Behind the Scenes: Securing High-End Real Estate Through Auctions
Is the idea of investing millions in a far-off property, without even setting foot on it, sounding more like a gamble or an opportunity to you? Well, an increasing number of investors see it as the latter. The market for luxury real estate is nothing new, but what's changing is the surge in these properties being sold at auctions - often to buyers who haven't laid eyes on the property before.
Chad Roffers, CEO of Concierge Auctions, a marketplace that operates under Sotheby's, a renowned international auction house with a robust real estate business, confirms this trend. "Buying luxury properties at auction is becoming more and more common," he says, attributing the rise to the opportunities and transparency that luxury auctions offer.
According to Knight Frank, a real estate firm that publishes The Wealth Report each year, 44% of family offices worldwide are aiming to boost their exposure to property. This follows a decrease in investment volumes since the market's peak in 2021. Similar trends are reported by Christie's, with a recent survey revealing that 74% of US real estate agents predict an increase in demand for luxury properties this year, while their counterparts in Europe and Asia anticipate the same.
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Popular destinations for international investors include both busy cities and idyllic retreats. In the U.S., New York and Los Angeles compete for top spots in prestigious sales, while in Europe, London, Rome, and Paris are the favorite cities for buyers. Global hubs like Dubai, Singapore, and Cape Town also pull in the wealthy, while sun-seekers flock to properties in the Caribbean and newly-popular Malta, which offers European Union residency through investment schemes.
The Allure of Luxury Property Auctions
The appeal of buying through an auction lies in its speed and openness. All offers are visible to everyone, and there's no need for drawn-out negotiations with sellers or agents. Plus, there's the prospect of securing the property at a lower price than traditional sales methods. Both buyers and sellers appreciate the difficulty of backing out after a sale agreement. Deposits from buyers are typically required, and sellers may face penalties if they change their minds. Roffers notes that the appeal of setting one's own price as a buyer is universal.
Most luxury property auctions still occur in physical auction houses, but online auctions are on the rise as well. Regardless of the platform, the auction house will provide a wealth of materials to support buyers, such as photos, videos, and basic due diligence documentation. They will also set the starting bid and a rough estimate of the property's sale value.
Ian Allen, regional sales director at Hamptons, a real estate firm that started online auctions a year ago, describes the experience as a blend of a traditional sale and an online bidding platform like eBay. "Buyers usually wait until the closing stages of the sale to make their offers, but the clock resets each time a new offer comes in, allowing other buyers a chance to respond," he explains.
Many buyers might decide to visit the property before the auction, but many others forego the visit, especially when the property is far away. Approximately 35-50% of Concierge Auctions' properties are purchased sight unseen, a trend not unfamiliar in the industry.
However, as enticing as auctions can be, it's crucial for buyers to conduct thorough due diligence. Paddy Pritchard-Gordon, director of buying agency Prime Purchase, advises examining the property's background, having surveys done, checking the title, and verifying any available information. Lastly, securing financing is key. Buyers will need a deposit ready immediately after the auction ends and may not have time for a mortgage application. So, have everything in place beforehand to avoid over-bidding.
- Given the growth in luxury real estate auctions, more and more investors are considering these events as opportunities to buy properties without visiting them, with Concierge Auctions reporting that around 35-50% of their properties are purchased sight unseen.
- The allure of luxury property auctions lies in their speed and transparency, as all offers are visible to everyone, and there's no need for lengthy negotiations with sellers or agents, potentially resulting in securing the property at a lower price than traditional sales methods.
- In the process of buying luxury properties at auction, it's essential for investors to conduct thorough due diligence, verifying the property's background, having surveys done, checking the title, and securing financing beforehand to avoid over-bidding and potential risks.
