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Update on Luxury Real Estate Auctions in Hawaii

While I’m on the topic of significant real estate auctions in Hawai’i, I should mention again that there are very different types of auctions in the news. It can be confusing when there are both foreclosure auctions (where buyers hope to get a steal and sellers are merely following a process to take title to a property) and luxury real estate auctions (where sellers hope to achieve at or above market price on a defined date).

One of the presenters at Hawaii Life’s second Worthshop event last week was Laura Brady, the vice-president of marketing for Concierge Auctions. It was a pleasure to finally share a cocktail after interacting via blog, email, and twitter…and her presentation gave food for thought on the process of effectively marketing any high-end real estate listing. Laura had invited me to be a guest blogger during their auction this May of a Kukio home.

Buying the Kukio lifestyle via real estate auction…what’s the verdict on this classic Hawai’ian sunset?

Was This Year’s Kukio Real Estate Auction a Success?

Recall that the Kukio property being auctioned was a 5,456 sq. ft., 5-bedroom home with big ocean view, designed for indoor-outdoor living…the prototypical resort-style floor plan and finishes a buyer at Kukio or Hualalai would expect.  

There was also nothing about the home that was “unique”…and I am saying that as a good thing, with “unique” referring to very particular features that a buyer would either love or hate and that can narrow the pool of prospective buyers.

Prior to the auction, this home had been listed by Kukio Properties for almost a year. From the initial listing price of $9,750,000, the asking price had gone through several reductions. The starting bid for the auction was set at $3,995,000 and the “buy it now” price at $8,950,000.

In my May blog post, I picked another home as the best buy property for sale in Kukio at the $8.9 million price point (now off the market). The winning bid at the auction? $5,770,000.

Did the auction buyer get a deal? Let’s look at it a couple of ways. As a percentage of asking price, it looks like the buyer scored. However, to compare papayas with papayas, let’s add the 10% auction premium paid separately by buyer to the bid price before looking at the comps. Our new reference price is $6,347,000. The three most comparable properties sold at Kukio or Hualalai in the past year sold in a range of $6,300,000 to $6,995,000. Hmmmm…buyer ended up right at the lower end of comps.

If you want to do your own research on the current homes for sale that would be comparable in size (though varying in features and location premium), I’ve created a gallery of homes for sale at Kukio and Hualalai with around 5,000 sq. ft. of interior living space.

This Kukio home listed for $6,250,000 (MLS# 238001) looks priced to sell among the competition.

Luxury Real Estate Auctions and the Luxury Real Estate Market – Do They Help or Hurt?

As an economist by training, I have an appreciation for the price-setting function of markets. Following the luxury real estate auction process and results in Hawaii’s Kohala Coast resort markets over the past few years (Hualalai, Kukio, Kolea), I feel fairly confident about this conclusion: real estate auctions don’t change the market value of property; they change the time frame in which it sells.

From the seller’s perspective, the recent Kukio auction produced 116 buyer prospects and 25 showings within a month, resulting in competition from 8 bidders. There are currently 11 properties on the market at Kukio and Hualalai of a similar size…and of those 11, two have been on the market for over two years…and five more for over 6 months. Letting the market determine the price allowed this seller to jump to the front of the queue.

At the same Worthshop cocktail party last week, a luxury agent (not with Hawaii Life) shared her Seller’s concerns about the auction process she’d tried. She and her seller felt the process demeaned the perceived value of their property and withdrew from the auction. The suggested reserve price was just under $8 million; months later, she sold the home for $8.8 million, she said.

Wait a minute…unless my math is off, didn’t she just say she sold for almost exactly what a buyer would have paid at auction, including the 10% auction premium…at a later date? I could relate to this story as I’ve just been through something similar with my own sellers. Pricing a listing is an art not a science; the auction result is the market’s independent valuation, at that moment in time.

Upcoming Luxury Real Estate Auction on Kauai

Dreaming of The Descendants? This Kauai home on 5 acres to be auctioned (MLS# 256306)

Now for the ad: Hawaii Life and Concierge Auctions have another event scheduled for two weeks from today on Kauai’s north shore. A spectacular 7,400 sq. ft. beach-access home on over 5 acres (MLS# 256306) will be auctioned on September 20, 2012. This property features views of the ocean, Kilauea Lighthouse, mountains, and valleys. Listed for $15.5 million, the starting bid is only $5 million. I plan to be there; let me know if you’d like more information on how to participate in the auction.

A hui hou,

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

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Margaret

September 7, 2012

Very Informative!

Margaret

September 7, 2012

Very Informative!

Jeremy Stice

September 7, 2012

Aloha Beth,

Thank you for sharing. The Worthshop 2 was awesome! I thought that Laura Brady’s presentation was very dynamic and informative. I totally agree with you that the auction format is a fantastic way to sell luxury properties for motivated sellers as the exposure they receive is as good as it gets. You have to ask yourself this, under what other circumstances are you going to get on average 8 well qualified cash buyers bidding against themselves for a multiple million dollar property? Makes a lot of sense to me once you really understand all that goes into the process.

Jeremy Stice

September 7, 2012

Aloha Beth,

Thank you for sharing. The Worthshop 2 was awesome! I thought that Laura Brady’s presentation was very dynamic and informative. I totally agree with you that the auction format is a fantastic way to sell luxury properties for motivated sellers as the exposure they receive is as good as it gets. You have to ask yourself this, under what other circumstances are you going to get on average 8 well qualified cash buyers bidding against themselves for a multiple million dollar property? Makes a lot of sense to me once you really understand all that goes into the process.

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