You may have heard that there are great deals to be had at real estate auctions. And real estate auctions may include luxury properties, whether the developer went bankrupt or the person building a custom home went into foreclosure. Here’s what you need to know about luxury real estate auctions.
The Price Tag
Luxury real estate auctions by definition include more expensive properties. These properties will be one million dollar to twenty million dollar homes, though they may be sold for far less. For those who want to sell their luxury home at an auction, there will be a commission due for the auction house’s services. And while it may or may not be a similar percentage to what a conventional real estate auctioneer charges, know that they’re having to do more work to market the property. After all, the market for such homes is much smaller than the general real estate market. They may be advertising the luxury beach house or upscale New York condo to people all over the world.
The Bidding Process
There are three main types of luxury real estate auctions. The first option is a minimum bid. The first person to reach that minimum number will have their bid accepted. The second option is an absolute auction. The highest bidder wins, and there is no minimum bid. The downside to this approach is that there may only be one low offer. Reserve auctions allow sellers to review bids before accepting or rejecting an offer. The uncertainty for bidders in a reserve auction increases the odds of there being few or no bids. On the other hand, it prevents you from being forced to accept an ultra-low bid.
The Work You Need to Do
You’ll get more bidders and a higher final price for the home if you do work to help promote the property. This can include cleaning it up so that the professional photographer will get great photos. It should include setting up a dedicated website to showcase the property. This will be in addition to the luxury auction firm putting the property on their website and advertising it. Hold open houses before the auction to generate buzz and show off the property to perspective buyers. Tell people you know about the auction, because you never know who is interested in buying it.
The Pros and Cons of Auctions
One point in favor of luxury real estate auctions is the sense of certainty. When the auction is over, as long as someone met the terms of your chosen auction format, you’ve sold it. You won’t have to pay the mortgage, insurance, property taxes and maintenance on the property anymore. You’re done. This is in contrast to luxury homes that have taken years to sell with real estate agents.
You’re taking a risk that you won’t get as much as you’d like for the property. A good marketing strategy can reduce the odds of this, and choosing the right auction format can prevent the two million dollar house for selling for 200K.