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Discusses the options sellers and buyers of luxury real estate have when it comes to luxury property auctions.

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Gary Gilbert

Gary Gilbert

I have been involved in multi-millions of dollars worth of luxury real estate auction transactions advising both sellers and buyers.

Answers to Most Commonly Asked Luxury Real Estate Auction Questions Video

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Thursday, 10 May 2012 Category Luxury Home Auction

It seems like every day, I get asked pretty much the same questions from potential sellers and agents regarding luxury real estate auctions.  I decided to answer some of these questions in a video which can be viewed by clicking here.

Do you or does your client have additional questions about the luxury property auction method that may not have been addressed in the video?  If so, please contact us anytime to get those questions answered including an analysis of the handful of luxury real estate auction companies that compete for your business.

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Are Luxury Auctions Used for Things Other than Real Estate?

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Tuesday, 08 May 2012 Category Real Estate Auction

It seems like I'm mostly writing about luxury real estate auctions here even though there are many other luxury assets in which an auction can be a good fit.  Some of those assets may include: art, automobiles, or yachts.

While the asset classes mentioned above are very different than that of luxury real estate, the concept and the benefits are very much the same-  Conduct an extensive advertising and marketing campaign to inform sellers about the upcoming event. Use a date-certain event to create urgency on behalf of affluent buyers. Require buyers to tender a non-refundable deposit with a cash, contingency-free 30-45 day closing.

Which asset class or classes are you considering an auction for?  If a luxury property auction is in your future, we would be glad to help by providing expert advice.  If it is something else, we would be happy to refer you to one of our counterparts in that sphere.

By the way, my new video blog is now live. Please click here to view.

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Who Wins at a Successful Luxury Property Auction.

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Tuesday, 08 May 2012 Category Luxury Property Auction

I love win wins.  Who doesn't?  Especially when it comes to luxury real estate auctions.  So, who ends up winning when
a luxury property auction is successful?  Obviously, the seller who has been able to use a date-certain event to force
buyers to react allowing them to close a chapter in their life, something they have not been able to accomplish in the past.
If the property was co-marketed with a luxury agent, the agent is able to earn a nice cash, contingency-free paycheck usually with a 30-45 day close.  The luxury real estate auction company wins because a successful event likely means addition business for them from other sellers who are eager to take control of the sales process.  Let's not forget about the local market in general and the benefit it provides for it.

Some, especially those that have similar properties for sale in the same marketplace, may argue that a high-end property
auction conducted for another home reduces the value of their home. However, we need to ask the person of that mindset,
"How are you determining the meaning of the word value"? "What determines the real, fair market value?  Your personal opinion? Comps and appraisals"?  When you think about it, true, fair market value is determined by buyers, not sellers.  Assemble a  room full of registred bidders who are end-user buyers with the ability to make a cash, contingency-free purchase and they will determine exactly what the value is. Transparency makes for a healthy market.

Let's discuss this topic or others you may have questions about in more detail.  We are ready to advise you on the ins and
outs of the real estate auction world including the selection process of the best auction firm to handle the sale of your
luxury property.

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The Consequences of Working with a Price Sensitive Luxury Real Estate Seller

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Sunday, 06 May 2012 Category Luxury Property Auction

How many times do I like to discuss here the two types of sellers that are when it comes to luxury real estate auctions?  Of course I'm talking about the price sensitive seller and the market sensitive seller.  The price sensitive seller is someone who is hung up on comps, appraisals or personal opinion of exactly what their luxury property is worth. For the most part, this seller profile is not a good candidate for something like a luxury home auction.  The market sensitive seller is the person who is realistic on the true, fair market value of their property and is fine with the price achieved at auction, assuming the auction is conducted with the right luxury real estate auction company.

Unfortunately, there are auction firms that will work with anyone, even a price sensitive seller.  They have a "throw it against the wall and see what sticks" model and hope for the best.  More times than not, the best does not happen ending up in what we like to call a "no sale".  A "no sale" is a bad situation for all parties involved.  For the seller who has spent a significant amount of money for the marketing expenses, that money is gone and they are right back where they started from with a luxury property still for sale.  For the agent involved in the deal, when applicable, they earn no commission with the same being said for the auction company.

With any credible luxury property auction company, their best interests should be for that of the seller.  However, for conversation's sake, let's discuss the negative consequences that are produced from a "no sale" event for high end real estate auction business in general. Many observers will dismiss the auction concept by saying that is simply doesn't work when in fact it works well in many situations.  Many sales take place post-auction after one-on-one negotiations, something that happens due to the date-certain event the auction produced.

