Luxury real estate auctions are becoming the norm for selling luxury homes and mansions. When it comes to high-ticket homes and large commercial properties, auctions are increasingly gaining traction and credibility in the press. Luxury properties are eligible for auctions if they pass the National Association of Realtor’s Two-Thirds Rule which maintains that after an analysis of the market, seller, and property, if two of the three tend towards auction, then auction must be offered to the seller as a viable selling option.
This is where brokers come in. Brokers are a conduit to assisting buyers and sellers. Based on the transaction and client preferences, real estate licensees are eligible to participate as listing brokers, cooperating brokers, co-brokers, or referral brokers. In this article, we’ll go over the advantages of auctions in comparison to private sales.
Issues with Private Selling
Brokers come up against a lot of obstacles when it comes to selling private homes via a regular sale.
Sale Price Limitations
With regular sales, there’s a limitation on the price. Brokers may overprice the property and deter buyers, or underprice it and end up with a beneath-market value sale price. Either way, the owner is at a disadvantage. With auctions, the final sale price has no ceiling. There’s also no negotiating the final sale price in auctions due to ‘auction fever,’ thus overriding the stress and intensity of private sale negotiations.
Finding the Market Is Harder
Finding the right buyer for a luxury home can be difficult when dealing with private sales. It takes much longer to promote and seek out potential buyers. It takes months of developing a network, combing through social media, and taking endless calls and meetings just to find one confident buyer. With auctions, the buyer market is already there in the room, with the intention to find something to buy. Many times, the buyers come from all around the world.
Why Auctions are Advantageous
Brokers view auctions as another channel of promotion and method for selling or buying property. While other forms of marketing can be convoluted or involve several third parties, auctions are great in a number of ways.
When it comes to selling real estate, contracts can be tedious, long, and contain the tiniest font. The topics covered in the contract list almost every contingency known to man and take hours to fully comprehend and understand. Once they’re read through, changes are slow to make and new edits must be incorporated. With auctions, the process is much simpler and more direct. Homes are sold as they are without contingencies. Sales are settled in a matter of days as opposed to a matter of months, sometimes years.
Homes can be on the market for up to 69 days, according to the National Association of Realtors (NAR), and that number goes up every year. As every real estate professional knows, the more time a property sits on the market, the costlier it becomes. In terms of upkeep, marketing costs, delayed commissions, and chances of the seller becoming dissatisfied and uninterested go up significantly. The odds are not in the agent or broker’s favor. Auctions cut to the chase and have a set-in-stone date that buyers can attend. If the seller doesn’t have a minimum reserve price, the house sells on the spot.
It Takes Zero Strategy
The more days-on-the-market (DOM), the trickier it gets to sell the listing. New listings excite buyers because of their inherent freshness on the market. The longer they sit and take up space, their value depreciates and buyers go bye-bye. To counteract this, sometimes brokers and agents will do everything in their power and whip out strategy after strategy to fight the stale energy of the sitting property.
Auctions omit this issue entirely. Properties are sold within minutes and never stay on the market for long. They’re sold on the date of auction so brokers know when to expect their commission, and sellers can count on the date of sale as a sturdy mark in the ground. Without a tedious, lengthy marketing process, brokers can see visible bids in real-time. No fancy DOM strategies are needed.
It’s a Level Playing Field
When it comes to having multiple bids on a piece of property, brokers can become overwhelmed. The true value of a luxury home is in the dark while buyers hide their offers and purchasers lowball their bids in hopes they don’t go overboard. Auctions allow for multiple bids at the same time, with a clear picture of the property’s value laid out in plain sight. The marketing process is equalized. There are no hot and cold buyers when it comes to auctions as everything is out in the open.
It’s Open to All Buyers
Luxury properties can mean real and unique problems for real estate brokers. As home values increase, the number of potential buyers gets slimmer. Auctions tend to attract a wide variety of prospective buyers due to their accessibility. People can find the auction at an easier rate, and brokers can access buyers that they may not have originally found on their own.
Pocket listings and coming soon listings have been on the rise in recent times. If you’re unfamiliar with these terms, they essentially refer to listings that are accepted by MLS-member brokers but not placed on the system right away. So, brokers may take on a new listing and sell it directly to the buyer or share it with a small cohort of other brokers. However, these practices can cause some fair-housing problems like segregated housing and other discriminatory effects.
Auctions equalize the playing field with everyone able to bid at the same time, with the same facts, regardless of other irrelevant qualifications. Everyone has an equal opportunity to bid. With wider marketplace exposure and a seat for anyone willing to pay the sale price, all people are welcome. Homes are widely announced for sale to the public, and promotion reaches anyone and everyone with internet access.
New Opportunities for Brokers
Brokers are known to specialize in various areas like condos and farms and could be missing out on incredible opportunities by glancing over auctions. Auctions are only projected to grow in the real estate marketplace as more and more brokers see the added benefits and ease of use.
With auctions on the rise as a viable selling and buying option, brokers will want to learn more about how they can get involved. More auctions mean more business opportunities. At Platinum Luxury Auctions, we auction luxury homes and host luxury real estate auctions that are fair, efficient, and simple. Check out our website for more information.