October is Luxury Month on Inman. Inman Handbooks offer deep dives on luxury marketing and agent branding, luxury staging, referrals, and more. We’re thinking about what luxury means now, examining how the pandemic is reshaping the needs of luxury buyers, and talking to top luxury agents, all month long.
That’s the question Duncan Schieb has been asking homeowners as he works to make this type of selling model more common in the city’s luxury sphere.
An auctioneer and agent with Keller Williams NYC, Schieb will be holding a number of auctions for New York City properties in the coming weeks — from an Upper East Side townhouse worth between $12 and $15 million to a Brooklyn co-op worth $700,000.
“We put a floor on the market rather than a ceiling and market the property,” Schieb told Inman, adding that he and the owners work out a minimum sales price that is generally 20 percent below what they expect a property to sell for. “With the property and the urgency of an auction, we end up finding out what the market is going to pay.”
Over the course of 30 to 45 days, Schieb’s team markets the property while interested buyers from all over the world are encouraged to place higher and higher bids. Using a custom auction management platform, sellers can accept an offer immediately or allow it to go on until the end of an auction. Unlike in a blind auction in which people can overbid in fear of losing the item, both the sellers and the buyers can see what other bids were made.
The benefits of this type of selling strategy — a quick and guaranteed sale, being able to attract bidders from all over the world and minimal in-person meetings — have made auctions a standard way to sell luxury real estate in Schieb’s native Australia. In the United States, however, auctions still carry a connotation with distressed, foreclosed or otherwise undesirable properties.
“The idea is still that it is being done on the steps of the courthouse,” Mark Chin, CEO of Keller Williams NYC, told Inman. “That’s literally how it was done in New York City at one point. The reality is actually that it is a very valuable and transparent way of selling.”
While the coronavirus pandemic has pushed more and more sellers to the online, contactless auction as an option, the few luxury auctions that take place in the U.S. usually feature single-family homes in non-urban settings or homes at such high prices that only a very select group of global buyers would be able to afford them.
New York City has also been slower to accept this kind of selling strategy in part because there are a number of regulations on how real estate is bought and sold. Co-ops, which make up roughly 75 percent of all properties in the city, require pre-approval by a regulating board — and some buildings on storied streets like Park Avenue on the Upper East Side have notoriously strict and exclusionary ones.
To avoid a situation in which the highest bidder is rejected by the board, Schieb’s platform requires them to upload personal information such as bank statements, work history and tax documentation so that the person running the platform can see who has the biggest chance of being accepted by the board. (If the chosen bidder of a co-op is still rejected, the sellers can choose to offer the property to another bidder or redo the auction.)
“The highest number isn’t necessarily the best bid,” Chin, who has been open to his agents exploring the auction as a selling option provided that is the preference of the seller, said. “A less qualified buyer might be passed over by the seller because what they want is somebody who can definitely pass the co-op board.”
It’s too early to tell whether the auction process will take root in notoriously challenging real estate markets such as New York City. Schieb said that, along with negative connotations, one of the biggest challenges holding auctions back is a lack of agents who are trained in the auction process and would be able to execute it properly.
But he finds that when sellers are given the auction as one of several selling options, many instantly become curious. The promise of a guaranteed sale is stimulus enough for some to overcome the fear of trying something new.
“A common misconception is that an auction makes you relinquish control of the property,” Schieb said. “The reality is that you are 100 percent in control in that you know what the market will pay. You may not always like what that price is but is it really better to keep it on the market for 200 days and still not be able to find a seller?”