Luxury Homes on the Auction Block - Atlanta Journal Constitution

Highlands, N.C. - The bidders came dressed like money on vacation, in polo shirts, sneakers, shorts, loafers without socks and khaki slacks. One wore a flowery print beach shirt; another, a straw cowboy hat, cowboy boots, black jeans and a snake skin jacket.

Into this crowd, the owner of a $4.8 million mountainside luxury second home, cast his plight. And, if you had to guess, you’re probably right. He didn’t get his $4.8 million. He got barely more than half that -- $2.45 million.

The auction last week in this affluent mountain town in the western corner of North Carolina where many Atlantans own second homes, describes a developing dynamic in the high-end real estate market.

Owners of multi-million-dollar estates and second homes built during the boom years who are trying to unload the homes now are watching as they languish, overpriced and unsold, on the market, sometimes for years, then resorting to the last resort: absolute auctions.

In an absolute auction there’s no minimum bid and the seller can’t pull out because the top bid is too low. Three bangs of the gavel and it’s gone. Half of what you hoped for? Tough.

But, you know what, count your blessings, said Stacy Kirk, co-owner of Grand Estates Auction Company, which hosted the auction last week in the great room of the 6,100-square-foot, five-bedroom, five-and-a-half-bath mansion at 750 Ravenel Ridge Road.

“This was a great deal for the buyer, and a great deal for the seller, because nothing is moving up here,” said Kirk, a few minutes after auctioneer Bill Higgins banged his gavel, pointed into the crowd of about 20, declared “sold to bidder number 17 for two million, four-fifty!” and was greeted with applause.

The owner built the mansion back in 2005 as a retirement home. He put it on the market 15 months ago when he and his wife decided to divorce. But, after 15 months, switching real estate agents and dropping the price from $4.8 million to $4.2 million, and still no buyers, he called Grand Estates.

Kirk told him an auction was the “most equitable way to get the true market value” out of his home and guarantee it would sell. “We put a spotlight on the property and create an urgency among buyers,” she said.

Neither the seller nor the buyer would agree to be interviewed. Did the seller get stuck? Depends whom you ask. Kirk wouldn’t go into particulars, nor say how much her company charged for the auction.

But, a couple of hours before the auction, based on her firm’s assessment of the property and knowledge of the owner’s situation, she said:  “We’re confident the value of the home is in excess of what is owed.”

Kirk declined to say before the auction what she thought the house would sell for. Afterward, she said it sold for a “bit more” than she expected.

The auction, which was advertised in the local newspaper, The Highlander, the Atlanta Journal-Constitution, the New York Times and national magazines including Forbes, was the talk of Highlands Tuesday morning before the afternoon sale.

High-end real estate is the lifeblood of the community, with its assortment of Rodeo Drive-like boutiques and restaurants on Main Street. About half the residences in town are second homes, estimates Gary Garren, the owner of Century 21 Mountain Lifestyles real estate in Highlands.

Over the last two years, sales prices on those homes have been battered, down as much as 20 percent, according to Garren. On the upside, he said, last spring they started rebounding. But not enough to make 750 Ravenel reasonable, said Garren, who researched the property for a client who decided not to bid on it.

Garren said after the auction that he had expected the property to go for “something south of $2 million.” Others in town figured $2.1 million -- a number reached in the first five minutes of the auction.

The sale price was, in any case, far below the $4.2 million it was last listed at, by Sotheby’s, last June, and more aligned with the most current Macon County tax evaluation, which put the value at $2,417,630.

But these were high-rollers rolling into town, from as far away as Washington, D.C., and they certainly had money to spend. Just to get into the auction each of the 13 parties bidding had to present a $50,000 certified check. That was refundable if they didn’t buy the house, put toward the purchase price if they did.

“At least two of these people own six homes or more,” said Kirk by way of explaining how much money these people were used to throwing around on real estate.

And, on top of paying the winning bid price of $2.45 million, the winner was assessed a 7.5 percent “buyer's premium,” which went to the seller, meaning the total sale price of the home was $2,633,750, said Kirk, who wouldn’t say how much the seller had to kick back to her firm for staging the auction.

Kim James, a broker associate with Signature Properties in Highlands, represented the losing bidder, who folded when the price got above $2.4 million.

She said the auction was well-staged, “wonderful, and the people who ran it were easy to deal with,” but the buyer she represented, who wanted the property as an investment, had a hard price-per-square-foot formula and anything above $2.4 million was overpriced.

James said the auction sent a mini shock-wave through the world of Highlands' real estate because, “Highlands is not known for auctioning off property, especially in Ravenel,” a gated community about a mile from the center of town that "is one of the premier areas of Highlands, and it always has been."

But there may be more in the future. Kirk said her 10-year-old company has seen an increase in owners giving up on real estate firms and going to absolute auctions since the recession and dive in real estate prices began about two years ago.

But her company rejects nine out of 10 potential clients, either because their property doesn’t meet the “luxury” standard (it has to be worth at least $1.5 million), or the owners “don’t have reasonable expectations -- they want 10 million for a home worth five million.”

Atlantan Daniel O’Dell is rolling the dice with his $2.85 million Buckhead home, which he will put on auction through Grand Estates in December, after having it on the market for almost a year and a half “and not getting enough traffic.”

“There’s risk involved, certainly,” said O’Dell, who has divorced and now has the five-bedroom home all to himself. “I guess somebody could bid $1 million on it. But I think the house will sell for what it’s worth. And, for me, it’s time to move on.”