Luxury Add-Ons of Cars, Yachts or Helicopters Don’t Always Make the Sale

Russians turn attention to South Florida real estate, Canadian foreign buyers’ tax gets a caveat, and more news from around the world

BY ANNE MACHALINSKI ORIGINALLY PUBLISHED ON FEBRUARY 03, 2017 | MANSION GLOBAL |

 

The buyer of this 12,385-square-foot mansion will receive a Rolls-Royce Silver Seraph.

DOUGLAS ELLIMAN REAL ESTATE

Buy a condo, get a sports car.

While this sort of two-for-one arrangement has become common in markets where there are a lot of luxury property listings, add-ons like this aren’t always what makes the sale—and in some cases, can actually harm a negotiation, experts say.

In some cases, luxury extras— like six-figure classic cars, yachts, helicopters and fine art—can add value, especially when they’re relevant to the lifestyle of the would-be buyer. Other times, they don’t impact the end deal, but are a way to attract attention and get media coverage. And then there are the cases in which including luxury extras with a listing are seen as a sign of desperation, and a cue for brokers to negotiate hard on price.   

MORE: Click to View a Chelsea Townhouse Comes with a Bentley for the Buyer

“When it comes to these houses that come with a boat or a Porsche, in general, it’s a gimmick,” said Gary Gold, executive vice president of Los Angeles agency Hilton & Hyland. “But if we’re talking about a $25 million house on Kauai that’s fully furnished and comes with cars, or a property on a golf course that includes a bonus golf cart, that makes sense. Those aren’t coming out of left field.”

When Mr. Gold considers where this practice of throwing in an extra car came from, he sees a direct link to how resort homes are generally sold fully furnished with everything you need already there.

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When Los Angeles developers saw how many buyers of homes in the  $10 million to $30 million range were using properties as the equivalent of a vacation home, and only staying there for two or three weeks of the year, they adapted that practice to this market.

It was about five years ago that Mr. Gold noticed that many luxury spec homes in neighborhoods like Beverly Hills and Bel Air were coming fully furnished. Today, he estimates that more than 50% of these properties priced above $20 million come with high-end, modern furniture.

In Manhattan, the developer of a new West Chelsea townhouse, listed for $36.8 million, is applying the same logic, and including a 2016 Bentley, valued at $368,000, as well as modern furnishings, which the client can purchase with the property.   

MORE: U.S.’s Most Expensive Home Hits Market at $250M

“We wanted this mansion to be the complete, turnkey package,” said Compass broker Alyssa Soto Brody in an email. “The home is already breathtaking, but we wanted this home’s buyer to be able to just walk in and start enjoying.” 

A much more extreme example of this same practice is Bruce Makowsky’s 924 Bel Air Road. Listed for $250 million, this 38,000-square foot spec mansion comes with 100 curated art installations, millions of dollars’ worth of classic cars and motorcycles, a deactivated helicopter and a $1 million outdoor TV.

“He did something in an extraordinary way,” Mr. Gold said, “and he’s shooting for a certain type of person that’s going to be completely enamored with the whole thing. I think it’s cool.”

If these are cases where the luxury add-ons make sense from a utility or lifestyle perspective, there are also times when extras are included in an organic way, leading to increased exposure and a sale.

Brad Robson, a listing agent for Place in Brisbane, sold a property that fits that criteria in late-November. The Chelmer house has four bedrooms, three bathrooms, and came with a 1993 Porsche Carrera 911, valued at $100,000. It sold a week before it was meant to go to auction for $2.31 million—an amount that Mr. Robson said the seller was “thrilled” with.

MORE: Buy This Home, Get the Helicopter and Rolls-Royce for Free

“I don’t believe the car was the reason that we sold it for a premium price,” said Mr. Robson, noting that the seller was looking to unload the car at the same time as the house, so they decided to make it a package deal. “What it did was generate a huge amount of interest over and above what we would have gotten without it.”

Because it’s incredibly uncommon to include an extra like this with a sale in Brisbane, Mr. Robson said the curiosity from would-be buyers was genuine. “If everybody was doing things like this, I certainly wouldn’t,” he said.

In the end, the buyer “loves the car, but isn’t sure what he’ll do with it just yet.”

But when the extras are thrown in as an afterthought—neither part of a lifestyle package or included in an organic way—there’s a chance the whole thing will backfire, said Dolly Lenz, the founder of Manhattan-based Dolly Lenz Real Estate.

“As a buyer’s representative, if I see a developer or seller offering a car, trips or other incentives, I see that as a major sign of weakness, and a cue to negotiate hard on behalf of our buyers for those units,” she said. “It’s just so silly. Anyone buying these properties could afford those things on their own.”

Mr. Gold agreed, noting that he recently told a client selling a $3 million West Hollywood house to forget about throwing in a $60,000 car, as he was inclined to do.

MORE: When The House is Just a Starting Point: 3 listings where the perks are plentiful

“That would have been a mistake on so many levels,” Mr. Gold said. “It makes it look like you’re desperate, adds an unnecessary cost, and now, you need to find someone that loves your home and also loves Porsches.”

Not to mention that this type of maneuver can be frustrating when it comes to paperwork tied to the sale. “In general, people don’t want to pay property tax on an extra like a car or artwork,” Mr. Gold said, so they separate the home from the add-on. “You’re basically adding an unnecessary cost that could impact how people look at your house.”    

http://www.mansionglobal.com/articles/52959-luxury-add-ons-of-cars-yachts-or-helicopters-don-t-always-make-the-sale

Luxury Loans Surge To Record Levels

luxury home buyerBanks are handing out mortgages of as much as $10 million to the wealthy in record numbers while first-time home buyers struggle to get loans. Wealthy borrowers are having an easier time getting a mortgage, with banks issuing a record number of mortgages in excess of $1 million while continuing to keep lending tight for first-time home buyers, Bloomberg News reports.

