You only get one chance to make a good first impression in life and in real estate and there are some things that don’t age well, and a "For Sale" sign is one of them.
"Days or long periods of time on the market are not your friend!" said David Fresquez, Business Development Rep for DeCaro Auctions. "It’s like being over exposed to U.V. rays from the sun: The longer you’re out there, the more you’re getting burned."
The number of days on the market is one of the first signs that it may be time to go the auction route.
Auctions create urgency around a sale, as well as get the word out to a new pool of affluent potential buyers. This is especially true for high-end and unique homes, which have such a small pool of potential buyers in the first place.
If a home has been listed for two or three times longer than the average number of days on market, it’s time to consider the auction route plain and simple, according to David Fresquez, Business Development Rep of DeCaro Auctions.
"Then it’s time to think outside the box about another way to sell that property," he said.
The number of days on the market depends on the location of that market; each city or town is different. The median age of properties across the U.S. in June 2018 was 54 days, which is six days fewer than the previous June and one day fewer than May 2018, according to Realtor.com.
For ‘One-of-a-Kind Properties’ and 'Trophy Homes'
Another reason to put the property up for absolute auction is if the home is hard to classify and, therefore, difficult to price accurately. A truly unique home is unlikely to have comparables, or "comps," which help guide pricing.
"Many luxury sellers should consider an absolute auction if they have a very one-of-a-kind property or one that has a small international pool of potential buyers," Mr. Fresquez said.
The auction process can expand that pool and has proven with its marketing strategy, getting the information out to clients around the world and creating a sense of urgency around the sale.
“The team from DeCaro Luxury Auctions was able to exceed my expectations with their ability to drive qualified buyers to my property. In the 3 weekends of open houses, DeCaro was able to bring far more potential buyers through my home than we received in the many years we had the home on the market. Additionally, the quality of the marketing and press we received matched the quality that my estate deserved. On auction day, we had more than a sufficient number of bidders to satisfy us that we received a fair price in today’s challenging market.” – Morgan E. O’Brien, Founder & Chairman of Nextel Communications
31952 Apuesto Way, Coto de Caza, California Auction Date: Saturday, August 11, 2018 at 11 am
When You’re Unsure of the Home’s Potential Value
These unique homes can be hard to price from the onset, experts said. Comparable sale prices—or comps—may not be available if the property in question is truly one of a kind. And "it usually takes a longer time for those homes to sell," Mr. Fresquez said.
Often, a seller may have high hopes of what their beloved, hand-crafted home is worth, but that isn’t necessarily what a buyer will pay. In the traditional model, a home that has been on the market for any length of time would probably get a price cut, which is something buyers don’t necessarily want to see.
On the flip side, if there’s a lot of interest in a property, the traditional sales model may not push prices high enough.
"There are barriers around the maximum value when you do have a lot of interest," Ms. Fresquez said. That’s because brokers tend to the take early offers, and someone who may be willing to pay more may not have had a chance to put in an offer. In a healthy market where homes sell quickly, potential buyers may not have even had a chance to see the a home before it’s sold.
With an auction, everyone comes to the table at the same time and "compete against each other," he said.
The auction allows buyers to determine what the property is worth in real time, said David Fresquez . Plus it creates a fear of missing out among buyers, he said, which can fuel interest and, ideally, higher bidding.
Another reason a seller may opt for an auction is because he or she has an investment opportunity and needs cash, but a substantial amount of it is locked in a property.
"Some sellers are looking to reallocate capital quickly so they can move on to their next venture," Mr. Fresquez said.
Iron Man Cal Ripken Jr Estate Sold at Auction in June 2018
This custom home built for Cal Ripken Jr, Reirerstown Maryland, Sold At Auction by DeCaro Auctions International.
You Have a Hard Deadline to Sell
For a seller with that kind of deadline, or who just wants to move on, an auction is a good bet, Mr. Fresquez said.
"It gives the seller certainty," he said. The deal is also as-is, so there are no or few contingencies that could stall the progress. Most auctions are completed in 30 to 60 days, and are generally done in cash.
Although there are more auction companies getting into the game, according to Mr. Fresquez, it’s still not the preferred way of doing business in the U.S. (Some countries, like Australia, have long-used the auction model as the preferred way to sell a home).
There’s still a stigma for some sellers about auctions and that only homes in foreclosure or another kind of distress are headed for the auction block. And some traditional brokers, like Dolly Lenz of New York City-based Dolly Lenz Real Estate, say sellers should be wary of auction houses that don’t provide transparency about marketing strategies and due diligence to their clients.
But auction companies have seen more sellers put their homes to the auction block in recent years, and more homes are skipping the traditional sales route and going straight to auction.
More and more sellers are trusting the auction process for its transparency when dealing with multiple offers and the essence to a quick timely close of escrow.