Luxury Property Auctions: A Better Way to Sell Luxury Homes Hassle-Free

According to the National Association of Realtors (NAR), one in five homes in the United States will be sold by auction in the next five years. Most of us think: auctions? Aren’t auctions just for selling foreclosures and other distressed property? Not necessarily. In recent years, a new trend has emerged: selling and buying high-end properties seamlessly through luxury property auctions.

What is an auction? Simply put, the auction is a method of offering goods and services to sell through the bidding process. The auction involves accepting bids and selling the property, usually to the highest bidder.

Today, the most widely used type of auction is the ascending open auction, also known as an auction in English. In this type of auction, participants openly bid against each other by bidding higher and the highest bidder wins the auction. That’s when the famous deck falls and the auctioneer announces: Sold!

There are two basic types of auctions: Reserve Action and Absolute Auction. Under the reserved auction, the seller will set a minimum price (disclosed or undisclosed) for which the property must be sold in order for the auction to be valid. If the highest bid does not reach that price, the auction is void. On the other hand, the Absolute Auction does not have a minimum price (Reserve), which must be met.

Why luxury auctions? Properly traded and executed luxury stocks have several advantages for sellers:

• The property sells for the highest market price, usually within 60 to 90 days.
• The price may exceed the price of a traditionally negotiated sale
• Auctions generate more competition and interest among qualified buyers
• The property is sold “as is”, without contingencies and with high certainty of closing.
• Auctions significantly reduce sellers’ expenses (maintenance costs, price reductions, and opportunity cost).

However, sellers are not the only beneficiaries of auctions. There are also several distinctive benefits for buyers:

• Bidders (buyers) set their own purchase price
• They compete fairly and openly on the same terms with other buyers.
• No need for a long price negotiation process
• Buyers know that the seller is committed to selling
• Buyers can review the property’s due diligence package prior to auction

In most of the US, the luxury residential real estate market (properties over $ 1 million) is struggling. While low and moderately priced homes sell relatively quickly today, high-end properties can stay on the market for many months and sometimes even years.

Sellers of luxury properties face substantial maintenance costs, price reductions, and opportunity costs, which can total hundreds of thousands of dollars. Recently, I have seen a luxury home in one of the most luxurious coastal communities in San Diego. Sellers had lost more than $ 1 million in maintenance costs and price reductions since the property was listed for sale nearly two years ago.

Compare that to a luxury property auction, which generally sells a property for the highest market value within 60 to 90 days. How do sellers know that their property was sold for the highest market value? They know this because properly marketed luxury auctions generate the highest number of qualified buyers, and ultimately the buyers, not the sellers (or their agents), determine the market value of any property.

So what is the “secret sauce” of luxury auctions? For the luxury auction to be successful, it must be properly marketed by a company specialized in that type of auction. We live in a global economy where goods and services are sold across country borders, and high-end real estate is no exception. The most successful luxury auctions involve extensive and well-executed marketing campaigns, often with both national and global reach.

As a result, it’s not uncommon for luxury auction open houses to attract 150 to 450 buyers eager to preview the property. In some cases, buyers, flying in from around the globe, are allowed to bid on the property before auction day (a so-called “pre-auction bid”). The seller can accept, reject or counter said offer, depending on the price and motivation.

On the day of the auction, there are typically between 10 and 50 buyers who are ready, willing and able (they have certified funds) to compete for the property purchase. This is in stark contrast to traditionally marketed luxury listings, which generally generate much less interest and fewer buyers, if any.

However, luxury auctions are not for all properties or for all sellers. First, the property itself must qualify. Typically, the auction company representative will preview the property to make sure it meets certain criteria to be considered suitable for a luxury auction. Some of the criteria include: minimum prices, architectural design, location, condition, and overall quality.

Second, sellers must also qualify, as they must be realistic about the value of their property. Auction is a great tool for selling a luxury home or property, but it is not a “silver bullet” for selling heavily overpriced or over-priced properties. For example, if sellers want to sell their property for $ 5 million, but the market value is around $ 2 million, the auction will most likely not help.

Lastly, the seller must commit to selling, because once the property is marketed and the auction is properly executed, there is a good chance that the property will actually sell. In fact, a luxury auction company has a 98% success rate.

Therefore, luxury auctions are not suitable for simply “testing the market” as some sellers do with conventional real estate agents when listing their properties to see if there is any interest.

In conclusion, the auction of luxury properties can be a very effective tool for both the sale and the purchase of high-end properties. Properly marketed and executed luxury auctions sell properties for the highest market value, in the shortest amount of time, with a success rate of up to 98%.