How it Works
What is an auction?
An auction is an efficient process used to determine fair market value for any number of things, including assets like stocks, real estate, automobiles, equipment, and more. For centuries, the great auction houses have sold luxury art, antiques, jewelry, and collectibles by auction. Since 2009, Paramount Realty USA has done the same for luxury, special, commercial, and other properties. Our firm is New York’s most active non-distressed auction company and our team has over $2 billion in real estate auction experience. Our firm has helped sellers and listing agents sell 750 properties by private auction throughout New York (primarily NYC and Long Island), Westchester NY, Greenwich CT, Miami FL, Chicago IL, Philadelphia PA, Taos NM, and elsewhere.
Why sell by auction?
We collaborate with sellers and listing agents to reach a wider audience, create urgency and generate market value on a timely basis. Our process provides the following benefits:
More Exposure: Auction marketing is more comprehensive and reaches a wider audience than alternative marketing approaches.
More Compelling Message: An “auction” is a captivating message that gets more attention than traditional listings.
More Traffic: Since auctions are compelling, our process generates more traffic online and physically through the property.
More Offers: More traffic typically translates into more offers.
More Clarity: Our process generates more bids, feedback, and market information, which helps sellers better understand value.
More Control: Sellers set timeline and terms of sale.
Our process generates market value by leveraging the above to create competitive bidding environments in one of our auction formats, which are outlined below.
Why buy through auction?
It’s an efficient and controlled process where buyers can participate on a level playing field. The buying process is more streamlined so there’s less back and forth, less negotiation, and less wasted time.
How do our auctions work and what kinds of auctions do we offer?
In our auction campaigns, (a) we implement comprehensive marketing, including digital advertising, listings on our site (which receives approx. 222,000 annual visitors) and relevant listing sites, social media campaigns, major public relations campaigns geared towards generating publicity for our auctions, and aggressive direct solicitation of the brokerage community and of our own proprietary subscriber list (which currently consists of approx. 70,000 buyers, high net worth individuals, private equity professionals, developers, investors, agents and others, primarily from the metro New York marketplace), (b) properties are almost always made available for inspection in advance of the auction, and (c) we make substantive due diligence information available for review virtually in advance of auction. Our campaigns create significantly greater engagement from buyers and brokers than alternative marketing and sales approaches.
Our process culminates in a competitive bidding environment to generate market value in 1 of 3 auction formats: (1) Online and (2) In-Person Auctions, which are most effective when there is known/quantifiable demand for the subject property and when market value is more readily discoverable, and (3) Sealed Bid Auctions, which allow for bidders to submit written offers by a stated deadline, and which are most appropriate for unique, difficult-to-value, and special properties, where value is truly subjective (“beauty is in the eyes of the beholder”).
How does pricing work in an auction?
Traditional listings typically provide for higher listing prices and buyers usually offer less. If a listing does not sell, the list price is typically reduced until it approaches a “market” price.
By contrast, auctions provide for lower “starting bids” or “minimum bids,” which triggers greater activity — just like any traditional price reduction often accomplishes. However, the fact that the new price is a floor in an auction context means pricing goes up from there. It’s a compelling strategy to sell almost anything. Sellers may set reserve prices, below which there is no obligation to sell, but we will not accept assignments with unrealistic reserve prices.
What does this cost?
The standard fee in the auction industry is a buyer premium, which is added to the buyer’s bid price to arrive at the total purchase price. If there is a listing agent, the listing agent is paid pursuant to a standard listing agreement, as is a buyer-broker, if applicable. For more on how we work with agents, please see below.
How We Work with Agents
What values do we add for listing agents and why should listing agents offer auctions to their seller-clients?
Sellers: First and foremost, some sellers simply prefer auction, so agents should be able to offer this service to their clients. Those sellers are more likely to sell through auction and sell faster by auction, because our process makes sellers realistic about market value. The value of this last point is truly paramount.
Listing Agents: Our strategies help listing agents sell more often, sell more quickly, and keep full commissions more often. Not only is there NO COST for listing agents, but over 75% of our past 750 transactions were direct (i.e., no co-broke), which is why listing agents are much more likely to keep the full commission by working with us. We charge a buyer’s premium as our fee.
How do the mechanics work for listing agents?
Listing agents keep their normal listing agreement and fee structure in place exactly as-is.
Sellers sign separate agreements with our firm. This effectively treats us as a co-exclusive agent, authorizes us to promote the marketing and sale of property by auction, and charge a fee known as a buyer’s premium.
Our firm coordinates comprehensive marketing campaigns in collaboration with listing agents and we co-brand all collateral with listing agent (at listing agent’s option). Listing agents are copied on all communications with buyers and brokers, and manage all property tours, which are reduced in number (usually to 3 scheduled showings in the weeks leading up to the auction), which significantly limits the time a listing agent spends going back and forth to show a property. Our formalized bidding processes also significantly reduce the back and forth typically associated with contract negotiations.
When should listing agents suggest auction to their clients?
Anytime: Since some sellers prefer auctions, listing agents can suggest an auction at any time. In addition, below are some particularly favorable or appropriate times for listing agents to suggest the approach.
Near expiration of exclusive: Listing agents should always offer an auction strategy near the expiration of the term (e.g., 30-60 days before expiration) because that’s when sellers consider other options, including hiring another broker.
“Stale listings” or unhappy sellers: If a property has been on market too long, or if seller expresses dissatisfaction with traffic, quantity/quality of buyers or offers, or anything about the existing approach, it may be appropriate to suggest an alternative, such as an auction approach.
Sellers should be advised that there’s little sense switching agents, which will likely generate a similar outcome, when they could instead pursue a different approach. If the seller agrees, the listing agent may secure a 3-6-month extension to match the terms of the auction agreement and, hopefully, a sale of the property.
How do we work with buyer agents?
Broker participation is invited in almost all our auctions. See the individual auction for co-broke commission splits and other details.
How does our process differ from traditional brokerage?
|Average||Likelihood of Sale||Higher|
|Unknown||Time to Sell||Less! Usually 45-60 Days.|
|Only 25% Probability of|
Keeping Full Commission
|Direct vs. Co-broke||75% Probability of Keeping Full Commission!|
That’s 3x Average!
|Unlimited/unknown||Number of Showings||Limited (Usually to 3-5)|
|Unknown||Showing Schedule||Scheduled in Advance|
|Average||Impact of Marketing||Compelling!|
|Average||Level of Efficiency||Higher|
|Negotiable||Terms||Less Negotiation; Set by Seller in Advance|
|Average||Level of Urgency||High!|