In the spring of 2014, Trayor Lesnock, the founder of Miami-based real estate auction firm Platinum Luxury Auctions, sat down with staff members of Kuper Sotheby’s International Realty to discuss how his luxury real estate auction firm evaluates multimillion-dollar properties as candidates for sale via its non-distressed auction platform, in addition to commenting on some “best practices” in the luxury estate auction transaction.
Excerpts of that discussion with the luxury real estate auction industry veteran – who is the creator and owner of the trademark rights to the now-popular term luxury auction® – are republished below (as taken from its original publication in Kuper’s Casas, Haciendas, Ranchos magazine). Though busy charting his path towards reaching the $1 billion career sales mark (which he expects to hit in 2019), Mr. Lesnock took the time to update some of his original comments for this article.
Knowing your client and your market.
Every business should know where and how it performs at an optimal level and stick to that operating range. For us at our luxury estate auctions firm, there are basically two criteria that define our operating range: the seller and the property. Our sellers are individuals who have little to no debt on their property, and who want to sell, rather than need to sell – this is a very important distinction. We do not work with distressed sellers. Second, the high-end real estate property must be desirable and in excellent condition. We do not work with distressed properties. While these criteria may sound a bit “highbrow,” they allow us to ensure that we are conducting business within our optimal performance range.
Careful due diligence (and knowing when to say, “No thank you.”)
When I was in my early years in the luxury real estate auction industry, the firm for whom I worked would never do any market research in advance of accepting a property for auction. The theory was that if the property was so unique that it had not found its value through the traditional sales process, any attempts at placing a paper valuation on it in advance were moot. Therefore, the valuation question simply couldn’t be answered until a room full of qualified bidders was competing to place a true market value on the property via the auction process. While there is still merit to this psychology in a basic sense, with the analytics and technology tools real estate professionals have at their disposal today, the times of a seller going into an auction completely blind as to the potential valuation range should be well behind us.
Prior to accepting any property for luxury auction, our team conducts a rather intensive round of due diligence and research. An important element of this process is identifying potential barriers to success. It is for this reason that we sometimes joke that we are actually in the “No Business,” but we just happen to do auctions. Knowing when to turn down a property for luxury home auction is a talent that all high-end real estate auction firms should possess, and they should exercise it often. Not every property or seller is right for the luxury auction process.
Don’t apply cookie-cutter formulas to unique properties.
You cannot acknowledge that your client has an exceptionally unique property, and then proceed with a generic marketing plan and expect exceptional results. While we have certain “blue chip” marketing and advertising outlets that always perform for us, each luxury auction marketing program is custom-tailored for the given property.
It’s all about the details.
From the creation of each advertisement in the marketing campaign to building dossiers on each prospective buyer who inquires about a given auction property, focusing on the precise details is critical. We don’t simply state:
“A buyer from Virginia likes your property. We’ll see what happens.”
Our clients get to hear:
“Tom Smith visited the property, stayed for 30 minutes, and asked a series of sincere questions. We’ve found that he just sold his company for $150 million, is chairman of various other organizations, and would really love to move his family into the area before the start of the next school season.”
Knowledge is power, so we believe in empowering our clients so that they can make sound decisions as we move towards auction day.
Let experts be experts.
We find that the luxury real estate industry and culture essentially makes agents feel like they have to be all things to all people. While this sounds heroic, it’s more often than not a recipe for failure – especially when dealing at the very high level of multi-million-dollar real estate. Because our firm operates nationwide (and outside of the United States on occasion), we cannot be expected to be the “local expert” in all markets. We are, however, experts in the luxury auction process, and we can apply that process essentially anywhere. We rely on the expertise of our cooperating, local brokerage partners to make sure that we are hitting on all cylinders for that particular marketplace in each luxury auction transaction. It is no different than how we want our attorneys handling the legal elements of the process, the surveyors handling surveys, etc. It ensures that all elements of the sale are handled by the experts in their respective fields.
Knowing you’re the right seller.
As noted earlier in this article, the ideal seller for a luxury auction is an individual who has little to no debt on the property and who wants to sell, rather than needs to sell. In our case, the property must be at least $2 million in value and be in great condition.
Keep your brokerage in place.
One of the greatest confusions about real estate auction firms is that they are competing with, or replacing, the current listing agent on a given luxury listing. In fact, the vast majority of high-end real estate auctions are conducted in cooperation with the property’s existing listing agent. This is important, as it allows for the formation of a “best of both worlds” scenario in which the local market expert and the luxury auction expert are joining forces to maximize results for the seller. In addition, most auction firms come at an added cost to the buyer in a transaction, not to the seller or listing brokerage.
Have realistic expectations.
Having a candid grasp on the market is important. If all market metrics show that a property listed for $12 million is worth between $7 and $8 million, but the seller demands $12 million or bust, our team is going to decline that opportunity 100 out of 100 times.
While the luxury auction process does create a very unique atmosphere filled with purchase pressures that are nearly impossible to reproduce in the traditional sales model, prospective performance metrics should be rooted in valid market data. Have we sold properties for 25-35% above current appraisal? Of course – but we don’t promote that as a guaranteed result. The goal of the luxury auction process should be to sell an $8 million property for $8 million. Sellers should be wary of overpromises or excessive salesmanship from their auction provider when it comes to pricing expectations.