These high-net-worth borrowers do act differently than first-time buyers, who borrow because they have to.  High-net-worth borrowers don’t have to borrow. They choose to, so they’re very strategic about what, why, and when they borrow. The wealthy are choosing to borrow while mortgage rates are still low, with some fetching mortgage rates as low as 3.15 percent for a seven-year adjustable-rate mortgage. By choosing to finance, the wealthy borrowers are avoiding having to liquidate other investments to purchase the home.

In Southern California, millionaires are boosting demand for the largest loans because of an improving economy and brisk sales of luxury homes gives them confidence in the market, said Mark Cohen, a mortgage broker at lender Cohen Financial Group in Beverly Hills. Cohen, whose average loan has increased to $1 million from $800,000 this year, said he gave a $9.9 million mortgage recently to an executive at a publicly traded company in Brentwood

For wealthy home buyers of single-family homes, the number of loans from $1 million to $10 million in the 100 largest metro areas soared by more than 15,000 in the second quarter, the highest point ever, according to CoreLogic, a housing data provider.

The luxury market has been heating up in recent months. During the first half of this year, sales of homes costing at least $2 million in 30 of the biggest metro areas increased to the highest since at least 2006, CoreLogic reports. What’s more, sales of existing homes of $1 million and more rose 8.5 percent in June compared with a year ago, which was the biggest jump among all price ranges, according to the National Association of REALTORS®.

What Luxury Consumers Want

kimridge-ken-new-10-051The luxury home buyer is an important contingent of today’s real estate market, as luxury homes tend to drive trends throughout the entire balance of the marketplace. The luxury consumer is considered a trendsetter in most industries, and to see the strong connection this consumer has with ‘home’ is very significant as we look at the real estate market as a whole

Luxury home owners and buyers place a high value on real estate, according to a new survey of 500 luxury home buyers.

In fact, the survey finds that 75 percent of luxury home buyers believe home ownership is a sounder investment than the stock market. What’s more, 57 percent of luxury home owners say home ownership is a bigger indicator of success than their job or title. The luxury home buyer has high standards and invests the money and time, to making their home fit their needs and reflect who they are. It’s remarkable that they do this so well that nearly all — 93 percent — believe their house is the best one on their block.

The survey revealed some of the following insights into the luxury home buyer and owner:

  • They desire multiple homes: Fifty-three percent say they prefer owning multiple “lifestyle” homes to support their lifestyle activities, such as skiing or attending the theatre. Fifty-eight percent of the luxury home buyers surveyed say they already owned multiple homes to support their lifestyle activities.
  • They’re willing to sacrifice square footage for luxurious amenities: Sixty-percent of luxury home buyers surveyed said they would rather have as many upgrades as they can afford in their home rather than greater square footage. Ninety-four percent of those surveyed would be willing to give up 1,000 square feet of living space in their next home in order to get the amenities they most desire, such as living in a better neighborhood, living in a house with “character,” more land, access to dining and entertainment, and a shorter commute.
  • They want a high-tech home. Sixty-six percent expressed a stronger desire for having a “smart” home than a “green” home. Eighty-seven percent said they would not even consider purchasing a home that wasn’t tech-friendly.
  • They also value their outdoor spaces. Luxury homebuyers also placed a high value on outdoor amenities as must-have essentials in a home. For example, they expressed a big interest in having a garden oasis, outdoor fireplace or firepit, and a separate guest house outside of the main home.

Forty percent of luxury buyers say the biggest challenge in searching for a high-end luxury home is to find a property that meets their family’s needs; 20 percent say it’s limited number of properties offered. What’s prompted their search for a luxury home? The realtor.com survey found that 19 percent of luxury home shoppers say a recent success in their career has prompted their home search, while 17 percent say they entered the market because they’re newly retired

Luxury Market Coming of Age With Younger Buyers

There is an emerging trend in the luxury real estate market place, it is a kind of coming of age, as in the age is coming down.  A new survey by  the Luxury Institute finds that wealthy younger buyers are driving the luxury real estate market, and are paving the way in a changing market place. And the bonus for luxury home sellers, they are willing to pay more than similar wealthy buyers age 55 and older. According to the survey of Americans age 21 or older with a minimum gross annual household income of $250,000, 43 percent of younger wealthy consumers are considering the purchase of residential property in the next 12 months, compared to 21 percent of those age 55 and older. On average these younger wealthy consumers spent more than $2.1 million on their most recent purchase of residential property, approximately twice the average amount spent by older and similarly wealthy luxury buyers, which was $1.1 million. These younger luxury buyers are leading a change in desired home amenities,  whether they have young families or are single without children, they are looking for homes that fit their active and unique lifestyle. Younger buyers are significantly more likely to want homes with amenities such as a pool, outdoor kitchen, home gym, home theater, wine cellar and four or more garages. Less importance is placed on staff quarters, tennis/sports courts and separate catering kitchens. For majority of luxury buyers, location is the most important factor when considering the purchase of residential property. However, nearly one in four have the freedom to choose a property anywhere. The younger luxury buyer have more freedom to choose a residence that truly fits their lifestyle and will not limit their search based on location.