Photo: Scott Wang Photography
It’s become quite clear that the auction method of sale isn’t just for broken-down properties on the brink of foreclosure anymore.Commercial properties, development sites, and farm land are all getting in on the auction action. And now the most recent influx of properties on the auction block appears to be luxury homes.
Lamar Fisher, President and CEO of Fisher Auction Company, sees the shift. “Even in today’s world, auctions are still perceived to some as a last resort,” Fisher says. “But what you’re seeing now is the luxury residential market, the wealthy of the wealthy marketing their properties via the auction process because they’re seeing the advantage of maximizing competition.”
Specialty firms such as Concierge Auctions see the rise of these properties at auction first-hand and credit it to the solid opportunity of closing the deal. “The multi-million dollar homes that the firm auctions off enjoy an almost guaranteed sale — and one conducted relatively fast,” Forbes.com reports. “In 2010, 85% of the properties Concierge represented resulted in successful sales. Given the fact that most abodes find new owners, it’s perhaps not surprising that this process has become an increasingly popular method of home selling among posh home owners.”
What else could be bringing on this surge of luxury properties riding the auction wave? According to Dan Mahaney, a full-service auctioneer of specialty properties based in Indiana, it’s a repercussion of loose lending. “There were so many people that overspent on what they could afford just because the financing was so easy back in those days. Two million dollar properties were being sold to people who made $60K a year,” Mahaney says. “Then they just couldn’t make sense of the numbers and they got stuck. I think the people that can afford the properties they’re in are going to sit on them because of the competition. It’s the supply and demand.”
Now buyers that once longed for the sprawling manse with every amenity under the sun are looking to go more practical to keep costs down. “Everything that I’m seeing across the country is showing that people would rather have a well-located, well-appointed home even if it’s 5,000 square feet instead of a 15,000 square foot mega-mansion that costs five thousand dollars a month to cover,” Mahaney states. “That’s what I tell every seller – everybody that I meet that is selling a luxury property says they want to reduce their exposure for capital as well as upkeep. They have to understand that the next person who is looking to buy this property has the same feeling that they do. You have to give them a reason to come buy it, otherwise why would they want to pay a retail price for something that everyone is kind of running from these days.”
Real estate auctions are known for their accelerated marketing campaigns – for luxury properties, advertising and promotion tends to be far-reaching. “We believe you need to market on an international basis, especially with your high-end residential properties,” Fisher says. “You’re seeing a tremendous amount of international buying capital coming in with buyers from Russia and Canada, etc. – they’re at our auctions daily.”
Mahaney notices the international trend as well. “We are seeing a large influx of buyers from Asia and Canada as they are flush with cash, so our ad campaigns are always changing. It’s very true in California because the economy in Asia is so rough, they’d rather invest in the U.S. real estate market because there’s such a huge opportunity,” he says. “Five to seven million dollars doesn’t faze these international buyers – they think it’s very reasonable. It’s just a matter of finding the right product for them. They have the money and they own the market right now.”
With many sellers of luxury properties looking to hit the auction block, they are required to be realistic in order to close the deal. “Sellers have got to be willing to listen to the market. “You need to put your purchase cost of that property aside and listen to what the buyers are telling you,” Mahaney says. “But that’s hard in this price bracket. A guy that has a three, five, or seven million dollar house didn’t get the house by being stupid. These owners are very educated business men that know the drill, and that can make them less willing to listen.”
“Nobody is going to overpay in an auction,” said Katie Bentzen, 56, who sold her Malibu home with a view of Zuma Beach in October 2009 for $900,000, a 47 per cent discount from the original listing price. “If you really want to move on with your life now, people have to be ready to get real on the price of their home.”
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