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  • Writer's pictureMike Brandly, Auctioneer

This $87.8 million mansion went to auction?

A mansion (not the above mansion) went to auction and the high bid was $45.76 million. A news headline thereafter read that a “$87.8 million mansion went to auction … and it did not end well.”

We would hold a $45.76 million (plus buyer’s premium) mansion was put up for auction and everything went perfectly fine outside of an excessively inflated opinion of value — and a “no-sale.”

As we’ve held prior, it’s not that something sold for less than it was worth, but rather that it sold for market value, less than an inflated opinion of value (appraisal):

Of course, does all property sell for market value at auction? The Supreme Court of Ohio ruled that if an auction was not a forced sale and arms-length (and we would add properly marketed) that the result would be “market value:”

There are also other times when an “English increasing” type of auction may not produce market value — when there are only a few bidders and/or highly disparate opinions of value.

Owners considering selling their property at auction should know that the final price may be higher or lower than their expectations, but if marketed properly, the result will be almost assuredly exactly “market value.” Those sellers with sufficient urgency, equity, and reasonable expectations should definitely consider an auction.

The terms and conditions of the auction must also be considered. As they have become more and more distasteful for buyers (misrepresentations and no returns, for example) the buyer pool becomes smaller, thus reducing the likelihood of market value, and as a result, injuring sellers.

How many bidders are necessary for a “sufficient bidder pool” for any one property (with reasonable terms and conditions?) Once you have 6 bidders, your odds are about 50% and if you have 14 bidders, your odds are about 75%, etc.:

We advise anyone in or outside the auction industry to be leery of any headlines which say something sold at auction for far less than it should have, as well as any headlines where something sold at auction for much more than it should have. It’s likely neither of these headlines is true.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at Mike Brandly, Auctioneer, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.

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