Haute Homes On The Block

Written by Jennifer I. Montgomery    Wednesday, 29 April 2009

A keyboardist played soft jazz on the veranda, and the dining room was laid out with hors d'oeuvres and soft drinks. More than 30 people milled around the sprawling 7,000 square foot modern country estate, with its 40 foot long pool, seven car garage, and wraparound porches overlooking more than 100 acres of rolling ranchland in San Luis Obispo County, Calif. David Levisay, a 44 year old fiberoptic contractor who races quarterhorses in his spare time, was one of the guests. But while he came as a visitor, he left as the owner of the property. He'd arrived with a check for $50,000 and ended up bidding $1.92 million at the auction of the Creston Valley estate. Fast sale. The phrase "home auction" conjures up distressed properties and bargain hunters hoping to benefit from others' bad luck. But these days, owners of luxury homes are frequently turning to auctions to sell their posh properties. "These people have a lot of money but not a lot of time," says William Bone, president of the National Auction Group, which specializes in trophy homes and ranches. "In traditional sales, the broker shows a property, the deal falls through. People make offers and counteroffers. It can take two or more years to sell." By contrast, homes sold at auction are sold "as is," without contingencies, and generally close within 30 days. The whole process can be completed in about three months. There are plenty of auction houses to choose from (a sampling follows this story). But some buyers find out through happenstance. Rance Sanders was walking his dog near his Birmingham, Ala., home when he noticed an auction flier atop newspapers out for recycling pickup. Memphis based Roebuck & Associates was selling "The Belvedere," a blue and white beach home with a widow's walk and tower that Sanders's family had rented and loved, located in the old fashioned town of Seaside, Fla., where The Truman Show was filmed. Sanders, 44, a real estate developer and investor, collected a thick bidders' package of material. Any reputable auction house puts together such a packet, which contains information showing that there's clear title on the property as well as details on zoning restrictions, financing options, and the seller's terms for the sale. It's up to the prospective bidder to research comparable real estate prices in the area. The bidder might also want to arrange for a home inspector to visit in the weeks before the auction. And there is that little matter of a cashier's check. When Sanders arrived at the house for the auction, he turned over his "earnest money" $100,000. The check is generally 10 percent of the expected price; unsuccessful bidders get the check back. Sanders had hoped for a light turnout, so he was dismayed to see more than 30 people at the house, at least half of them seemingly serious bidders, judging by their big bidders' packages. Once everyone settled into their chairs in the den, they were off. Bids started at $1 million, with the auctioneer, John Roebuck, trying to move the price up in $50,000 increments. Most bidders dropped out at about $1.5 million, Sanders remembers, and finally he was bidding against one other man, a country music songwriter from Nashville. Sanders offered $2 million and change. There was a long pause, and he thought he had it. Roebuck asked the songwriter to go up $25,000. He nodded. Sanders went up an additional $10,000, and this time the other bidder shook his head no. Sanders had the house for $2.32 million. Though he spent about $50,000 more than he planned, he was happy. "It was a hoot," says Sanders, "a fun way to buy a house." Residential real estate auctions make up only a small fraction of home sales about 6 percent of dollar volume, or $58.8 billion in 2002, according to the National Association of Realtors. Nonetheless, they are growing faster than any other auction category, increasing more than 13 percent in dollar volume this year. The recent growth in luxury home auctions, which have been around for about a dozen years, is at least partly a result of the comfort level people feel with other types of auctions. "The buyers we deal with have often bought fine art or horses at auction," says J. Craig King, president and CEO of JP King Auction Co., one of the nation's largest luxury home auctioneers. "They recognize that this is a viable way to buy real estate." Last year, King says, his company conducted 38 auctions. This year, they've already hit that number and expect to conduct 55 auctions by the end of 2004. Not surprisingly, traditional real estate brokers aren't thrilled to see potentially lucrative commissions vaporize under the auctioneer's gavel. But many auction companies now court brokers, offering referral fees if they bring in bidders and a commission of 2 to 3 percent if one of their folks wins the property. High end auctions do offer the occasional bargain. Just ask Eric Turnquist. He had heard about the June auction of the LL Ranch, a 375 acre mountain retreat near Colorado Springs, Colo., with stunning views of the Sangre de Cristo mountains, through the broker who'd showed him the property the previous year. At that time, Turnquist made a $900,000 offer. But the owner wanted $1.15 million, and they couldn't agree on terms. A year later, the tables were turned. Unsuccessful at selling the property through conventional means not uncommon with large, remote, or unique properties that are hard to value the owner put it up on the auction block. For a harrowing 30 minutes, Turnquist, on a cellphone from his home in Tewksbury, N.J., vied with two other bidders. Then the gavel came down and Turnquist, 59, became the ranch's new owner. His winning bid: $875,000 less than he'd offered in '03. What if the gavel comes down and you've paid way too much? That can happen, says Bone, remembering a man whose final $2.5 million bid was about $1 million more than he'd planned. When he balked, the auction house offered the property to the second highest bidder, who was glad to get it. And the top bidder was relieved to have lost "only" his deposit of $200,000. "When there's a handful of buyers, the price goes up and you think, 'Wow, this must really be a good property,'" warns Turnquist. Although it's easy to keep bidding, caveat emptor may be a better auction motto than carpe diem.

Last Updated ( Wednesday, 29 April 2009 )