In summary, it is critical that you or your seller of luxury real estate sold at auction be a market sensitive seller.  How would we describe a market sensitive seller, someone who would be a good candidate?  Please contact us anytime to find out.

 

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Does a Luxury Real Estate Auction Company Get Paid for Pre and Post Auction Sales?

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Friday, 04 May 2012 Category Luxury Property Auction


One of the questions that comes up often from both owners and brokers considering a luxury real estate auction regards whether or not a luxury property auction company should get paid should a pre or post auction sale occur. 

So, what is a pre or post auction sale?  Just like it sounds, it is a sale that occurs either prior to the auction or after the
auction has occurred.  Why you ask would this happen?  For pre-auction sales, the date-certain event created by the auction itself forces a buyer to a point of action.  They may not want to participate in a competitive bidding situation on sale day and would rather buy the property in advance.  A post-auction sale would occur should the property not sell on sale day by not meeting the seller's reserve price.  After the fact, it is very common for the auction company to negotiate with potential buyers who were brought into the mix by the auction.

So, should the auction company get paid if it is able to procure a buyer?  It really depends on the language in the agreement but any good luxury real estate auction company will include language that allows them to be compensated for their efforts should the auction itself be the catalyst which produced the successful purchaser.

Please contact us anytime to discuss the details of this subject or with any other questions you may have about luxury property auctions including the pros and cons of the luxury real estate auction companies that compete for your business.

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Do Buyers Ever Really Get a Steal of a Deal at Luxury Real Estate Auctions?

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Wednesday, 02 May 2012 Category Luxury Property Auction

One of the questions that has been coming up a lot lately is that of whether or not buyers ever get "steals" when purchasing at a luxury real estate auction.

As you probably know, there are two types of auctions- auctions with a reserve and auctions without a reserve which is also called an absolute auction.  If any "steals" were to be had, they would probably occur at an absolute auction which means that the property sells no matter what the price is.  Very often, potential sellers ask me "Do you mean that if someone's high bid is $100 on my mullti-million dollar home, I have to convey the property?".  While this is an extreme example, theoretically, that would be true.  However, the ridiculous rarely, if ever, happens and buyers rarely get "steals".  Not to say that it doesn't happen, but it is rare.  If a seller hires the best luxury real estate auction company to handle their sale and the market responds, the bidders will determine the true, fair market value.  Sadly, there are luxury property auction companies that advertise something like a luxury home auction as "absolute" only to cancel the auction if the bids are not acceptable to the seller on sale day.  We like to call that a "green apple auction" in our world.

Would you like help when it comes to selecting the best company to handle the luxury auction you may be considering?  If so, were are here with answers.  Please contact us anytime to discuss.

 

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Without a Date-Certain Event, a Luxury Listing is Just Another Luxury Listing

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Wednesday, 02 May 2012 Category Luxury Property Auction

I am continually surprised at the volume of luxury homes priced above $2mm there are on the market across the country.  In advance of yet another Seattle trip later this week, I searched www.realtor.com for homes in a 20 miles radius of Seatlle with an asking price of at least $2mm.  The number was significant. With one property not really standing out from all of the others, how does one stand out?  How about trying something new and proven like a luxury real estate auction?

The auction method uses a date-certain event which in addition to forcing buyer to react, puts the property being auctioned in the spotlight with all of the focus be placed on it.  As I have written about here before, another interesting phenomenon that occurs is that of the "freezing" effect.  The "freezing" effect is what happens to a marketplace when a luxury property auction is announced.  Few, if any, properties will trade during the auction marketing period as buyers will wait until the auction occurs before conducing any type of transaction.

Is your luxury home one of many being offered in a crowded marketplace?  Would you like to freeze your marketplace?  We can help you make that happen by providing expert "high-end" real estate auction advice.  Please reach out to us anytime to begin the dialogue.

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The Role Egos and Emotions Plays in Luxury Real Estate Auctions

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Monday, 30 April 2012 Category Luxury Property Auction

Happy Monday to all.  This morning, let's take a look at the role played by emotions and egos when it comes to luxury property auctions.  As I wrote about recently in a blog titled "Why Winners Selling Luxury Real Estate at Auction Attract Buyers that are Also Winners", winners are typically people who hate to lose and are often fiercely competitive.  Put these type A personalities in a room together bidding their interest for the same item at something like a luxury home auction and anything can, and often does, happen.

