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Auctions of non-distressed, luxury residential properties seem to be in the news regularly these days, from Angelina Jolie’s former New Orleans home to Derek Jeter’s New York castle going under the hammer.
Buyers and sellers alike have grown more fascinated with and accustomed to the concept in order to acquire or sell properties quickly. Meanwhile, traditional real estate brokers over the past several years have become more open to luxury auctions, and, in some cases, have established concrete partnerships with niche auction houses, experts noted. And the boom in luxury home auctions can be a boon to buyers, who get a fast, transparent process with little chance of overpaying, experts said.
“I don’t think that it’s the micro or the seasonality or the market conditions that is the primary driver behind this growth in momentum in this auction industry,” said Misha Haghani, founder of New York-based luxury real estate auction house Paramount Realty USA. “It’s the macro—I think it’s the market acceptance of auctions as a more common method of selling assets.”
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These auctions are not the typical selling of foreclosed or distressed properties. Rather, high-end sellers tend to opt to put their pricey pads on the auction block after trying to sell them on the market the traditional route. Auctions, experts said, offer sellers concrete timelines and committed buyers, benefits not usually seen in a typical home-selling process.
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“What auctions do for the seller is it creates liquidity in what is traditionally a non-liquid asset,” said Scott Kirk, founder of Charlotte, North Carolina-based luxury home auctioneer Interluxe. “It creates attention and it creates the fixed time frame, as well as [giving] sellers peace of mind of understanding that they’ve got a competing, qualified audience telling them … what the property is worth in the market.”
And buyers, who also tend to be drawn to the quick turnarounds of auctions, appreciate that all the deal work and due diligence is done upfront. There are few, if any, surprises for both sides, experts say.
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“Auctions create urgency on the part of buyers,” Kirk said. “Obviously, there is the opportunity for buyers to name their price on a particular property. And the transparency of it is that buyers never have any fear of overpaying because they know exactly what the market sees that value as being, whether it’s one increment more or less than what they’re willing to pay.”
In some cases, luxury homes sold via auctions can result in significant price cuts for sellers—at least from what they had hoped to sell their homes for originally. For instance, Angelina Jolie and Brad Pitt’s former New Orleans mansion sold at auction for $2.8 million in December. But the seven-bedroom property originally had been listed for $3.475 million, making the hammer price about 19% lower.
A Nashville property with ties to the singer Adele was once on the market for $22.5 million. It eventually sold via auction for about $7.53 million, said Trayor Lesnock, the founder and president of Miami-based Platinum Luxury Properties, which handled the sale.
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In fact, such discounts are actually the market correcting itself, auctioneers said. Luxury homes, which are often unique or notable in some way, can be inherently harder to price than homes in the average market, where more comparable data exists. “High-end properties are hard to price because oftentimes there aren’t comps,” said Chad Roffers, chief executive officer of New York-based Concierge Auctions. “So what is the right price? It’s very difficult. And I would just say that our process gets to the right price faster rather than a seller going through a multi-year process trying to figure out what the right price is,” Roffers said.
What it comes down to, said Paramount’s Haghani, is information.
“As long as information is widely available, there should be no opportunity to buy something really below market,” Haghani said. “If you market it well, which is [easier] to do today than ever before because of all the platforms that are available, you’re going to reach the marketplace, and you’re going to get market value.”
Some buyers, of course, may be attracted to auctions for the opportunity to snag a discount. But at the end of the day, it’s still an auction—which means a buyer can never fully know what will happen.
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“The ability to obtain the deal exists,” Lesnock said. “It exists more in the auction industry, much more so than it does in the traditional brokerage industry. But when you have the ability to name your price—well, there are other bidders who may name a higher price.”
Some auction houses also offer sealed bid auctions. In those instances, buyers can’t see what others are bidding—and that refers not only to price, but also to deal terms.
“We do a lot of sealed bid auctions,” Haghani said. “And I think that’s more likely to get a higher price for the seller.”
While there have been niche players in the space for some time, traditional real estate brokers have been getting in on the action, too. For instance, famed global auction house Sotheby’s and real estate services firm Realogy Holdings Corp. , now Anywhere Real Estate Inc. (NYSE: HOUS), announced in November 2021 that the companies had partially acquired Concierge Auctions. In January, it was announced that Compass had chosen Paramount to serve as its real estate auction partner. And some brokers ink deals with real estate auctions firms, typically bringing clients and handling marketing while the auctioneers handle the sales.
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Eileen McGill, a New York City-based agent at Elegran, recently completed her first auction of a luxury property—a condo at the famed Plaza Hotel.
“The seller was particularly interested in going the auction route,” McGill said. “He had sold a property before that way and explained it to us, and we were completely on board.”
“It feels like the potential is huge for the future for auctions,” McGill added. “I don’t know that every house or apartment can trade that way. But … when you have an iconic building, a rare opportunity, maybe something that was owned by somebody historical, it just brings the audience together.”
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