I read an article a while back that profiled the lives of those fortunate people who had made the decision to jump from the Golden Gate Bridge. These people were fortunate because in spite of their desire to kill themselves by jumping from that bridge, they survived the fall and swam to safety. One memorable line from a survivor detailed how at the point of the jump he realized that every single thing in his life that he was upset about was something that he could fix. Everything except the fact that his feet had just cleared the railing of that bridge.
Even though this gentleman, and many like him, jumped from that bridge and lived, that doesn’t make jumping from the bridge a good idea. Sure, you get to share your story at high schools and corporate learning sessions. And you get profiled by the New Yorker, or maybe the Atlantic, which would be pretty neat I suppose. But just because he lived doesn’t mean that I, too, will make that jump.
Last week, the second and third auctions of lakefront property on Geneva Lake occurred. The first such auction was held back in May, when a buyer paid the equivalent of $5.8MM, give or take, for a fine home on the North Shore. That auction worked, and so the sellers of two other lakefront homes went to auction with the same outfit, during the same season. One of the homes was a nice enough lakefront, with a shared pier and a shared driveway. The other a unit at Stone Manor.
The auctions were advertised as ABSOLUTE auctions, with NO RESERVE!!!! The auction house advertised the homes all over, and even the Wall Street Journal took the bait and featured the home. The auction for the Stone Manor condo was first, and that auction failed. I do not know the details, because you’d assume an ABSOLUTE AUCTION could never fail, but it did. The seller of this NO RESERVE AUCTION HIGHEST BIDDER WINS decided not to sell, after the bidding came in light. This is rumor, but unless we see the unit close in the next thirty days, we’ll assume the rumor was correct.
The other home did sell, and a buyer was whipped into a frenzy by the bidding process and paid what I presume to be an above market price for the home. The buyer may have been aware of the limitations of that particular home, or they may not have been. They likely figured the market context was close enough, and so they bought. They bought because ABSOLUTE AUCTION NO RESERVE is a very enticing concept. Never mind that for buyers the only two auctions this year will have been successful at what I believe to be above market prices. This is the equivalent of shopping the clearance section hoping for a deal, only to walk out of the store having paid full price for an item that was inadvertently placed on the sale rack.
For sellers, they’ll see this and assume that the process works, if indeed I’m right in my believe that both auctions from 2015 achieved the goal of getting a buyer to pay a bit over retail. But at what risk did they succeed? Where does the seller of the failed auction go now? Back to another auction? Or back to a traditional brokerage model, one that allows a seller flexibility in price and in structure? Yes, two out of three auctions this year worked. But that one guy also jumped from the Golden Gate Bridge and lived to tell about it.