I have also written here about the pros and cons on online bidding versus live, onsite bidding.  As you may remember, I am big on the live, outcry event.  While I don't want to see any bidders eliminated because they may not be able to be at the live event, I do want to see bidders live, in attendance if at all possible.  Why?  Online or phone bidding tends to be cold in nature with the inability for bidders to interact psychologically with one another.  It is not possible, unless bidders are in the same room together, for them to look into the eyes of their competition.  The chances of someone bidding an additional amount is greatly increased if they are able to engage with their competition in a live, outcry event.  Think about the huge egos that many of these bidders have and how they hate to lose.  Think about the emotions that flourish at something like a live luxury real estate auction.

Would you like to experience this phenomenon at your event?  We can help show you how to make that happen by advising you on the world of high end real estate auctions including discussing the handful of luxury real estate auction companies qualified to conduct your event.  Let's get started by contacting us to strategize.

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Luxury Real Estate Auction Budgets- Does Size Really Matter?

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Friday, 27 April 2012 Category Luxury Real Estate Auction Companies

Today, let's take a look at a major component of a luxury real estate auction, the budget, and whether a larger budget means a better end result.

So, what do we mean by "the budget"? The "budget" as part of a luxury property auction is the amount it takes to conduct an auction event which includes many components.  Those components could include: print media, online media, public relations efforts, due diligence items, signs, showing staff and sale day items.

Typically, a luxury real estate auction company will require that the seller be responsible for funding the "budget".  For most companies, paying for the "budget" upfront, in advance is the total commission paid by the seller.  However, there are a couple of firms, one in particular, that asks the seller to pay the "budget" in addition to paying a few points of commission.  Beware of this type of arrangement and consider this a red flag. We recently talked to a very savy Wall Street veteran who was pitched this arrangement by the firm most often using this tactic.  He laughed and told us that perhaps he was in the wrong business.

Does a larger budget mean a seller will experience better results?  I think not.  Why would one auction firm quote a budget much higher than another for the exact same property and seller?  Firms using things like having one of their staff members show the property/conduct open houses instead of using a local agent adds unnecessary costs.  In addition, some firms may claim that there is no mark up in media pricing while in reality it is a small profit center.  Do some firms get better pricing on media than others?  What about line items for travel expenses?  Is someone like an auction manager really necessary?  These are all things that should be considered which could total in the tens of thousands of dollars in savings when addressed correctly.

What is your auction budget for a $2mm plus property?  If you have already been researching such, I'm sure you have seen numbers that your are having trouble justifying.  Regardless, please contact us for guidance.  We would be happy to take a look at your situation and make our best recommendation.

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The Relationship Between Luxury Brokers and Luxury Property Auction Companies

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Thursday, 26 April 2012 Category Luxury Real Estate Auction Companies

I thoroughly enjoyed meeting hundreds of luxury agents at a luxury conference in Las Vegas earlier this week.  I noticed that their impression of the luxury real estate auction method is begining to change as they realize that auctions can be a valuable tool for the right client.

In the past, their impression was not as positive but now that they are seeing the auction method work in various markets across the country, they seem to be opening up to the idea of aligning with a luxury property auction company

So, what exactly does the relationship between a traditional agent and an auction firm entail?  Depending on the auction firm, the relationship could be strictly a transactional one with little interaction and little compensation, or it could be one in which the agent is very involved in the deal and is compensated for such.  I personally am a big fan of the later and don't like working with firms who tend to be greedy.  When the agent is incentivized, the chances of experiencing a successful event is much greater. Regardless, the role of the referring agent, at a minimum, is to conduct the property tours which are usually held a couple of weeks prior to the event.  A good auction firm will involve the agent extensively including involving them in regular conference calls and strategy sessions to educate them on the auction process. 

Let's discuss the luxury property you and your seller may be considering taking to high end auction including the luxury real
estate auction companies
that are the most agent/broker-friendly.  Please reach out anytime.  We are here to help.

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How Brokers and Agents are Paid for Referring Property Selling at Luxury Real Estate Auction

by Gary Gilbert
Gary Gilbert
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Tuesday, 24 April 2012 Category Luxury Property Auction

I am wrapping up my week here in Las Vegas with one of the nation's largest brokerage firm's luxury division team members.  As you can imagine, I fielded many questions as I discussed here yesterday regarding how an alliance between a luxury agent or broker and a luxury property auction company would work.  I often begin by saying to them "Let's start off by discussing what you really want to know which is how you get paid".

