, it piqued my curiosity and I called the other agent.
“I just got an email about your price reduction. What’s the story?
He laughed. “My clients were getting antsy, wondering why we hadn’t had any offers yet. I tried to explain the workings of the market, but they kept insisting I do something to bring people in, so that’s why I sent the email.”
We spoke about potential buyers for the property, about what my interested buyer was considering, and what pockets he had coming on line. As we were about to hang up something occurred to me and I had to smile. “You know what, the email did get me to call.” 
“So, bring me an offer.”
My client is still passing.

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