Inside The World Of Luxury Real Estate Auctions

Typically we cover luxury homes or celebrity homes, but this would typically be the “middle class” of luxury, but there is even another level of luxury that even exceeds that and you rarely find the “ultra” luxury simply listed on the MLS.  Even if you do see this kind of home on the MLS, you likely won’t get access to the home without jumping through several hoops.     In particular, many of the listing agents for ultra-luxury real state require proof of funds upfront before viewing as well as any other disclosures that might need to be signed.   For those kinds of homes, they are typically sold via auction (if the seller wants to sell in a timely manner).   So let’s look Inside The World Of Luxury Real Estate Auctions

Luxury Real Estate Auctions are really no different than regular auctions.  If you’ve had some experience with Ebay then you’ve gotten a crash course in auctions.  You bid, sometimes there’s a reserve, and the highest bidder wins.   Unlike foreclosure auctions where you must pay with cash to buy a home, a real estate auction often wins you the right to actually purchase the home in a set amount of time.

Real estate auctioneers like Decarro do their due diligence upfront on behalf of the seller on the buyers before the actual day of the event.   Once that’s done it’s off to the auction.

Luxury real estate auctions can feel like a huge win for the seller.   Often home sellers in the luxury market can feel like their agents aren’t working.   Usually, everything is exciting at the beginning of a real estate listing.  Professional photography, videos, and other marketing packages are all done.  The listing agent might even set up a single property site or run a pay per click campaign to promote the house.   However, luxury listings take a long time to sell traditionally. “In Atlanta, it could take up to 1 year to sell a luxury home,” says Stan Jones of Keller Williams.

Luxury Real Estate Auctions “The closer the luxury home is to the median price point, the better, ” reminds Michael Perna of The Perna Team in Farmington Hills, MI. ” There are some homes that are just going to be that ultra luxury home and they are outside the reach of athletes and celebrities (and dentists).”  With a year long listing it’s hard to convince the home seller that you’re doing everything you can.

Luxury real estate auctions fix this age old problem for listing agents.

The benefits of a luxury real estate auction for the seller:

  • Faster Sale
  • Many Times The Seller Nets More Money than a traditional sell
  • Less Hassle (Faster Sale)
  • Sense of urgency and scarcity for the buyers
  • A greater sense that the real estate agent is actually working
  • Buyers may not know the market value of your home and bid higher than they might if they had time to study the market

The Disadvantages of selling your home through a luxury real estate auction

  • Sometimes the home may not sell or may have low or no turn-out.
  • Bidding can be slow and may not reflect the true value of your home.
  • “Sunk” costs of marketing the home.

Costs of a Luxury Real Estate Auction

Most real estate auctioneers don’t charge too much to get started upfront.  In many cases, a relatively small deposit (less than 1%) will be enough to secure their services.   However, there are costs associated with marketing the home and either the home seller can pay for those out of pocket or give the money to the auctioneer to do.    Here’s some potential costs to think about.

  • Signage – Billboards and local signs
  • Real estate websites – Links can cost money, advertising
  • Tv Commercials, Informercials
  • Radio advertising
  • Personal invitations – and “list” buying
  • Social media – additional internet marketing

In addition to these marketing costs, luxury real estate auctioneers can charge up from 10% to 40% commisisons. … and here you thought 6% was high!  Often they can back up their commission with claims of a their buyer network. …

Luxury Real Estate Auctioneers
Some auctioneers sell yachts too

How to hire a luxury real estate auctioneer

Do your due diligence of course.  What’s their track record?   Any real estate auctioneer will have a list of successes.   What’s their buyer market or “buyer list” look like?   Is their buyer list “niche” matched up with your home?  For example, a luxury home in Tennessee owned by a former musician might not be the attractive to an west coast architect.   Does the auctioneer work in the international market?  These are all questions you need to ask before moving forward.  Interview at least 3!

Luxury auctioneers often do yachts, jets and more.   Keep this in mind.   While sometimes that’s a could be a selling feature for their service it could also be a distraction.

The best way to interview a luxury real estate auctioneer to ask yourself, “if I were a buyer, would I use this company?”

The benefits of the luxury real estate auction buyer are:

  • Exciting
  • Often the sell is packaged together with financing and/or furnishings
  • Access Exclusive homes
  • Sometimes you can get a good price on a home if there’s not much competition.

Do Real Estate Auction Cut Out Traditional Real Estate Agents?

Not always. Luxury Agents can benefit from bringing an auction company into the transaction as well.   Often the potential commission lost on a transaction is made up in the quick sale (and time value of money) as well as picking up buyers that the home was not right for.   While the auction company will sometimes require a piece of the transaction pie, the potential “lead generation” opportunities can be worth it.



More to luxury real estate to explore