- The scene for the $5.2 million auction
Was it auction fever or media madness? A property put up for auction in the ailing Nantucket market today — no minimum bid, no reserve — sold for $5.2 million.
The vacation home, known as the Second Glance, had been just another wall flower in the ailing Nantucket real estate market until Grand Estates Auction turned it into the belle of the ball with a marketing blitz that struck a balance between desperation and devil-may-care confidence: The seller doesn’t really need to sell, but really, he’d just rather not carry two vacation homes on the island. If it goes for one million dollars, so be it, Paul C. Steinfurth told the Nantucket Independent newspaper.
Yeah, right. The normally private Steinfurth suddenly materialized in the New York Times “Living with Less” series and the property popped up on websites everywhere — even Craigslist. No minimum! Absolute Auction! The Times made the situation sound so dire that my family and I considered putting in a bid for the property until the auctioneer convinced me that no one was giving away anything. Henry Blodget weighed in on his blog, predicting a crash for high-end vacation properties on the island known as the Gray Lady for the fog that comes rolling in from the coastline. As for the no-minimum bid sale, Blodget sarcastically says: “THAT should be interesting!”
The fog machine today was Grand Estates Auction, which one real estate agent said was rumored to have spent $200,000 on marketing. The auction company didn’t respond to my email asking about this eyebrow-raising number. It seems unlikely but the point is clear: The success of this sale was about as spontaneous as a Broadway show.
According to the Nantucket Independent, about 30 people couldn’t even get inside the place.
Inside, Stacy Kirk, Grand Estates president, described the scene at the Second Glance to me as “electric”: about 50 to 60 people gathered in the living room (spacious enough to seat everyone!), with a few others peering from the entryway and kitchen. The auctioneer stood before the fireplace, beginning the sale at $1.5 million. Twenty pre-qualified bidders vied for the property along with three on the telephone. The price quickly jumped in $500,000 increments until it got in to the three-plus million zone. Then the number of bidders thinned. At $4.5 million, the bids began to jump in $50,000 increments, until the gavel came down on $4.85 million. In addition, the buyer paid a fee of 7.5%.
I asked Brian Sullivan of Sotheby’s International Realty just what this meant: Sullivan’s a long-time Nantucket man who was unsurprisingly pleased with the outcome. He also thinks it’s a bit early to be writing the obituary for Nantucket. The market is soft, to be sure. At the moment, he counted a total of 473 single home properties for sale, 22 in the $5-$7 million price range and another nine with a $10 million-plus price tag. Dead? On July 2, he reports, a home closed for $13 million, nearly 19% below the $15.99 million asking price. The day before, another home closed for $5.25 million, about 21% below the ask of $6.65 million. Foreclosures are up, but on “B” and “C” grade properties that mostly johnny-come-latelys bought at the height of the real estate bubble.
The Second Glance price was 25% below Paul C. Steinfurth’s original asking price of $6.95 million. But he didn’t have any takers. He also never paid anywhere near that price for the property: In 2004, at the height of the bubble, he paid $5.4 million plus renovations including custom floor coverings and window treatments. In addition, Stacy Kirk says as a “surprise” the auctioneer threw in all the furniture in the house as a bonus. The buyer, reported to be a Florida businessman by the name of David Sherrill, drove off by himself at the end in a rental car. Kirk says the he told her “I came with the intention of being the winning bidder.” Veni, vidi, vici.
How did Steinfurth go from being the poster child of the NYTimes Living with Less series, to successful seller of the 5-bedroom home with harbor views?
Kirk gives a studied, savvy explanation: An auction focuses the buyer. When you shop with brokers, you go through a list of properties. Right now, that list can be pretty long in Nantucket. “They can’t focus attention on any one property. An auction brings the focus to one specific property.”
This fits in with a new trend in marketing to present fewer options to buyers. I always think of the scene from “Moscow on the Hudson,” the film starring Robin Williams. A recent immigrant from Russia, he hyperventilates when trying to choose from the dozens of coffee available at a local supermarket. “Coffee, coffee!” he repeats over and over again. Too many choices, we can’t choose. We do nothing. Behavioral economist Dan Ariely says social experiments show that even medical professions can simply fail to make new choices if there are too many available.
By doing something bold and unusual, Grand Estates differentiated a property from a dozen others. The auctioneer made it easy for the buyer to pretend that no other estate existed. The fog came in and rolled over all the other choices leaving the sun shining on just 6 Juniper Hill Lane for one afternoon.
The Second Glance also benefited from what Ariely calls “anchoring.” In talking with me a few days before the sale Kirk suggested that the home would go for $3 million to $3.5 million. I would be surprised if I were the only other person she told that to. (Sullivan said he expected a price of $4 million.) When the auctioneer got in that range, interest waned. For the others, either auction fever took over or they took a second glance at the property and decided price-be-damned — the recession-be-damned — I want it.