Selling a house involves drama that is usually revealed in bits and pieces — the late-night calls an agent takes from her anxious seller, the tension of waiting to see if the buyer’s bid gets accepted, the terse notes back and forth when a mortgage doesn’t come through.
But at an auction, the drama crescendos quickly and is all over within an hour. That’s how it is expected to unfold on Thursday, February 17, when 17 Hibben Road, a 1927. Rolf Bauhan-designed Colonial Tudor, will be auctioned “without reserve,” meaning with no minimum bid. It could go for much less than its original listing price of $4.2 million. Drama is guaranteed.
How will it work? Every day from now through February 16, the house is open from 1 to 4 p.m. for anyone to come and look, but only qualified bidders may attend the auction.
On the day of the sale, New York City-based Concierge Auctions Inc. will have a bank of phones ready for offsite bidding. The company also will set up the video cameras with live audio/video streaming for Internet bids. Then the caterers and musicians will arrive, ready to provide the ambience.
From eight to ten buyers can be expected to show up or bid by phone or by computer. When they arrive, they will have family members, and perhaps their real estate agents, financial advisors, or attorneys in tow. Each will have put $100,000 in escrow and will have been approved for monthly payments of some $15,000.
After a little schmoozing (the contenders will want to play their hands close to their vests), a little food and drink (no alcohol at this point), the auctioneer will start the bidding. What’s to keep the house going for a fraction of its worth?
Theoretically that could happen, but an option in the financial arrangements makes that unlikely. As in a regular transaction, the seller will pay the in-town real estate agents — in this case, Jud Henderson of Henderson Sotheby’s — and the agent who represents the successful buyer. About five percent of the sale price will be deducted for those commissions.
An auction requires an additional commission. The buyer pays the company that handles it, and the standard rate is 10 percent of the gavel price. Does Concierge Auctions want to encourage a high opening bid? You bet. So it is likely to negotiate deals with prospective bidders: “If you open with a minimum bid of such and such, we’ll reduce our 10 percent fee.”
That’s why someone looking to “bottom fish” will probably not get lucky.
Truth is, if you had to worry about your house bringing a fraction of what you expected, you wouldn’t be selling without reserve. Virtually all the owners who sell without reserve are “well capitalized,” code for “have lots and lots of money.” They could have lost more in the stock market last year than they could possibly lose on their house.
In the case of 17 Hibben, Henderson has not identified his client, but property records show that it is Barclay Knapp, CEO of ProCapital Group. Formerly known as Charles Street Partners, Pro Capital is a management consulting and advisory group based in Newtown, PA, that develops, invests in, and manages high growth companies (http://procapitalinvestors.com).
Earlier, as CEO and president of NTL in the United Kingdom, Knapp built one of the world’s first hybrid fiber-coax telecom networks, now known as the Virgin Media Group. He went to Johns Hopkins (Class of 1979), has a Harvard MBA, and gave Johns Hopkins $10 million in memory of his father.
Most definitely Knapp, who reportedly has already moved into a new house in Princeton and has had 17 Hibben on the rental market for several years, wants to sell this house and move on. Though the luxury home market is doing better in Princeton than elsewhere, Henderson points to the 26 other homes that cost $2 million or more that are selling at a rate of less than one per month. He predicts that more for-sale signs will sprout this spring. “My client recognized that this is the only way in this climate to get a guaranteed sale,” says Henderson.
But owners considering an auction do not always agree easily to this process. “It’s a tough pill to swallow,” says Laura Brady, vice president of marketing of Concierge Auctions. Hand-holding may be needed to persuade the seller that it will increase buyer interest by a factor of five. “We can back it up with case studies of other sales,” she says. “Lots of sellers speak with past sellers. It’s an education process trying to get the seller to understand what we know.”
Brady cites a property on a Montana lake that competed with 62 other homes for sale. “There were virtually no recent sales to tell us what the property was worth. It was difficult to find what number would fill a room with buyers on auction day.” When it went on the block with no reserve it sold for a satisfying sum.
Sellers who just don’t have that kind of nerve can choose between a published and an unpublished minimum bid. A published reserve may be too high to attract competition, says Brady, but at least the bidders know before they get there how low the seller would be willing to go. When bidders are kept in the dark about the minimum price, that is an “unpublished reserve,” and Brady says that is “even more difficult to market.”
The Princeton market got a taste of that difficulty in 2003 at the auction of Chalan Farm, an unfinished 34,000 square-foot mansion, eccentrically built on 48 acres on Canal Road in Griggstown. You might remember the talk about the “Glass House,” with 360-degree floor to ceiling windows, owned by the John Boultons.
Prudence Morgan Boulton was an heir to the Flagler fortune, sourced from a partnership in Standard Oil, the development of Palm Beach, and the building of the Florida East Coast Railroad. She encouraged her husband, John, a retired Columbia Electronics CEO and an aficionado of Mies van der Roh, to spend $10 million building his dream house. A professional architect provided the actual drawings. They had to move away for medical reasons before it was actually finished, and they couldn’t find a buyer. So they auctioned it, but with a $3 million unpublished reserve (U.S. 1, April 23, 2003 and May 7, 2003.) It was not zoned for commercial or nonprofit/museum purposes.
You can guess the outcome. The only serious bidders had commercial or nonprofit uses in mind, and they weren’t willing to gamble $3 million on uncertain zoning. There was lots of hoopla, lots of people attending the auction who weren’t serious bidders, but no sale on that day.
