Going Once, Going Twice, Sold!

While not common place, auctions are being used more to sell non-bank-owned homes nationally. According to the , the number of homes sold via auction in that city increased in all price ranges.

A 13,500-square-foot spec built mansion in Tarzana that went for $4 million in December may be opening up more sellers’ eyes to the possibilities.

Since that sale, Beverly Hills-based Kennedy Wilson has started signing up private property owners who want to use auction as a sales tool rather than the traditional list and wait method. The auction house is planning a “great estate” auction featuring multiple sellers and properties throughout Southern California and perhaps a few select markets such as Las Vegas.

Another high-profile auction in the works is Cher’s Hawaii compound, which she hopes will fetch between $8 million and $12 million.

Why I’m expecting to see more auctions in the mainstream: It gives the seller a defined time frame; if the house doesn’t meet the “reserved price” the seller had in mind, then it can be always listed later; and the idea is still novel enough that the marketing is an attention-grabber for the house.

I’m not sure this method of selling a non-bank-owned home will become popular here in , , or the rest of the Tri-Valley but it is an interesting option. Auctions have 2 main benefits: Stronger demand when the market is slow, and (usually) an immediate sale. This can be useful from the seller’s standpoint. The same dynamics can be created with purposely underpricing a home as well, although it becomes awkward and creates ill will if the seller refuses an offer at the asking price. I have seen many cases where the buyer ends up paying more in an auction environment than what similar homes have sold for using traditional channels. As the market strengthens, it is unlikely that we will see more of this locally.