This varies from firm to firm but generally the listing agent is compensated in some form via the "buyer's premium" which is simply an amount that the high bidder pays in addition to their high bid price.  Some luxury real estate auction companies may offer 2-3% while one I am familiar with pays the agent their full commission, whatever percentage they are currently at with their client.  Most firms will also use some type of broker incentive program which incentivizes them to make written offers prior to the auction.  Still other firms may use other arrangements. On occasion, the referring broker may also be able to represent the purchaser.

Owner/Brokers:  To discuss conducting a strategic alliance presentation for your office, please contact us.

Agents:  To discuss your clients' properties on a case-by-case basis, please contact us.

 

 

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What Price Value Justifies a Stand-Alone Luxury Home Auction?

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Tuesday, 24 April 2012 Category Luxury Home Auction

Good morning from Las Vegas.  I am attending a luxury real estate conference here this week and have really enjoyed hearing the opinions of luxury realtors located across the nation regarding what is happening in their markets.  I have answered the typical questions that I write about here often including "How am I paid?", "Can we set a reserve price?" "Why would someone use a luxury real estate auction?" and "Who would be a good candidate for a luxury property auction?".

One question that I will discuss here today that came up a few times was "What value home justifies a stand-alone event?".  In general, I feel that a home priced at $1mm or up in most markets is probably a candidate for a stand-alone event based on the financials and models of most luxury property auction companies For those homes priced from the $300-$900k range, it likely would not make sense for a seller to conduct a stand-alone event.  In these cases, I recommend that a seller consider participating in a multi-property event in which, for example, 4 or 5 homes are all sold using the same advertising and marketing campaign in addition to sharing the advertising and marketing expenses (which is typically a seller's total commission).  An event like this would be held at a central location like a hotel ballroom.

I wonder what questions await me today?  What questions do you have about the high-end real estate auction world?  I would be happy to answer those for you including having a discussion about what luxury real estate auction company is best suited for your needs.  Please reach out anytime.

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The Profile of Buyers at Luxury Property Auctions

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Sunday, 22 April 2012 Category Luxury Property Auction

The profile of bidders and buyers of real estate sold through high end auctions are pretty much the same as those selling at luxury real estate auctions.  They are affluent, successful people who, as I've mentioned here before, hate to lose.  Many of them own their own business and are fiercely competitive.

Geographically, many of the buyers I encounter don't live in the immediate area where the luxury property is located but seem to have some type of connection to the area.  Perhaps they lived there in the past or maybe they have, or are looking for, a second home.  Locals buyers do surface but for the most part I find that buyers come from elsewhere.

So, what makes these out of area buyers react?  First, they are made aware of an upcoming auction thanks to a comprehensive advertising and marketing campaign that any good luxury real estate auction company will conduct.  Secondly, the auction creates a  date-certain event that forces them to a point of action, something they have not had pressuring them prior.

I would be curious to hear where most of your out of area buyers seem to come from.  For example, many Austin buyers end up being from Houston and many Colorado buyers are from Texas.  Let's discuss the auction option including the financials, the mechanics and the company best suited to handle your sale.  Please contact us anytime to begin the dialogue.

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Pockets of Luxury Real Estate Auction Opportunities in Major Metros.

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Friday, 20 April 2012 Category Luxury Home Auction

Happy Friday from Atlanta.  I lived here years ago and I have forgotten how many luxury real estate auction candidates there still are out there.

Like all major metropolitan areas, Atlanta's luxury homes are concentrated in a few areas.  Here that would be the Buckhead community or something like Country Club of the South. Few luxury property auctions have occured here, especially in Buckhead, but I feel that is about to change. 

Affluent sellers, both here and beyond, are finally warming to the idea of something like a luxury home auction
Like I say here so often, they are usually not distressed and don't have to sell but would like to due to something like downsizing, retiring, asset allocating or possibly health issues.  The property has likely been listed for an extended period of time with few, if any, legitimate offers.  The auction method, with it's date-certain event, forces affluent buyers to a point of action, something they have not faced previously. The auction method allows the seller to take control of the sales process offering them the opportunity to close a certain chapter of their life.

Brokers and agents as well are also warming up to the idea of auction.  Some are presenting the option to their sellers while we are seeing many sellers asking their agent to look into the concept for them.

