With a price of $141 including broker and other fees, Bel Air mega mansion The One has shattered records for the priciest home sold at auction.
The sale, which recently received bankruptcy court approval, is leading some local real estate experts to believe that more extremely high-priced homes will be sold at auction.
Agents agree that a lot of the reason we are seeing more mansions sell at auction is that properties are simply listed too high and in some cases, sellers want to offload the properties quickly. Another major reason for some of the high-priced auctions we’ve seen, such as The One, is that the developer or company that owns the property has filed for bankruptcy.
“I suspect that these unique properties will use auctions as a clearing mechanism given the frothiness of this market. There are very few assets available for sale and there are more buyers in the market. Those high dollar assets, what the auction allows you to do is shorten that time frame on the market so you have an exit strategy or a time frame where you know you will sell the property,” said Hilton & Hyland’s Stuart Vetterick, one of the agents who represented the buyer of The One.
Richard Saghian, owner and chief executive of Fashion Nova, purchased the property.
Aaron Kirman, of Compass and one adding that auctions are used in situations where a buyer wants to sell in a certain time frame.
“Luxury auctions can make sense when sellers are under a time constraint and need to get something sold in a very short period of time. Luxury auctions can be good if sellers are willing to release some control over the sale of their home,” he said.
Some agents agree that another reason auctions occur is that people are simply pricing real estate too high.
Mauricio Umansky, founder and chief executive of The Agency, said he was “definitely seeing more” auctions.
“The majority of the properties I’m seeing auctioned, the feeling is that perhaps they were overpriced and when you have an overpriced home, the urgency level does not exist. To sell a house you need an urgency that someone is going to take it…an auction creates that urgency,” he said.
Jade Mills, a top agent with Coldwell Banker, agreed. She has actually bid on a property with her husband as well as dealt with auctions as an agent.
“Usually what happens with the properties that are auctioned, the price starts out too high and the auction brings them back to reality,” she said.
But Branden Williams, who along with wife Rayni Williams and Kirman had the listing for The One, is not expecting the number of auctions to skyrocket.
“Generally speaking, because of the affluence in the city, there are very few distressed properties and therefore I do not believe it will be very common to use auction houses in the high-end sector,” Branden Williams wrote in an email.
The One has a long and storied history. Developer Nile Niami, whose limited liability company Crestlloyd owned The One, is known for developing high-end spec homes around the county. He first marketed the property for $500 million before it was even completed.
The property is huge with a 4,000-square-foot guesthouse, private theater, spa, nightclub, moat, pools, 21 bedrooms and 42 full bathrooms.
At the time of the auction, it was listed at $295 million.
“Many people, including me, were upset with the end result of The One number,” Kirman said of the final sale price.
The property, however, had a plethora of issues including a lack of an occupancy permit and allegations of defects and code violations.
The One was bankrupt at the time of its sale, with roughly $191 million in total debt, with a large chunk of that money coming from billionaire Don Hankey, records show.
The property was auctioned off on Concierge Auctions, an online auction site based out of New York.
The site connects “sellers of one-of-a-kind homes with high-end property connoisseurs with our state-of-the-art digital marketing, property preview, and bidding platform. Our sellers gain unmatched reach, speed, and certainty; buyers receive curated opportunities; and agents earn their commission in 30 days,” Mario Vargas, the company’s senior vice president of corporate development, wrote in an email.
The company was recently acquired by Sotheby’s and Realogy Holdings Corp.
Vargas said that auctions are needed because “traditional real estate can sometimes have limitations, especially in the ultra luxury realm.”
For The One, the buyer had to pay a 12% buyer’s premium or fee to Concierge Auctions and a 1% co-broke commission.
The One is not the only noteworthy L.A. home to sell at auction recently.
Spec developer Mohamed Hadid’s Franklin Canyon site received a $34 million offer, subject to court approval, in March.
Last year a home in Beverly Park sold at auction for $51 million, more than $100 million lower than the initial list price.
The home, known as Villa Firenze, sold last April. The 10-acre property contained a nearly 29,000-square-foot mansion.
The property was also sold on Concierge Auctions, breaking a record at the time it sold.
Hungarian billionaire Steven Udvar-Hazy sold the property. Hilton & Hyland’s Rick Hilton and Jeff Hyland had the listing.
Then in September The Beverly House, which was once owned by William Randolph Hearst, sold at auction for $63.1 million.
Nicolas Berggruen of the Berggruen Institute purchased the 3.5-acre property.
Umansky, however, said that despite what may seem like high numbers, he thought the properties sold for low prices.
“Buyers are getting good deals but I’m not sure that the sellers are,” Umansky said.
Agents say that there are some changes in how they market properties sold at auction but other things don’t change.
Rayni Williams said in an email that part of marketing the property was taking out “luxury Rolodexes to do a large marketing campaign coupled with a call to action with the auction house to prevent a foreclosure sale.”
Kirman agreed, adding that his team was often hired “for our database and our connections and our marketing.”
One big difference, however, is that Kirman said with other properties he might roll out a marketing campaign over time while with an auction, everything is done at once.
Mills said another difference is timing for buyers.
“You have to have all your ducks in a row and be ready to pull a trigger. It’s an auction. The bidding starts, usually there’s an opening bid and you bid up from there and it goes very quickly. You have to get all of your paperwork in before the day of the auction,” she said, adding that it usually includes proof of payment.
Kirman said sellers need to be cautious that “the price is the price” and unlike with traditional listings, the seller can not simply reject the final offer for whatever reason.
Concierge Auctions’ Vargas said the company always works with listing agents on sales, viewing them as an additional way to drum up interest and potential buyers.
For a buyer’s agent, there are some unique considerations to discuss with a client.
Vetterick said the buyer of The One had toured more than 75 high-end properties before winning the auction.
“With auctions, you have to have a really good understanding of the value that you are willing to pay,” he said, adding that for buyers he cautions them to come up with a value they think the property is worth and not bid beyond that.
“You dont want to get other people that are opportunistic pushing you through the levels you are willing to pay… buyers’ remorse is a real thing,” he added.
The next high-end luxury auction agents say to watch out for is a Bel Air spec mansion from Alex Khadavi at 777 Sarbonne Rd.
The property has a $50 million reserve bid set and will be auctioned off on Concierge Auctions from April 22 to April 26.
Kirman and Umansky have the listing.
Kirman said the house was “absolutely gorgeous” with one of the best views in L.A.
Kirman said the reason for the auction came down to selling quickly.
Umansky said that he expects to see more high-end actions and hopes going forward to see more fetch higher prices.
“For unique properties with unique situations, an auction is a great idea but it’s specific and it’s not for everybody,” Kirman said. “It also can be good for properties that are stressed properties…and ones with a shorter (selling) time frame.”