Most of us think: auctions? Aren’t auctions just to sell foreclosures and other distressed properties? Not automatically. In the past couple of years, a new trend has emerged: purchasing and buying high-end non-distressed properties via Luxury Property Youtube Channel in Singapore auctions.
In other words, auction is a way of offering services and goods for sell through the bidding procedure. Auctioning involves taking bids and selling the house usually to the maximum bidder.
Now, the most widely used kind of auction is Open Ascending Auction, also known as English Auction. In this kind of auction, participants publicly bid against each other by placing higher bids and maximum bidder wins the auction. That is when the renowned gavel falls and the auctioneer announces: Sold!
There are two standard types of stocks: Reserve Action and Absolute Auction. Underneath the Reserved Auction, the vendor will establish a minimum cost (disclosed or undisclosed) where the property must sell for the auction to be valid. If the highest bid does not reach that price, the auction is void. On the flip side, the Absolute Auction does not have any minimum cost (Reserve), which needs to be fulfilled.
Properly promoted and implemented luxury actions have several benefits for the sellers:
- Property sells to the highest market price, typically within 60-90 days
- Price can exceed the purchase price of a traditionally negotiated sale
- Auctions create more competition and attention among qualified buyers
- Property is sold “as is” with no contingencies and with higher certainty of closing
- Auctions greatly reduce sellers’ expenses (carrying costs, price reductions, and opportunity cost).
- However, sellers are not the only beneficiaries of auctions.
Bidders (buyers) set their own purchase price
- They compete fairly and openly on the same terms with other buyers
- No need for lengthy price negotiation process
- Buyers know that the seller is committed to sell
- Buyers can review property’s Due Diligence Package before the auction
- The sellers of luxury properties are faced with substantial carrying costs, price reductions, and opportunity cost, which can add up to hundreds of thousands of dollars. Recently, I have previewed a luxury home in one of
- San Diego’s most luxurious coastal communities. The sellers had lost over $1M in carrying costs and price reductions since the property was listed for sale almost two years ago,
Compare that to a luxury property auction, which typically sells a property for the highest market value within 60-90 days. How do the sellers know that their property had sold for the highest market value? They know because correctly 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’s the “secret sauce” of the luxury auctions? For the luxury auction to be successful, it must be properly marketed by a company which specializes in that type of auction. We live in a global economy where goods and services are sold across the 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 domestic and global outreach.
As a result, it is not uncommon that luxury auction open houses will attract 150 to 450 buyers eager to preview the property. In some cases buyers, who fly in from all over the planet, are allowed to make an offer on the property before the auction day (so called “pre-auction offer”). Such offer can be accepted, declined, or countered by the seller, depending on the price and motivation.
On the auction day, there are typically 10-50 buyers, who are ready, willing, and able (have certified funds) to compete to purchase the property. This is in stark contrast with traditionally marketed luxury listings, which typically generate much less interest and fewer, if any, buyers.
However, luxury auctions are not for every property and every seller. First of all, the property itself needs to qualify. Typically, the auction firm’s representative will preview the property to make sure that it meets certain criteria to be considered suitable for a luxury auction. Some of the criteria include: price point minimums, architectural design, location, condition, and the overall quality.
Secondly, the sellers need to qualify too as they need to be realistic about the value of their property. Auction is a terrific tool to sell a luxury home or estate, but it is not a “silver bullet” to sell over-priced or over-encumbered properties. As an example, if the sellers wish to sell their property for $5M, however, the market value is around $2M, the market is the most probably not going to help.