Luxury Property Auctions are on the rise as astute homeowners recognize the benefits…
It’s interesting when you hear luxury property owners raise concerns about selling their high-end homes by auction. After all, the world’s finest works of art, antiquities, jewelry, cars, planes, and yachts are celebrated and revered when they are sold at auction – so why not a luxury property?
At Supreme Auctions, we are seeing increasing numbers of astute homeowners who agree with this strategy as the percentage of luxury homes sold by auction has risen an average of 17% month-over-month since the start of the year. However, it’s still important that we take a moment to address some of the most common myths of luxury home auctions.
Top 8 Myths
1. Properties sell for less at auction.
2. Auctions are for problem, distressed, or foreclosed properties
3. Auctions are not relevant in today’s market
4. You cannot preview the property before the auction
5. Buyers can only pay cash and not utilize financing
6. Auctions exclude realtors and brokers from representing buyers
7. Buyers must attend in-person to purchase at the auction
8. Sellers have no control over the auction process
Myth 1: Properties sell for less at auction
Supreme Auctions has a proven track record of their auction properties selling 20-30% higher than traditional market values. All properties, no matter how they are sold, are subject to current market values. It is not the listing price that determines the value but what potential buyers are prepared to pay. The difference is that auctions are transparent so as long as your auction company has done its due diligence, the very competitive nature of an auction will have bidders driving up the sale price. At Supreme Auctions our Accelerated Marketing Process drives over 100 buyers to a property (in person) resulting in an average of 5-7 bidders at auction time!
Myth 2: Auctions are for problem, distressed, or foreclosed properties
This is an unfortunate impression. Although it is true that financial institutions regularly sell bank-owned properties by auction, a vast variety of savvy real estate sellers also recognize the benefits. It is also an outdated belief that only problem homes sell by auction, in fact, many stunning and unique luxury homes are sold this way and all of Supreme Auctions’ homes are in perfect condition. Supreme Auctions has been auctioning properties for over 15 years and our 96% SOLD success rate proves the effectiveness of selling by auction.
Myth 3: Auctions are not relevant in today’s market
Another misconception is that auctions are not relevant in today’s market. This is simply not true – in fact, auctions can leverage any market situation to maximize a seller’s return. In a hot market, the number of potential buyers available is generally higher and in a traditional sale, this can create a multiple offer situation. However, with a high-end property selling at a luxury property auction, this results in an intense bidding situation, which often escalates the price far above expectations. In a down or slow market, it is the time sensitivity of the auction date combined with the stimulation among buyers of the sense of urgency that creates a “fear of missing out”, drawing potential buyers’ focus to view, bid and buy a property before looking at others in the traditional market.
Supreme Auctions sells the properties they take to auction in 30 days or less. This is financially important when you consider the carrying costs that accrue on a property, as selling on the traditional market is more often than not a far longer process, and in some cases years.
Myth 4: You cannot preview the property before the auction
While properties are sold in “as-is” condition at auction, this does not mean that buyers will not have the opportunity to preview the home in person. Luxury home auctions are transparent, previews are encouraged, and full disclosure of all conditions known, as is the opportunity for a property inspection – no different from a traditional sale. Supreme Auctions works closely with their sellers to ensure that buyers are given ample opportunity and information to make their own assessment and conduct their due diligence.
Myth 5: Buyers can only pay cash and not utilize financing
For a buyer to participate in an auction it is typical that a predetermined deposit is placed in order to bid at auction. If the buyer has secured financing prior to the auction, then this will allow them to bid knowing the amount they are pre-qualified to bid to on auction day. There is typically a 30-day window between purchase and close, which should give the buyer plenty of opportunity to complete the financing they secured. However, as there are no contingencies for a buyer’s financing it is important that the buyer can close within the timeline stated.
Myth 6: Auctions exclude realtors and brokers from representing buyers
Supreme Auctions welcomes buyers who wish to be represented by their real estate professional, and we work with them to ensure that all parties are fully aware of and informed of the auction processes and procedures. All parties have the right to be represented by a real estate professional who in turn will receive their due compensation when their buyer is the purchaser of the auction property.
Myth 7: Buyers must attend in person to purchase at the auction
Just like all forms of auctions, online bidding has changed the way auctions are held, and it is now commonplace for buyers not to be required to be present in a particular auction room or location bidding during the auction process. Buyers can bid from the comfort of their own home or office, practically anywhere around the world, and at any time the auction is open. As each registered bidder is assigned a bidding number, buyers receive anonymity during the bidding process.
Myth 8: Sellers have no control over the auction process.
Contrary to belief, sellers have MORE control over the auction process than a traditional sale. They set the date, terms, conditions, and closing period. As a bonus, sellers do not have to get into a lengthy negotiation process with a buyer because all due diligence is conducted by the buyer ahead of the auction, with no contingencies upon the sale of the luxury property. The very nature of the auction sells the property “as-is” – so there are no contingencies put in place by the buyer..
If you have any questions about the auction process and considering selling your property via a luxury property auction, contact Supreme Auctions or 1-866-929-2243 for a private, no-obligation consultation.