Luxury Estates Hit the Auction Block

Jan. 8, 2010 — -- Edward Abramson admits he has it good. At 66, he's retired, owns several homes and spends his time doing volunteer work while his wife works as a ski instructor at a Colorado resort.

But Abramson took a brief detour from his life of leisure this week to take a stomach-turning risk: After his Vail penthouse floundered on the housing market, the former magazine publisher decided to cut ties with his real estate agent and approach an auctioneer instead.

"We couldn't sleep for two days" before the auction, he said.

The source of his anxiety was not knowing what kind of bids he would get for the mountain-view home he had once hoped to sell for more than $3 million. "You're gambling with a real chunk of money," he said.

As banks rush to get foreclosed homes off their hands through foreclosure auctions, wealthy and ultra-wealthy homeowners are also turning to auctions as an expedient alternative to the snails-pace sales dragging down housing markets across the country.

Many of the luxury estates hitting the auction block are second and third homes located in resort communities. Singer and actress Cher, for instance, has never actually lived in the beachfront Hawaiian home she's putting on the auction block later this month.

"She decided that she wanted to sell and she decided that the auction process was the right route for her," said Laura Brady, the co-founder of Concierge Auctions, the company selling the 8,800-square foot estate, which is valued at between $8 and $12 million.

A representative for Cher did not respond to requests for comment.

Cher's six-bedroom estate on the Kohala Coast in Kona, Hawaii, right, will be auctioned by Concierge Auctions Jan. 18.

Unlike their down-market cousins, luxury estates that sell at auctions aren't automatically associated with the kind of sob stories now part and parcel of foreclosure auctions. Their previous occupants weren't typically kicked out after a job loss or overwhelming medical bills forced them to miss mortgage payments.

They're often just looking for a better result than the traditional marketplace has had to offer, said Stacy Kirk, the president and co-founder of Grand Estates Auction Co., the Charlotte, N.C., company that Abramson chose to run the auction for his Vail home.

Grand Estates, Kirk said, only handles properties assessed at $1.5 million or more.

The sellers who approach them, she said, "feel as though they have exhausted the traditional process and, because the competition for the attention of the buyers is so heavy, the challenge for the attention of the buyers is so heavy that this gives them an opportunity to draw in all interested parties at one time," Kirk said.

In addition to Cher's estate, Concierge Auctions is putting several other Hawaiian properties on the block Jan. 18. Pictured above is an 8,500-square-foot home with 20 rooms and seven "lanais" -- covered, open-air balconies and verandas -- and a salt-water pool.

But no matter why a home is up for auction, its seven- or eight-figure price tag gives the auction a feel that's far different from typical distressed home sales.

Buyers often fly in from around the world -- the weak dollar has made U.S. properties especially attractive for foreign nationals -- to tour auction-ready estates. They might come via private jet or arrive with an entourage. They might be Hollywood celebrities or Venezuelan oil magnates or Russian entrepreneurs.

They pay in cash.

"If a party of that high net worth likes it, they're going to buy it. It's not a question of I can't afford it," Sheldon Good's Kravets said.

Nonetheless, the opportunity to name their own price for a luxury property, he added, lures such buyers in a way that traditional real estate ads for multimillion-dollar properties don't.

"One of the problems in marketing properties like this is they have such gigantic price tags on them, you need to overcome the potential buyers' resistance to even coming out and looking at these properties," he said.

Retiree Abramson said that when his home was on the market for $3.4 million last summer, just one person appeared seriously interested. At the Grand Estates Auction -- held in his penthouse living room Tuesday -- the property garnered several bids before the winning bid of $2.3 million finally brought the gavel down.

The final selling price was a cool $1.1 million less than what Abramson had originally asked for his home. But he was still pleased with the final result: He'd bought the penthouse for $1.1 million in 2004 and the Colorado home he plans to buy -- one that's closer to his daughter's middle school -- recently dropped in price to below $1.8 million.

"I feel great," he said.

Kirk said that while the volume of her business has stayed roughly the same over the years -- about 20 sales a year -- sellers like Abramson have changed the way they approach sales.

"Sellers in the past would dig their heels in and demand a particular price point," she said. "Now, the sellers have to have greater flexibility."

"The current economic climate is just allowing us to show the marketplace that it is a viable alternative to traditional brokerage," said Brady, who worked as a broker before starting Concierge Auctions.

In boom times, some sellers preferred real estate auctions for a different reason: They didn't have to limit themselves by setting an asking price.

In 2006, Kravets' company auctioned off Miramar, a Newport, R.I., estate built to be a replica of the Palace of Versailles, for more than $17 million, setting a local sales record.

"If you have an upmarket where someone's willing to pay just about anything , why would you put a list price on the property?" Kravets said. "You're capping the price."

Traditional brokerage strategies and luxury auctions, however, don't have to be mutually exclusive, say auctioneers with the National Association of Realtors. Auctioneers and real estate agents can split commissions and work together. A home may not sell at auction, for instance, but the attention it received, thanks to the auction, could help the real estate agent sell the home later. Agents may also refer would-be buyers to auctioneers.

"In today's market, there's more uncertainty and it is taking longer to sell properties," said Ben Anderson, the past chairman for the National Association of Realtors' auction forum and the president of Anderson Realty USA, a real estate auction company in Destin, Fla.

"There's probably greater need to have a Realtor and auctioneer alliance."