David Sandwith has been trying to sell his seven-bedroom house on Mercer Island since 2009, listing it first for $32 million, then cutting the price to $28.8 million last year. After not receiving any acceptable offers, he recently put it up for auction.
“I have a growing family and I have opportunities that I want to pursue in my life, and that doesn’t necessarily mean that I will be located here in the greater Northwest,” said Sandwith. “The time is right for us to sell the home.”
Real-estate auctions, long used in the sale of foreclosed properties, are becoming more popular among wealthy homeowners to drum up interest for mansions that have languished on the market after the housing crash.
In exchange for a quicker sale, many sellers are accepting price cuts of 50 percent or more.
Sandwith, a father of four who retired in 2007 after selling a family company, hired J.P. King Auction Co., based in Gadsen, Ala., to try to find a buyer for his 14,000-square-foot waterfront property.
The auctioneer started the bidding at the house by asking for $30 million, which no one bid at, then called for bids at $25 million, then $20 million, then $17.5 million and finally, $15.5 million, which he revealed was the seller’s minimum.
No one bid, so the house went unsold.
There were four registered bidders at the auction, which drew about 35 people.
“This is a unique property and we’re living in strained economic times,” said Tommy Board, vice president of sales at J.P. King, who was present at the Sandwith auction on Aug. 30.
Sandwith said the property remains for sale for 90 days after the auction through J.P. King.
Despite the lack of a sale at the Mercer Island auction, many such high-end homes are selling at auctions.
“While our bread and butter are auctions for homes between $3 million and $8 million, calls for these mega-mansions have doubled this year,” said Caley King Newberry, a J.P. King spokeswoman.
“Many didn’t have to sell when they wanted to in 2008 and 2009 because they had the holding power, but now they’ve decided it’s time to move on with their lives.”
At a J.P. King competitor, Grand Estates Auction, only about 12 percent of auctions are the result of financial distress, said Stacy Kirk Reich, president of the Charlotte, N.C.-based company. The number of buyers has risen 130 percent since 2006, she said.
“Sellers will come to us for various reasons, maybe the death of a loved one or a divorce, but most frequently because they are reallocating wealth to other locations,” said Kirk Reich, whose company specializes in auctions of properties valued at $1.5 million to $10 million.
The company gets an average of 276 inquiries per listing and 16 bidders per auction.
The number of sales at Premiere Estates Auction, which sells luxury properties, rose 30 percent last year, said Anthony Fitzgerald, a broker with the Manhattan Beach, Calif.-based company.
He wouldn’t say how many homes the company sold. The gain is likely to be exceeded this year, he said.
Premiere Estates is preparing the sale of a Malibu, Calif., beach estate owned by William Chadwick, a managing director at investment bank Chadwick Saylor Co. The minimum bid is $22 million.
With an original listing price of $65 million in 2008, it is the highest-priced home ever to go to auction (scheduled for Sept. 18), according to Fitzgerald.
The home sits on “Billionaire Beach,” a stretch of Malibu officially known as Carbon Beach, where Jeffrey Katzenberg, chief executive of DreamWorks Animation, and Paul Allen, co-founder of Microsoft who lives on Mercer Island, also have homes.
Interest at the open house indicates a sale may happen before the auction, scheduled for Sept. 18, Bird said. Should it come to auction, Chadwick has the right to decline bids he doesn’t consider to be satisfactory.
While auctions usually result in a sale — at Grand Estates the success rate is 94 percent — they can bring about hefty price reductions from the original listing prices.
“Many sellers have unrealistic expectations of the worth of their homes,” said Chris Longly, of the National Auctioneers Association.
Jack Gerlach, who sold his Malibu home in an auction conducted by Premiere Estates last year after it had been sitting on the market since 2008, got $2.6 million for it — less than half the original listing price of $5.5 million.
“During those two years my house was on the market, I was in a way at a standstill,” he said. “To use the auction process was a decision to move forward.”
“Auctions draw in a huge amount of people,” Gerlach said. “You always have that dream that two people will walk in” and “battle each other to the top,” he said.
Most auctions at Grand Estates have fetched 80 to 120 percent of the tax value of properties sold during the past 18 months.
Tax values are often well below the prices real estate sold for during the peak years of 2005 to 2007, said Fitzgerald of Premiere Estates.
“Nobody is going to overpay in an auction,” said Katie Bentzen, who sold her Malibu home with a view of Zuma Beach in October 2009 for $900,000, a 47 percent discount from the original listing price.
“If you really want to move on with your life now, people have to be ready to get real on the price of their home.”
With assistance from Hui-yong Yu in Seattle and Kathleen M. Howley in New York.