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Hawaii Luxury Real Estate Auctions: Great Deal or No Deal?

With another great residence at Hualalai Resort set to be auctioned at the end of this month (August 2016), it seemed timely to update this article, originally written in February 2013.

haas-honokaope

Concierge Auction at 49 Black Sand Beach, December 2016 (MLS# 281239)

Luxury Real Estate Auctions: 2016 versus 2013

What motivated the buyers we represented in the March 2013 auctions of a home at Mauna Kea Fairways North and a Balinese inspired residence at Hualalai Resort, was the thought that participating in a luxury real estate auction might be a way to get a deal in a market where distressed properties have become scarce.

Whether todayʻs real estate auctions turn out to be a great deal for a lucky buyer…or a better deal for the seller…or no deal at all (the property doesn’t sell) is something we only see in the rear view mirror.

But here is how you might judge whether or not to participate, and how to determine your offer price.

Success in a Luxury Real Estate Auction – For Seller & For Buyer

I have written before on the topic of how to judge the success of a luxury real estate auction in Hawai’i…both here on Hawaii Life and as a guest blogger for Concierge Auctions.

Success from the Seller’s perspective is not necessarily getting a record-setting price. What is the motivation of a seller who is not distressed, does not have to sell, but chooses a company that specializes in the auction of luxury real estate? The answer is simple. And no different from the reason auction houses like Christie’s exist (Disclosure note: Hawaii Life is the exclusive affiliate of Christieʻs International Real Estate for Kauai, Maui, and Hawaiʻi Island). This seller has an illiquid asset that they want to monetize now. If the property sells under the terms they’ve offered, the auction was a success.

If you are reading this blog post as a prospective buyer, what you want to know is whether you can get a great deal on one of these properties.

The bottom line of my analysis of the luxury real estate auctions over the past few years at Kukio, Hualalai, and Kolea on the Big Island is that every one of them produced a sale that seemed to be near fair market value for the property.

Kauai Estate Concierge Auction

This Kauai luxury compound with five dwellings was successfully auctioned in August 2016

Bidding Strategy to Win at a Luxury Real Estate Auction

In my experience with luxury real estate auctions, a savvy buyer goes in with a strategy, not just a price. Here are three things a buyer needs to keep in mind to get a deal on one of these auctions:

Do Your Homework Up Front

An experienced auction buyer understands that (just as with a distressed property), they are buying “As Is” and so must do their homework in advance. If you don’t have a chance to see the property before the auction, use professional “eyes and ears.”

That might mean not only your real estate agent, but also a contractor or interior designer if there are things you would change or update in the home. Read the documents provided and consult with your attorney or accountant. And if this is a property you plan to keep, understand your holding costs and whether the Hualalai or Mauna Kea resort lifestyle is right for you!

Understand the Process and Costs of Buying at Auction

At the first luxury real estate auction I attended in Hawai’i, most of the buyers were being represented by an agent but were not present in person. The bidding process took a time out repeatedly as buyers consulted with their representatives to get a sense of what other bidders were doing…but also as buyers and agents quickly calculated “what they were really paying.”

When you make an offer on a property listed for sale, you as a buyer normally pay no commission, only customary closing costs. When you bid on a property at auction, you must consider that in addition to the offer price and closing costs, you will pay an auction premium of 10% at closing directly to the auction house.

Really experienced auction buyers understand that by making a commitment to an opening bid price at the time of registration they can take advantage of buyer incentives that would reduce their all-in cost if they end up as the winning bidder. Which means go back to “do your homework upfront” and forward to “understand what the comps indicate about the value of the property.”

Understand What the Comps Indicate About the Value of the Property

If you haven’t been personally walked through all the properties currently listed for sale that would be alternatives to the one you are considering at auction, and you haven’t seen the homes most recently sold at Hualalai, Kukio, Kohanaiki, or Mauna Kea that serve as comparable sales, why not use a local real estate agent to work with you on your bidding strategy? It doesn’t cost you any more to have a professional in your corner.

Sometimes luxury real estate buyers believe that by dealing directly with a listing agent or on-site brokerage they get a better deal. With an auction property, there is no “inside track.” Success comes down to auction strategy and knowing the numbers, not negotiating strength or emotion.

This time (August 2016) the luxury real estate auction property is not a Hawaii Life listing. Want my views on a current auction property? I’ve shared more general views in my earlier posts. But specifics – I’ll save those for my buyer clients.

A hui hou,

Beth Thoma Robinson R(B
Direct: 808.443.4588
Email: beth@hawaiilife.com

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