House auctions have not been considered a traditional method of selling and buying real estate in the United States. Particularly in the luxury real estate sector, buyers and sellers alike have been reticent to explore the auction route. This seems to be an anomaly with luxury goods because auctions have often times been the accepted method of selling luxury items like jewelry, cars, or fine art. And in other parts of the world luxury house auctions are the preferred method for selling luxury properties.
One of our jobs as a company has been to educate buyers, sellers, and luxury real estate agents on the benefits of the auction process in selling high-end homes. Auctions are a time proven method in selling one-of-a-kind goods, and a unique home should be no exception. A luxury home auction creates urgency, gathers all the pertinent buyers in one place at one time, and brings out the market price on auction day. Along with these obvious advantages, here are 5luxury house auction myths debunked.
Myth #1: Auctions are complicated Luxury house auctions may seem daunting at first, but upon inspection they may actually be less complicated than a traditional real estate sale. First, there are no contingencies in an auction sale, so all due diligence has to be done before the auction and the sale is as-is where-is. Secondly, all the sales process and bidding instructions are included in a contract, so there should be no back and forth regarding closing or other issues after the gavel falls on auction day. Once the high bid is received, the process should be very strait forward.
Myth #2: Auctions are for distressed properties Especially in the luxury sector this is definitely not the case. Since our first auction in 2009, all of our property auctions have been from non-distressed sellers. True, there are tons of foreclosure auctions and bank owned property auctions every day, but there are also tons of non-distressed property auctions every day. Many buyers choose to take control of the sale process and pick the day that they will sell their property. Far from being distressed, these sellers choose to leave their property on the market for an extended auction exposure period, and then sell their home on auction day.
Myth #3: Auctions do not bring the highest price Again, the auction method has been proven to bring the best price possible with things like fine art, cars, and jewelry. Why should fine homes be any different? With a luxury house auction all the interested buyers are identified and gathered together on auction day. They bid against each other. So, whatever the high bid is on auction day, that is the highest market-driven price that the property is going to bring. It may not always be the price that the seller was hoping, but it will be the highest price for that property at the time of sale.
Myth #4: Auctions cut the agents out of the sales process Quite the contrary, agents are an important and integral part of a luxury real house auction. I started as an agent and broker, as did most of our staff, so we know the hard work that all luxury agents put in. The last thing we would want to do is cut the agent out of the process. The listing agent is our most important partner with each auction we conduct. We will work side-by-side with the listing agent, and always guarantee a standard co-broke commission, so the buyer’s agent is also a big part of the auction process.
Myth #5: Buyers have to pay cash Often times buyers do choose to pay cash after an auction winning bid. But this is by no means required. At a high-end real estate auction all the bidders are generally required to put down a cash deposit in order to participate. This is just a part of the vetting process and only a deposit. The entire deposit is returned post-auction, and the winning bidder can put that deposit toward the final sale price or they can choose to finance the purchase however they choose.
Are you an agent or broker? If so, download our 7 Steps in the Real Estate Auction Process below. Or leave a comment if you have any questions about real estate auctions.