The property was bought by Gunther Bright, senior vice president of American Express’s global client group, and his wife, Jill. It has since been torn down and replaced by another house (which has attracted no notoriety).
Everything is different this time, starting with the fact that Princeton likes Rolf Bauhan houses and does not like ersatz Mies van der Roh houses. The tone will be different. Chalan Farm’s auctioneer went into a frenzy. On Hibben Road, according to Brady, Frank Trunzo will have a sophisticated, easy to understand, dignified calling style.
Each prospective owner will have set a personal limit, but what if the bidding goes over that limit? Anyone can call a time out to confer, in person or over the phone. There is no rush. This is not a tobacco auction. They’re dealing with millions of dollars here.
Brady predicts that about 20 minutes after the bidding starts the final gavel will sound. Out will come the champagne, the winners will celebrate, and the true market value of the house will have been determined. The deal will close in 30 days with no contingencies. No butting heads over what faults might be found on an inspection. No uncertainty about whether the buyer can get a mortgage. No niggling negotiations about why the drapes don’t go with the house. The house will have been sold “as is.”
Brady says that an auction sale results in a fair market value for the transaction, with the seller guaranteed that the process is quick and efficient and the buyer assured that the deal is transparent. No buyer can possibly be favored over another buyer. The seller will get immediate cash. No more waiting, no more tax payments, maintenance payments, interest payments, or angst.
What kind of buyer will this house attract? Brady says that each auction attracts from nine to twelve bidders, divided into three types. One third have been looking at the house before and just need a push to plunk their money down. The next type have been looking in the marketplace but never saw this house because it didn’t meet their original requirements. Maybe it had fewer bedrooms than they thought they wanted, but the prospect of a bargain encourages them to change their priorities. The third category: New buyers that weren’t even looking at all but were attracted by the publicity.
What will the winner walk away with? A house by Rolf Bauhan, a prolific and favored designer in this town from the 1920s to the 1960s. A graduate of Princeton (Class of 1914), he designed more than 70 houses here. He also designed grand buildings such as the original Stockton Street campus of the Hun School (now owned by the Princeton Theological Seminary) and the manor house that now houses Princeton Academy of the Sacred Heart. He had a penchant for creating Colonial-style villages and did so for the faculty houses overlooking Lake Carnegie at Harrison Street.
Overall, Bauhan’s signature style catered to Princeton alumni, who preferred to look self-effacing and unpretentious. Their houses could be big and elegant on the inside but should look not-so-big from the street.
This brick house has the sheen of a fine antique with the polish of “like new” in crucial places like the bathrooms and kitchen. The master bedroom has a fireplace, but it also has a new deluxe bath and new his-and-her walk-in closets. Of the other four bedrooms, one is over the garage and could be a loft for visiting grandchildren or an office. It also has 7.5 baths, four fireplaces, a library rimmed with built-in bookshelves, a circular conservatory, a gourmet kitchen, a brick-walled terrace, a slate roof, and a pool with a guest house. Taxes are $55,000.
Unlike luxury homes in the far reaches of the township, 17 Hibben is in easy walking distance to town. As a matter of fact, Albert Einstein lived on the next block of Mercer Street.
What will the real estate agents get? Both the buyer’s agent and the seller’s agent will receive their usual commissions, probably in the range of 2.5 percent for each side.
Based on 10 percent of the sale price, if the house sells for $3.5 million, Concierge Auctions could gross $350,000. From that they must pay for marketing (spending from 1 to 1.5 percent of the sales price on such items as ads in glossy magazines), the staging (bringing in furniture and accessories to make it look good, accomplished here by Kelly Eager of Stage It), and a month’s salary and expenses for project manager Tom Banner, a real estate agent from Aspen, Colorado. Banner has been staying at the Homewood Suites during Princeton’s winter freeze, but some assignments have taken him to warmer climes, like Hawaii. Concierge has recently auctioned more than a dozen properties there, including Cher’s $8.7 million estate on the Big Island.
Since it was founded 10 years ago, Concierge has sold more than $2 billion worth of real estate, ranging from a $29 million property in Jackson Hole, Wyoming, to a $1.5 million, 15-acre estate in Wawa, PA, formerly owned by a Wawa heir. Next on the block: an estate in upstate New York and one in the Brandywine Valley.
When Brady co-founded Concierge, she was selling luxury real estate in Florida. She grew up in a real estate family (her mother develops retail centers) and is a graduate of the University of Texas.
Concierge’s CEO and co-founder, George Graham, graduated from Penn and the London School of Economics. He had a 25-year Wall Street career, including stints at Citigroup/Salomon Smith Barney and most recently as a global alternative asset manager of Fortress Investment Group.
Concierge is the “preferred provider” of residential real estate auctions to the gilt-edged Sotheby’s brand, but it contracts with other firms as well. The company has grown to about 30 employees, including six at the Manhattan headquarters, five on the marketing team, and a dozen project managers. And it’s hiring. “We are growing our social media team,” says Brady.
The Hibben Road house will sell on February 17. Until then, take a look for yourself, any afternoon. Check out what it would be like to live in Einstein’s neighborhood.
The property is available for preview from 1 to 4 p.m. daily, or by appointment. Concierge Auctions senior project manager Tom Banner will be on site and can be reached at 970-390-9708. For further information contact Henderson Sotheby’s International Realty at 609-924-1000, or visit www.PrincetonAuction.com or www.hendersonsir.com