What is the overall feeling for luxury real estate auctions in your market? Are you or is your client interested in learning more about the process?  If so, we can help.  Our job is to advise you and educate you on the process including evaluating the various luxury real estate auction companies that want your business. Contact us anytime to begin the conversation.

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Luxury Real Estate Auction Markets are All Different in their Own Way.

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Thursday, 19 April 2012 Category Luxury Property Auction


Good Thursday from Atlanta- a far cry from this time last week when I wrote you from Seattle. Saturday finds us in Las Vegas, yet another completely different luxury property auction market. 

So, what makes one luxury market different from another?  Other than mountains versus skyscrapers versus beaches, the mentality of sellers regarding auctions can be a deciding factor as well.  In addition, some states seem to be more auction-friendly than others.  Colorado, for example, is the first state that comes to mind as being a very luxury real estate auction-friendly state.  I think that this is the case based on the fact that so many auctions, succesful for the most part, have occured there.  Florida is another state that comes to mind thanks to water, which is always a big draw.

In places like Australia, the preferred method for the sale of real estate is that of auction.  Will we ever see that here in the US?  I doubt it in my lifetime but who knows. 

What market are you located in?  We would love to hear your experience with/opinion on luxury real estate auctions.  What makes your market special? Please reach out to us anytime to share your thoughts.

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Companies Specializing in Luxury Property Auctions

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Wednesday, 18 April 2012 Category Real Estate Auction

More and more, I am seeing either owners or traditional real estate firms attempting to conduct  luxury real estate auctions. While I applaud them on thinking outside of the box by trying something new which is proven, I do not applaud their copy cat approach.  Many think that conducting something like a luxury home auction is simple- they pick a date, do some advertising and hope for the best.  The problem with this, based on my observance of the handful of recent auctions conducted by non-luxury auction companies, is that it typically does not work leaving a bad impression on our industry in general.  Why does it typically not work?  Because conducting a successful real estate auction, especially at the "high-end", requires years and years of experience.  There is a lot of psychology involved as well as strategies only understood by someone or some company that has been in the luxury property auction business for many years.  It is an extreme example but you wouldn't want a podiatrist performing your brain surgery would you?

So, what is a broker, agent or owner to do?  First and foremost, they need to select the best luxury real estate auction company to handle their event.  Most will start their search online and go from there.  In my opinion, there are really only four or five choices with a couple of those firms' practices, both ethically and financially,  being questionable.  Most of their business models are pretty much the same.  However, buyer beware as each has their own pros and cons.

Our job is to help you sift through the luxury property auction companies competing for your business and make our recommendation based on your property and situation.  Please contact us anytime to begin the search.

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Bids Placed Prior to a Luxury Real Estate Auction

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Tuesday, 17 April 2012 Category Luxury Home Auction

I am often asked what is the best way to handle bids received prior to something like a luxury home auction.  At first glance, one would think that sellers would be thrilled to receive bids prior to the auction event, which they should, assuming it is a strong number.  However, some sellers may not want to consider accepting a pre-sale bid, especially if they are offering additional properties in something like a multi-property event. Why would a seller have concerns about accepting a bid in this scenario? The general concept I hear most often is the fact that should the word get out as to what that accepted bid number may be, the stage may be set for numbers achieved at the scheduled auction with those number being based on the number that the seller was willing to accept pre-auction.

Again, this example would apply only to a seller who is offering multi-properties, someone like a developer.  For someone like a stand alone seller offering only one asset, the pre-bid psychology is much different.  Should a seller receive a pre-bid that was generated due to the auction event, the luxury real estate auction company would present the offer to the seller and make their recommendation as to whether the seller should take the offer.  The final decision, of course, is made by the seller.  If the seller declines their offer, the auction firm tells the bidder that their offer has not been accepted and wishes them luck at the upcoming auction.  If the seller accepts the offer, a deposit is tendered, escrow is opened and the luxury property auction company makes their best efforts to let the world know that the property has pre-sold and no auction will occur.

Keep in mind that regardless of the situation, the date-certain event produced by the auction was the catalyst that forced buyers to the table, something that was not being achieved prior.

Would you like to entertain pre-bid offers on your luxury asset?  We can show you how to increase the odds of making that happen.  Please contact us to discuss your property, the auction method and the auction companies competing for your business.

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Price Sensitive Sellers of Luxury Real Estate Sold at Auction.

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Sunday, 15 April 2012 Category Luxury Property Auction


When it comes to sellers of luxury real estate offered at a luxury property auction, there are two types: price sensitive sellers and market sensitive sellers.

