After trying the traditional route once, maybe twice, New York City apartment owners are being sold on the idea of auctioning their home.
Auctions are growing into a mainstream option for owners looking to offload their apartments, Crain’s reported. Once reserved for court-ordered transactions and foreclosed properties, auctions are no longer just a last resort.
Major brokerages have partnered with auction houses in recent years to facilitate the process for sellers. Anywhere Real Estate owns a controlling stake in Concierge Auctions, while Compass has a partnership with Paramount Realty USA.
Even high-society individuals have jumped aboard the auction express, valuing its transparency and speed. Tim Smucker, an heir to the Smucker’s jam conglomerate, recently auctioned his one-bedroom condominium at the Plaza hotel in Midtown Manhattan for $2.5 million. The process involved only several weeks of marketing and 10 minutes of bidding.
“This is really the most efficient way to sell an apartment,” Smucker told Crain’s.
While auctions grow more popular, however, they still come with drawbacks for sellers and buyers alike. The anonymous purchaser of Smucker’s Plaza unit, for instance, had to pay a 10 percent fee to the auction house.The seller, meanwhile, is still on the hook for a broker’s commission.
Auctions’ effect on sale prices is unclear. Smucker sold his unit for $400,000 below what he paid for it three years ago, though there’s no way to know if he would have done better or worse selling it the usual way.
It’s possible that auctions attract low-bidding bargain hunters, or fewer interested buyers. But the psychology of auctions can sometimes cause bidders to get carried away.
Also, waiting patiently for a home to sell can be expensive. Costs can include mortgage interest, property taxes, and monthly dues.
Unit owners at the Plaza pay for substantial overhead: personalized butler and concierge services, the availability of 24-hour dining, twice-daily room cleaning, nannies and drivers. Common charges for a four-bedroom apartment at the Plaza asking $15.9 million are $6,130 a month, and taxes are $6,866 a month. At some Manhattan co-ops, common charges are $1,000 a day.
Luxury homes in Manhattan typically take two years to sell. Waiting that long to be paid also carries an opportunity cost, as the seller has to wait much longer to invest the sale proceeds.
— Holden Walter-Warner
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