While putting up a ‘for sale’ sign on the lawn and subsequently holding open houses on the weekends may be the average person’s first thought when it comes to selling, the world of high-end luxury real estate market and its selling strategies are a bit different, and auctions are reigning supreme. Luxury real estate auctions are the pinnacle of exclusivity, while giving the utmost ease and safety to the seller.
The housing market has grown significantly over the last few years, with luxury real estate leading the pack. In 2021, the sale of luxury homes increased by 41.6%, which was far greater than that of mid-priced or affordable homes at 5.9% and 7% respectively. It has remained a seller’s market with many owners finding that their properties are selling at ultra-high prices, far more than 20.5% which is what is defined as a seller’s market. In fact, the Luxury Market Report found that in February of 2022, there was a sales ratio of just over 66% and what’s more, luxury single-family homes are staying on the market for a shorter period of time, more than 20 days less than they did in 2021, on average only 11 days.
So, what’s driving this increase in sales, price, and selling speed? Is it only due to covid-19 and working from home? Is it the vast-reaching societal move towards home life? Or is it the implementation of new strategies of selling, such as luxury real estate auctions which have become one of the most popular approaches for properties that have a lot to offer but require specific marketing to highly qualified buyers? In this article, we’ll go through what luxury real estate auctions entail and why they are so effective for sellers.
What Auctioning Luxury Homes Entails?
Luxury real estate auctions are most often run by prestigious auction firms, those who specialize in affluent and extravagant, high-end properties that require promotions and engagements with specific highly qualified buyers. These companies go far beyond simply listing the property, but rather market them as a chance for buyers to live in the mansion they’ve always dreamed of. These auction firms bring together both parties and facilitate ease within, not only the auction process but the transaction as a whole. There are several types of property auctions that can be implemented. A “minimum bid” is an auction where the seller will accept a low-point price that will be accepted if a buyer reaches it. There is an “absolute auction” which goes to the highest bidder with no minimum, and there is a “reserve auction” which gives the seller the option to reject an offer regardless of if it is the highest bid.
Benefits Of Auctions For Luxury Real Estate
One of the main reasons that luxury home auctions are becoming so attractive for the luxury real estate market is that it lessens the time between the listing date and closing date. Sellers of luxury real estate properties do not want their properties on the market for long, because the longer a property is available the less likely the seller is going to get their intended price and nearly erases the chance of a bidding war. The phrase “time is money” couldn’t be truer when it comes to the luxury housing market. However, the listing time is not only about the final closing cost but about the life of the seller. Generally, those looking to sell their luxury properties are busy individuals who don’t have time for multiple private showings and the back and forths with potential buyers. When sellers opt to work with an auction firm they have someone who’s there to facilitate the auction and complete the entire transaction once a buyer has been secured, making it as stress-free an experience as possible. Compared to a traditional selling process where there are constant negotiations between parties, the mansion auction process allows the buyers to do the negotiating and keeps the seller out of it until the very end.
Properties that are historic, unique, or specific in aesthetic, benefit greatly from an auction selling strategy as they can be marketed to specific individuals. This saves those one-of-a-kind homes from sitting on the market for a long amount of time, as their strategy can be pointed at the right buyer and produce both fast and financially strong results.
Auctions make buyers feel like they have a bigger sense of control over the pricing of a property. This is particularly important in the current climate when individuals can now work remotely and therefore are open to the prospect of owning a second or third property. While in the past many buyers felt luxury real estate wasn’t a sound decision because they wouldn’t be able to spend enough time there, they are now seeing that they can and will make use of a second property for more months out of the year. But it remains that these buyers still want to set their own numbers. Auctions for luxury real estate are marketed as a golden opportunity for potential buyers to purchase a property at a price they’ve set themselves. Although this may sound as if auctions accommodate buyers, a great deal of sellers leave with their original asking price or higher, as once a buyer sees the space, and commits to a bid, they generally fall in love with the idea of living there. Add to this the natural anxiety experienced as they see their bid may be too low, they often up their offer to ensure they win.
The Effect of An Auction on The Market
The power of an auction within a luxury real estate market has been proven, as properties that opt for an auction can slow down the rate of traditional sales around it. What this also means is that if a luxury home is in a slower-moving market, an auction will increase the market activity.
Auction luxury homes with Platinum Luxury Auctions and discover for yourself why this process is quickly becoming the go-to selling strategy for the Crème de la crème of high-end property owners.