When the former mansion of Sheboygan coal magnate John P. Reiss failed to sell last year, the owners put it on the auction block. The nine-bedroom, 7.5-bathroom Classic Revival home with breathtaking views of Lake Michigan had originally been listed at $3.75 million. “A lot of buyers in this price range tend to wait around […]
When the former mansion of Sheboygan coal magnate John P. Reiss failed to sell last year, the owners put it on the auction block. The nine-bedroom, 7.5-bathroom Classic Revival home with breathtaking views of Lake Michigan had originally been listed at $3.75 million.
“A lot of buyers in this price range tend to wait around and see if the listing price is going to go down,” says Valerie Zelinski, who handled the property as a luxury home specialist for Century 21 Roberts & Andrews in Crystal Lake, Ill.
Zelinski felt the auction might entice buyers sitting on the fence to take action. She was aping a national trend. The National Auctioneers Association reports that the amount of U.S. residential real estate sold at live auctions jumped by 46.6 percent between 2003 and 2007.
No figures are available for the metro Milwaukee area, but local sources say they are seeing the increase here, too. Part of the growth is driven by foreclosures, but the auction business is also rising in high-equity areas that include some of metro Milwaukee’s most exclusive enclaves. Within the city itself, auctions are “not prevalent,” says Marilyn Betthauser of the local Betthausers’ Auction Service. “I think it’s the mindset of the sellers in this area. Their perception when you mention auctions is a fire sale.”
But west of the city, real estate agent and auctioneer JJ Hausmann says his Oconomowoc firm, The Real Estate Company, started using more auctions upon seeing how successful they were in coastal areas of California and with oceanfront properties in Florida. The Midwest is just starting to catch up with that trend, says William Jensen, who co-founded Capital Crown Auctions in Delafield two years ago. In 2008, the firm auctioned almost 25 properties, including the Reiss mansion.
Bill Minett, founder of The Real Estate Company, has auctioned upscale real estate on Pine Lake, Oconomowoc Lake, Okauchee Lake and Lac La Belle, selling several properties for more than a million dollars and one for more than 2 million. Most of the real estate his firm auctions is “highly appreciated,” Minett notes. “And free and clear. Or [with only a] low mortgage.” They’re not the foreclosed properties people historically associate with auctions.
Auctions offer a quick sale in a slow market for job transferees, heirs and owners having trouble keeping up with mortgage payments. Most homes go to auction in six to eight weeks, and if there’s a winning bid, the deal closes in 30 to 45 days.
Baby boomers are increasingly using auctions to liquidate the personal property and homes of their parents, says Betthauser. A quick sale ends the burden of the property’s upkeep and lets family members move on with their lives.
Sellers can also lower their prices because they don’t have to pay a commission to a real estate agent, notes Zelinski. Instead, buyers pay a buyer’s fee. Depending on the property, that ranges from 5 to 10 percent of the final bid.
Auctions attract serious buyers: They must submit a nonrefundable cashier’s check as earnest money after they’ve won. And since no contingencies are allowed, the deal closes faster.
The sales price at auction will likely be less than a seller would get when the market finally recovers. But that recovery could be a long way off. Property values may now “be at their height for several years to come,” says Betthauser, and an auction could achieve that price.
Auctions also make sense for luxury homes with beautiful views, which are notoriously difficult to price. In Aspen and Vail, Colo., for example, properties are often put up for auction “because how do you put a price tag on a priceless view from your balcony?” asks Chris Longly, a spokesperson for the National Auctioneers Association. “Auctions can actually tell you what that view is worth.”
The Reiss mansion, as it turns out, didn’t sell at auction, but Zelinski isn’t ready to put the home back on the market. She still has some potential out-of-town buyers attracted by the auction who haven’t been able to tour the property.
The problem, she notes, is that high-end buyers who might consider this as a second or third home or as an investment have suffered a big decline in their portfolios. Even the excitement of an auction may not overcome that problem.