Luxury Kauai Auction Sees Property Sell For Millions Under What Original Buyer Paid

The Kauai high-end market was recently part of a relatively new occurrence.

Originally listed for $15M, this Kealia Kai home and adjacent ocean bluff lot sold for $3,860,000 at auction.

In July of 2001 a homeowner purchased the first two lots at Kealia Kai, a luxury subdivision located above Donkey Beach on Kauai’s eastern shores. The homeowner paid $3.5 million for two adjacent ocean bluff lots.

The rumor mill (often called the coconut wireless here in Hawaii) was that the home that was built on one of these lots ran over-budget, and as a result the homeowner was selling what was then the only home in the Kealia Kai subdivision (originally 33 large luxury lots). The home supposedly cost $1,000 a square foot and was over 6,200 sq ft. The original listing price was $15,000,000. In 2008, the homeowner switched agencies and listed for just under $10,000,000. After another period of unsuccessfully selling the property, the homeowner chose the auction method as the best way to sell this luxury home in 30 days.

Concierge Auctions specializes in luxury property auctions and had recently completed 5 auctions on the Big Island in February, including a home of Cher’s which sold for $8,000,000. The notion of an auction caused quite a buzz amongst the Realtor community. To enter the auction a bidder had to submit a $100,000 deposit and additionally pay 10% above the final bid price in order to complete the purchase. There were 24 bidders who showed up for the two properties.

According to my estimate, the seller had invested around $8,000,000 in the lot which the retirement home was built upon. The adjacent lot cost $1,750,000. There was a $2,000,000 reserve price on the home and NO RESERVE on the lot. At the end of the day, or rather the auction I should say, the home’s winning bid was $2,950,000 and the lot sold for $910,000. So, the homeowner spent close to $10,000,000 and after the auction was done his gross revenue before closing costs was $3,860,000. So what does this mean to Kauai’s high end?

Seller’s may feel that this was a distressed seller and that the sale should not effect the value of their luxury property. It is true that unique luxury property in these islands truly are one of a kind masterpieces. However, buyers may ask “If the seller spent $8,000,000” and recouped $2,950,000, then another seller over here with property “X” that cost $6,000,000, should be selling for $2,000,000 or less. The reality lies probably somewhere in the middle. In the final analysis, the buyers, who hailed from Aspen and California, got amazing deals on properties that, hopefully, they will enjoy for many years to come. And the seller, well, he/she can move in to the next phase of his/her life, and enjoy it.

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