I'll need 18 of those $1,000,000 bills thank you very much.A small townhouse of "quasi-historical significance" just came on the market in Brooklyn for $18,000,000. It's a small building. By suburban standards, it's minuscule. If this buildings' doppelganger were being sold in Buffalo, NY it might sell for $30,000 or so. Theoretically, you could by 600 of these in Buffalo for the same $18 million that this one in Brooklyn is listed for.
Does this mean that this $18,000,000 townhouse is overpriced?
Well, that's a tougher question than one may think. It really all depends on what someone is willing to pay for it. Comparable sales suggest that it is overpriced, but what is "quasi-historical significance" really worth? More importantly, if you are the seller of a "unique" property, how do you maximize your profit.
Consider the owner of this property. Perhaps a real estate broker came in and valued the townhouse at $4,000,000 based on comparable sales. Let's go wild and assume that ten brokers came in and valued it ranging from $3,000,000 to $5,000,000. Finally, the eleventh broker comes in and says that you can get $18,000,000 for the property. What do you do?
All things being equal, it seems the property is worth $4,000,000, but how can you possibly leave a potential windfall of $14,000,000 on the table? That's a very, very compelling reason to list the property in the stratosphere. Many of us buy lottery tickets, why shouldn't a rational human being try for the moon?
The problem is that if you go for the $18,000,000, and then reduce it to $15,000,000 and so on ... all the way down to $4,000,000 everyone will wait for it to go even lower because you'll have a white elephant that no one wants. You're facing quite a conundrum because the lure of the silly money is a tempting siren indeed. What's the answer?
The answer is this. If you are a seller and you are truly uncertain about the true value of your property because of extenuating circumstances such as "quasi-historical significance" your safest bet is to offer the Pollyanna broker the following: "I will let you list my property for $18,000,000 for 30 days. If you are correct, and this is the price point, everyone benefits. If you have misjudged the market and you are wrong, you are fired."
This protects you from brokers who are "buying the listing". Specifically, they simply want to get your listing whether or not the price is realistic. They do this to attract buyers to see the property who they then woo and guide them to other, more reasonably priced, listings. If they price your property ridiculously high, it is detrimental to them as well because frankly the buyers they're hoping to attract will be angry that they went on a wild goose chase for a clearly inferior property.
The moral:
The more unique and out of the ordinary your property is, the more important it is that you do your homework and try to get the most qualified sales team on your side.
Reach me at: michael.sussilleaux@gmail.com
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