When a multi-million dollar mansion is put up for auction, it’s typically not a great sign.
It could mean that the home has sat on the market for years because of poor pricing, because it’s an unusually unique property that hasn’t found the right buyer, or because the seller has a debt to pay.
Luxury homes that go to auction, therefore, sometimes come across as the black sheep of listings, and they definitely require a nuanced approach.
But luxury auctions have been rising in popularity, in part because they’re helpful to sellers in a sticky situation and because they can help create a buzz around a property. In 2019, Concierge Auctions reported to Fortune that the company was seeing an average annual growth rate of 35 percent every year, and the auction house reported a record year in 2021 with more than $3 billion in historic sales and $3.4 billion in competitive bids processed.
Agents who want to please clients going to auction should keep a number of factors in mind, Aaron Kirman of the Aaron Kirman Group at Compass told Inman.
The luxury real estate agent and star of CNBC’s Listing Impossible has sold a string of ultra-luxury homes at auction recently, from the mega-mansion “The One” to a celebrity botox doctor’s debt-ridden mansion, both of which sold for tens and hundreds of millions — so Kirman knows a thing or two about unloading challenging properties at auction without a hitch.
Here are his top recommendations for other agents considering a luxury sale at auction, from supercharging one’s marketing to picking the right auction house, and more.
Make sure the buyer and property are a good fit
“The luxury home auction isn’t for everyone,” Kirman told Inman. “It’s a very unique segment. I always tell people it kind of just depends on the situation and the sellers and where they are.”
Kirman elaborated that luxury auctions are typically best for sellers who have high expectations for the value of the property — and have not received any offers thus far that have met those expectations.
Because it’s not unusual for ultra-luxury properties to take several months up to a few years to sell, auctions also make sense for sellers who are facing a time constraint on when they need to sell by. Oftentimes with ultra-luxury properties, this comes up when sellers get a little carried away when developing the home and fall into debt in the process. Therefore, auctions come into handy once they get to the point of facing bankruptcy — they need the money quickly, and an auction delivers just that.
Supercharge your marketing and advertising
Once the agent and seller determine that an auction is the best course of action for selling a property, it’s go-time for the agent’s marketing strategy, Kirman told Inman.
At that point, Kirman will do everything he typically does to market any other property to sell, but he aims to do twice as much in half the amount of time to bring as many potential buyers to auction as possible. He likes to keep the vibe classy in his marketing materials on these types of properties, Kirman said, because they’re almost always at the top end of the market.
“I do everything that we do as agents, but in a very condensed period of time,” he said. “Double marketing, double advertising, double exposure.”
Since agents typically have about 45-70 days to prepare for an auction, they need to move fast and be prepared to hit the ground running with their marketing efforts. That means rolling out local, national and international marketing across print and TV news outlets like The Wall Street Journal, Bloomberg, Robb Report, FOX Business and CNBC, in addition to his own online ad campaigns and targeted marketing efforts.
Build a strong international luxury client network
Properties of the kind of magnitude that Kirman has brought to auction recently — ones that have brought in between $47 and $126 million — are prime candidates for investment by international buyers who are seeking to put their money in relatively stable investments (like real estate) outside of their own countries.
That’s why it’s crucial to build up a network of ultra-luxury international clients, which can prove extremely valuable when it comes to auction off a multi-million dollar property.
“On the uber-high-end [properties], I tend to fly to Europe and the Middle East to try to find the billionaire buyers that are looking to buy,” Kirman said. “I have a massive database with some of the most wealthy people in the world … But, we also do technology advertising around the world targeting the wealthy.”
Kirman explained that the team’s Estate Dynamics tech stack uses artificial intelligence based on the team’s data sets in order to predict which buyers might be attracted to a specific home, which allows him to do targeted outreach to individual international buyers who are likely to show interest in the home up for auction.
Instill urgency in potential buyers
One of the cards an agent has in their back pocket when putting a home up for auction, is that it literally orchestrates a bidding war, which can get sellers higher sales prices.
But agents can also instill a sense of urgency in buyers they hope to attract to the auction by reminding them they that this is a limited-time offer. And once the bidding starts — they’re out of luck, since all bidders must be vetted in advance and have submitted a refundable deposit to escrow.
“I have the ability to say, ‘Look, this house is selling with or without you on this day, so if you want to be a part of it, now is the time because you know it is going to sell,’” Kirman said.
That’s where selling a luxury home via auction can be a great asset to a seller — because buyers face an anxiety that’s typically not present in the open market at the ultra-luxury level.
“That’s probably part of the challenge of selling luxury houses,” Kirman noted. “In general, there is no sense of urgency for buyers because buyers feel like they are the only one.”
For agents representing buyers at an auction, it’s also good to remind them of the urgency at hand, Kirman said, while keeping them at their comfort level.
“The scope of what we’re doing is, we’re working with our buyer to urge them, get them to their comfort level and not lose out. It’s a very nerve-wracking experience. It takes a lot to get me nerve-wracked … but [auctions] always do, because in 10 minutes, you literally are watching the sellability of a multi-million dollar house.”
Mentally prepare the seller
Ultra-luxury sellers — like average homesellers — take pride in their homes, but there’s often more ego involved, especially if they’ve had a hand in designing the property.
Therefore, it’s extremely important to prep sellers for what’s to come at auction, which is often a price lower than the seller anticipated or hoped for.
“You’ve just got to calm them down,” Kirman told Inman. “At the end of the day, it’s an education process. We need to let them know that, at the end of the day, the market speaks the value of any given house, [which] is what the highest bidder would be.”
“And cards on the table, sometimes [sellers are] not happy,” he added. “Sometimes they’re not, and that’s the problem when you don’t have the luxury of time. So I always tell future developers and developers, ‘Be really cautious with what you’re developing, because God forbid the market changes, or God forbid it takes some time. You don’t want to be in a position to have to sell, because that’s when people get disappointed …’ Once it goes to auction, it’s out of the seller’s control where it’s going to land, and they need to be prepared for that.”
Choose the auction house wisely
Kirman added that it’s also important for agents to be deliberate about the auction house they choose to run the transaction, because not all properties are created equally.
“Make your partnerships — I mean with the auction houses — wisely, because it is a complicated game and some are better than others,” he told Inman.
Kirman has used Concierge Auctions for his most recent luxury auctions. He likes that they have their own outlets for distributing marketing on the property, and that the process is completely transparent — even as bids are coming in, which can help generate a buzz among potential buyers.
“[And] we don’t want to jeopardize our [client] relationships in the process,” Kirman warned, which is why he said it’s especially important to choose the right auction house to run everything smoothly.