Much like a potential seller is analyzing luxury real estate auction companies, a good luxury auction firm will also be evaluating their potential future client. If a client is hung up on a number that they insist their property is work, based on things like appraisals and comps, it may be better for the auction company to pass on this business.  No one wants to go through the process of conducting an event spending time and money only to not sell the property and end up right back where they started from.  However, if the client seems to be someone who would be realistic on the true value
obtained on auction day and is not too hung up on things like comps and appraisals, they may be a good candidate.

Sadly, there are luxury property auction companies that have a "throw it up against the wall and see what sticks" philisophy.  They simply roll on to the next auction in the next state and hope for better results.  In this case, most sellers are out the expense money they put up on the front end and end up right back where they started from. It is much better for all involved to pass on business where a seller seems to be too "price sensitive". 

Which type of seller are you or your client?  Let's discuss your situation and find out.  We are happy to guide you through the world of luxury property auctions including recommending the company best suited for your needs with your best interest in mind, not their's.

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The Psychological Element of a Luxury Real Estate Auction

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Friday, 13 April 2012 Category Luxury Property Auction

Many may feel that an auction is pretty much cut and dried- something is offered for sale, an auctioneer cries the bid and people bid their interest.  While this is the general outline of the auction process, there is actually a huge psychological element to the process that may not be apparent to the average person on the outside looking in, especially when it comes to something like a luxury real estate auction.

First, let's talk about the psychology behind the word "auction".  What do you think of when you hear that word?  For most, words like "deal" come to mind.  They may feel that the person selling the asset offered at auction is distressed and is willing to sell the asset for a greatly reduced price.  We in the luxury property auction business want people to have this type of mentality.  The more people that think they may get a "deal", the more inquiries and property tours.  The more property tours, the more registered bidders.  The more registered bidders, the higher the price achieved at auction.

Next, lets touch on the psychology involved with bidders.  Bidders, especially those bidding at something like a luxury home auction, typically have big egos.  They, like sellers of luxury property, are winners and hate to lose.  Put those folks in a room on sale day, let them bid their interest and let the games begin.

Finally, by using a date-certain event, buyers are forced to a point of action, something they have not had prior.  The psychology of missing out on their opportunity forever is powerful.

Are you ready to utilize the psychology behind an auction to help sell your luxury property?  Are you ready to take control of the sales process?  We are ready to help by advising you on the auction method and the auction companies competing for your business.  Please contact us anytime.

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The Use of a Buyer's Premium at Luxury Property Auctions

by Gary Gilbert
Gary Gilbert
I have been involved in multi-millions of dollars worth of luxury real estate au
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Thursday, 12 April 2012 Category Luxury Real Estate Auction Companies

So, what exactly is a "buyer's premium"?  A "buyer's premium is simply an amount (percentage) that the high bidder(s) pay in addition to the high bid price. Look at it like a sales tax.  With luxury real estate auctions, the standard percentage used is 8-10%.

Why is a "buyer's premium" used?  Typically, it is used to fund the commissions for the selling and buyer broker (if applicable) in addition to funding the commission of the auction company. Please remember that the total  commission paid by the seller is typically their funding of the advertising and marketing of the event. On a side note, I have noticed recently a couple of luxury property auction companies that are retaining a portion of the "buyer's premium" in addition to charging a few points of additional commission.  Please consider this a big red flag as there are much better options out there with your best interests in mind.

Is a "buyer's premium" never used?  Yes.  I know a veteran auctioneer in my home town that is adamant about not using a "buyer's premium".  He and I have had many spirited conversations about this topic with my primary thought on the matter being that the use of such generates more proceeds for the seller and motivates the brokerage community more by having more funds available to pay them.

Lastly, sellers often ask me "Doesn't a bidder factor into (reduce) their bid if they know that they have to pay an additional 8-10%?"  On the surface, that would seem to be a factor, but when someone really wants something, they don't let something like a "buyer's premium" keep them from bidding their interest.  Think about it- you have your eye on that new car, those new shoes, or whatever luxury property is a must have in your mind.  Are you going to reduce the price you are willing to pay for it just because there is a sales tax involved?  Probably not.  Add to this example an auction environment in which you are competing with others for ownership of the same luxury property.  Would the "buyer's premium" keep you from bidding your best interest?

Please contact us anytime to discuss this topic or any others in more detail.  We are ready to advise you regarding luxury real estate auctions and the auction companies competing for your business.

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