Thanks to companies like Concierge Auctions a single tap on the screen can buy you a luxury level house. Is this the future of real estate sales?
The castellar design of the luxury apartments Casa Karen located on a hillside in Los Cabos, Mexico, has been designed by Karen Redekop following strictly defined criteria. She hired local craftsmen who created gorgeous wall paintings while interior items were imported from India, Indonesia, Thailand, Europe and the Middle East. However after five years of improving the apartments it was time to focus on something else.
A sixty year old Canadian was eager to start her next project – a two hectare building complex in the nearby Palmilla. So she hired a local real estate agent who posted the house on sale for $ 2.7 million. After a year she had not yet received any purchase offer. Then she found a New York real estate company Concierge Auctions who sells luxury home to the highest bidder which guarantees top-level marketing and fast property sales to the supplier. Just two months after Redekop’s property was included in the Concierge catalogue the house was sold for $ 2.6 million in a 30 minute long mobile auction.
The acquisition and sale of wealthy client properties using the latest technology made a sales worth over $ 270 million happen in 2016 for Concierge Auctions generating more than $ 30 million in revenue and raising the company above the previously highest 1.2 billion dollar mark. However not all auctions succeed as great as in the case of Redekop – about 30% of transactions are unsuccessful and often the property is sold at a much lower price than initially expected. However Concierge is a leader in a small but growing auction house group that is selling sophisticated, artsy homes.
Over time Concierge has collaborated with celebrities such as Michael Jordan and Cher, as well as billionaires like the founder of GoDaddy Bob Parson who generally wants to maintain privacy. Our vendors make clever decisions, says the 37-year-old founder and president of Concierge Laura Brady. Watching money vanish while maintaining an unused property is unpleasant. Brady turned to real estate in 2004 and quickly became one of the best agents in Florida. In the very next year the American housing stock grew very rapidly raising concerns about the bubble. Also Brady had to think about how to sell expensive and exclusive properties.
The standard model when a potential buyer views a house and then makes an offer, works well for properties worth less than 250 thousand dollars. There are a lot of potential buyers for such housing while it’s harder to find buyers for expensive properties worth millions of dollars. Last year only 2.3% of homes sold in the US exceeded 1 worth of million dollars.
Luxury properties are usually bought quickly if their price is close to requested if not they are in the market for months until being sold at a significant discount. The higher the price and the more exclusive the property, the harder it is to sell it in a traditional way, says Brady. Auctions were ideal solution. They are profitable. The deal takes place fast and reveals the true value of a very expensive real estate. (Many houses are sold at such auctions in Australia.) Brady convinced her boss Chad Roffers to test such a theory in practice. After some successful deals she founded
Concierge and moved to New York in 2008. Roffers – now as chairman of the board – soon followed her.
Many companies now sell properties in auctions, especially pledged ones but only a few are sold in equivalent price range in which Brady and Roffers are working. From 133 houses put on auction in 2016 Concierge sold eighty five; in 2015 only sixty out of eighty were sold. This year the company plans to auction 150 houses.
Their rival Platinum Luxury Auctions make around 25 luxurious sales per year.
Both in buying and selling Concierge cooperates with local real estate agents who receive a usual of 5-6% commission and also ensure that the property is visible to everyone. As a buyer Concierge just like art auction houses charge very high commission – 12% and many homes are sold cheaper than the original listing price.
Houses auctioned by Concierge usually do not have a mark-up. The price varies from two to 40 million dollars but the average is about four million dollars. The company claims to be profitable since the very first year of operation but the new pricing policy could potentially change it. In order attract homeowners in Concierge began paying seller’s commission in November last year. Company also withdrew from the advance payment of 50 thousand dollars which was returned after the transaction was concluded. Basically sellers hire Concierge but do not bear any costs themselves.
Jonathan Miller, Chief Executive Officer of Miller Samuel, believes that imposing all costs on the buyer is just a marketing trick – just like a victim’s lawyer who gets the customer’s trust by asking for a payment only after an agreement has been reached. “It’s not that the seller will earn more money,” says Miller further explaining that buyers will have an important role in setting prices. It is a smarter sales strategy.
Such concession could turn out to be a clever marketing campaign but in fact the company does nothing to reduce the incredibly high cost to the buyer. Brady argues that buyers have not complained about high costs, and her recommendation to anyone who is not satisfied with the price is this – bid less or do not bid at all. If they do not want to pay extra costs then they don’t even need to bid, says Brady. From the buyer’s point of view – if they do not want to lose their property they must accept such rules. Some may say that such position towards customers is very unfriendly but agents who have worked with Concierge say that auctions offer better deals than an open market. Sellers appreciate the ability of Concierge provides by exhibiting the house month prior to the auction more times than it would have been visited during several years while it is on sale. The company has calculated that a person who wants to sell eight million dollar worth property, for various costs – taxes, insurance and maintenance could spend 40 thousand dollars a month, often maintaining a house where he does not live any more. Before the property reaches Concierge it will have been on the market for an average of six months.
Also technology introduces adjustments to how Concierge works with buyers and sellers. If you watch the video on the company’s website several times you will be contacted by a sales agent. If you search for videos like house with a swimming pool it will select only those houses where it is. Currently 90% of auction transactions are concluded in the Concierge Instant Gavel mobile application created only a year ago. Agent Matthew Magnotta from Berkshire Hathaway HomeServices Utah Properties remembers how he wondered how can a client on his iPhone overbid a medieval-style castle in Park City.
In an ordinary real estate sales deal there’s a lot of discussion and research going on which is what makes the agreement realistic – you can see that deal is really happening, says Magnotta. But it seems incredible that with a few taps on your iPhone screen can buy you a house worth ten million dollars just like buying a cheap knick-knack on eBay.
IT SEEMS INCREDIBLE THAT WITH A COUPLE OF TOUCHES ON YOUR IPHONE SCREEN YOU CAN BUY A HOUSE WORTH TEN MILLION DOLLARS.