Want to Buy a Discount Luxury Home? Better Bid Fast

The luxury market has remained mighty strong in America during this wild year of rising real estate prices. But that doesn’t mean that high-end homes are exactly flying off the shelves.

In fact, some well-off homeowners are increasingly choosing a speedier route to a sale: a luxury real estate auction.

Luxury home auctions became common after the housing crash in ’08, when there was a glut of million-dollar-plus homes that had descended in value, and even the wealthiest buyers weren’t in the mood to snatch up property. But these days, according to Daniel DeCaro, CEO and founder of DeCaro Luxury Auctions, some sellers simply prefer auctions in general to more traditional selling.

“A lot of wealthy people are used to buying their antiques and classic automobiles and jewelry through the auction venue,” he says. “They’re starting to believe in the process of selling [a home] under that same venue.”

Beth Rose of Beth Rose Real Estate and Auctions agrees. “We’ve seen an increase in the last four years with luxury real estate auctions and the caliber of real estate that we’ve been doing,” she says.

Rose and DeCaro handle only “nondistressed” sales—this isn’t about a glut of abandoned, speculated homes. “None of my sellers are ever in trouble,” Rose says. “The seller hires me for my marketing efforts.”

It’s no different from selling a Van Gogh, says DeCaro. “You wouldn’t consign it to an antique dealer; you’d sell it at a luxury auction house.”

Actually, there is a difference: While a Van Gogh might sell at auction for above the market value, a home sometimes sells for less.

DeCaro says when the traditional real estate market was slow, a buyer could hope for a sale of 30% to 40% below the market price. These days, he says, because the market is so fiery, some of them are going for only 20% to 25% below.

For the record, Rose disagrees. “Some of our statistics have proven that we’ve gotten between 90% and 100% of list price,” she says.

Here’s how luxury real estate auctions usually work: There are several weeks of open houses, during which a prospective buyer can order a home inspection and ponder his or her maximum bid. The auction itself lasts somewhere between 15 and 30 minutes. When it’s done, that’s it: You offer the highest bid, you win. Up to two months later, pack up your Van Gogh and move in. You pay the auctioneer’s premium of 10%; your agent gets the commission from that.

There are different kinds of auctions, from absolute (no reserve—the property goes to the highest bidder, period) to minimum bid (no starting at $50, folks) to reserve (think eBay—if you don’t get the minimum price you wanted, you don’t have to sell).

So if you want to jump in while the water’s still lukewarm, check out these current, or imminent, auctions.

Perhaps something Western is your style. There’s 2987 W Jordanelle View Dr. in Park City, UT, a seven-bedroom, 11-bathroom winter wonderland of 11,308 square feet. Bids start on Saturday.

How about a whole enclave of homes in the Hamptons’ village of Quogue (disclosure: Not all of them are actually finished)? The reason for the auction? There was a “partnership dissolution,” the PR folks say. Bidding starts on Nov. 18.

Why stick to the States for your discount luxury real estate? If you’re looking for some prefab Austrian properties, may we recommend these four modular show homes (three of which are assembled), with an opening bid of 30% less than the regular turnkey price, per the press release.

Auctions do seem to prove effective. A 16-bedroom, 22-bathroom palace, 7 Montagel Way in Birmingham, AL, has been hard to unload. We’ve written about this home twice. It’s Alabama’s most expensive home, and it’s been one of our most looked-at homes. It finally sold at auction on Halloween. (DeCaro says they don’t release sold prices “to protect the seller’s privacy.”)

What’s the upside of auctions for sellers, considering they’re likely to suffer a hefty pay cut?

Speed. A traditional seller “could be listing their home for a year, two years, five years,” DeCaro says. “The auction process takes 60 days from beginning to end.”

Also, in some wildly overpriced markets, where homes are selling for far more than they were a year ago, maybe 25% off is relatively painless. Last year, that would have been the exact amount you’d hoped for.

If you have a reserve auction, you do run the risk of rejecting what measly bids you get. Just last week, a Chinese auction house tried to auction off Michael Jackson’s old Neverland Ranch. There were no winning bids.

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