Wealthy turn to auctions to sell real estate after price cuts fail
David Sandwith has been trying to unload his seven-bedroom house on Mercer Island, Washington, since 2009, listing it first for $32m, then cutting the price to $28.8m last year. After not receiving any acceptable offers, he’s putting it up for auction.
“I have a growing family and I have opportunities that I want to pursue in my life, and that doesn’t necessarily mean that I will be located here in the greater Northwest,” Sandwith, 41, said in a telephone interview. “The time is right for us to sell the home.”
Real estate auctions, long used in the sale of foreclosed properties, are becoming more popular among wealthy homeowners to drum up interest for mansions that have languished on the market after the housing crash. In exchange for a quicker sale, many sellers are accepting price cuts of 50 percent or more.
Sandwith, a father of four who retired in 2007 after selling a family company, hired Gadsden, Alabama-based JP King Auction Co to find a buyer for his 14,000 sq ft waterfront property. The sale, to be held today, doesn’t have an opening bid. The reserve auction will allow Sandwith to decline any offer he doesn’t deem high enough.
“While our bread and butter are auctions for homes between $3m and $8m, calls for these mega-mansions have doubled this year,” said Caley King Newberry, a JP King spokeswoman. “Many didn’t have to sell when they wanted to in 2008 and 2009 because they had the holding power, but now they’ve decided it’s time to move on with their lives.”
At a JP King competitor, Grand Estates Auction Co, only about 12 percent of auctions are the result of financial distress, said Stacy Kirk Reich, president of the Charlotte, North Carolina-based company. The number of buyers has risen 130 percent since 2006, she said.
“Sellers will come to us for various reasons, maybe the death of a loved one or a divorce, but most frequently because they are reallocating wealth to other locations,” said Kirk Reich, whose company specializes in auctions of properties valued at $1.5m to $10m.
The company gets an average of 276 inquiries per listing and 16 bidders per auction.
Homeowners are seeking new methods for selling their properties as the US economy shows signs of sputtering. The Standard & Poor’s 500 Index has declined 6.4 percent in August, poised for its fourth straight month of losses. Morgan Stanley said on Aug. 18 that the US and Europe are “dangerously close” to recession.
The number of sales at Premiere Estates Auction Co, which sells luxury properties, rose 30 percent last year, said Anthony Fitzgerald, a broker with the Manhattan Beach, California-based company. He wouldn’t say how many homes the company sold. The gain is likely to be exceeded this year, he said.
“The actual dollar amount of homes auctioned off has also increased by about that much,” Fitzgerald said. “It means there are more auctions but there are also more high-end auctions. I think it’s fair to say that we’ve seen a 100 percent increase in opening bid prices.”
Premiere Estates is preparing the sale of a Malibu, California, beach estate owned by William Chadwick, a managing director at investment bank Chadwick Saylor & Co. The minimum bid is $22m. With an original listing price of $65m in 2008, it is the highest-priced home ever to go to auction, according to Fitzgerald.
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