More Brokers Are Turning To Auctions To Sell Luxury Properties
Hard-to-shift mansions are fast becoming auction regulars, as brokers use the gavel to drive bidding wars.
If you can rely on New York for one thing, it’s to have a healthy real estate culture. And by healthy, we mean A-list-only expensive. Apartments with asking prices greater than the financial deficit of Canada consistently fly off the market, while potential city buyers struggling to make it onto the first rung of the property ladder try to convince themselves that 90 square feet constitutes a lucrative investment. In short, if you own a property in NYC, you’re onto a winner.
So it’s perhaps surprising that, increasingly, homes like Manhattan’s Kleeberg mansion, built in 1898, are being sent to auction after static periods on the market. The Kleeberg home is heading to the auction block today, having been felled to just 50 percent of its initial asking price of $40 million after sitting on the market for years.
The eight-bedroom, nine-bathroom mansion boasts Hudson river views and a French renaissance revival facade, not to mention a newly installed, all-the-mod-cons kitchen, a private elevator and an indoor resistance pool in the basement. In spite of its prestigious name and breathtaking architecture, the property has experienced little in the way of buyer interest, and as a result, has undergone a number of price cuts since it was originally put on the market in 2012.
Historically, at least in America, property auctions have been synonymous with last-ditch attempts to shift distressed and foreclosed homes at a fraction of their market value. However, recent years have seen more and more luxury properties going to auction. But can an auction really benefit a seller when a property is as pricey as Kleeberg?
Well, according to Australians, they sure can. In fact, luxury properties in cities such as Sydney and Melbourne are more likely to bypass sale prices entirely, heading as they do straight to auction. “Auctions are seen as the fairest and best method of sale,” says Peter Baldwin, chief auctioneer of Richardson & Wrench, a Sydney-based real estate network. “Everything is out in the open and is transparent, and the market dictates the price”.
Furthermore, sales at auction appeal to both buyers and brokers alike for their simplicity. Real estate documentation is notoriously lengthy and complicated, whereas auctioned homes are sold without contingencies, in a timely (say, 15-minute) fashion. Similarly, auctions offer a very enticing guarantee to sellers: unless a home is listed with a reserve, it is sure to sell, sidestepping months of marketing fees were brokers to list the same property on the sales market at a fixed price.
And it seems that America is indeed cottoning on to the idea of auctions as powerful marketing tools. Auction.com recorded that in 2013, 35,000 auction transactions were made, jumping to 50,000 just a year later. But can this method of quick-and-dirty selling really work for luxury properties? Well, it’s definitely a leap of faith for the seller. Indeed, the Kleeberg mansion is only expected to sell for between $13 and $16 million, a significant drop in value. An auction, however, does conversely have the ability to inspire a fierce bidding war. Indeed, Laura Brady, president of Manhattan-based Concierge Auctions, advocates “gathering interested people and making them compete against each other” so that the seller can reach the best possible price for the property.
Only time will tell if Kleeberg’s owner will reap the rewards of an auctioned sale, but in a market where luxury prices mean a much-diminished pool of potential buyers, there’s something to be said for laying all your cards on the table—and seeing who ups the ante.
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