Velvet Rope Marketing
November 18, 2021
Sometimes you need a velvet rope to foster demand and create buzz and exclusivity. Remember the red velvet barrier in front of Studio 54 in the late 70’s? How cool was it when the big burly bouncer out front nodded that you could enter and join the other disco party-goers? When applied to real estate sales, velvet rope marketing is about creating demand by limiting availability to achieve a premium price.
I learned the strategy five years ago when I partnered with an associate on the sale of a townhouse in Historic Bed-Stuy. We had limited access for showing because the family was elderly and ailing. The house was classified as an 8-unit SRO, so conventional financing was out of the question. There was an open Landmarks violation and multiple other infractions. We priced the property below market at $999K, and invited interested buyers to submit an offer with proof of funds before we would confirm an appointment. Two months later, we closed with a cash buyer for $1.150M.
In September I was appointed by Kings County Supreme Court to sell a two-story wooden frame house, circa 1901, in the Ocean Hill neighborhood of Brooklyn. The good news was the property was vacant, but it was in poor condition and in need of rebuilding throughout. Nothing inside was salvageable, and everything including floors, walls, ceilings, kitchen, two bathrooms and possibly the roof needed to be gutted. The house was being sold AS IS and comprised just under 1,500 sq. ft. with an above ground 720 sq. ft. basement that you could stand up in, but there was no operating plumbing or electric, and the back garden was overgrown and could not be accessed. When the locksmith came, he cautioned that the longer the house stayed empty, the more likely it was to attract squatters, and then a sale would be even more complicated. It was clear that we needed to sell before cold weather set in.
Most of Brooklyn is a seller's market today. But this purchase would not be made by an uninitiated novice. We fully expected the purchaser to be an investor who saw upside potential. We used the appraiser’s stark, unfiltered photos for our marketing to underscore the extent of the work needed. Announcing the property’s availability with a week’s advance notice, we publicized that the property would be shown by appointment for two days only to serious cash buyers and invited interested buyers to submit their offers with proof of funds within five days.
We priced the house at $279K, 41% more than the appraised value. We showed to 32 groups of buyers at half hour intervals, and received 22 offers, including four from sight unseen drive-bys. We treated each buyer the same, making each feel special, but we disclosed nothing about incoming offers although each prospective purchaser pressed hard to get information about what it would take to win the property. On September 20th, we sent a term sheet to the highest bidder’s attorney for $551K, nearly twice the asking price. The contract was fully executed eight days later.
We have the judge’s approval to proceed and are awaiting title clearance to set a closing date. We didn’t need a red plush rope to control the flow of appointments, but by limiting showing hours and setting clear guidelines and a deadline for the process, we fueled desire and exceeded all price expectations, demonstrating there’s great power in velvet rope marketing.
Shirley Hackel, NYRS®
shirley.hackel@compass.com | (914) 980-0371