The founder of Nextel Communications Inc. thought for a couple of years that his 11 fireplaces, eight bedrooms and 18-plus acres on a secluded peninsula on the Eastern Shore might be a little much, but he's bided his time.
Until last weekend. On July 19, his Queenstown home sold to the highest bidder.
"We decided this was a good time to try it," said Morgan E. O'Brien, who purchased the 300 Wye Narrows Drive property in 1999 for $8 million.
The market for luxury homes has struggled since the recession. In the Baltimore region, more than 560 homes listed above $1 million sat on the market in June, but just 36 homes in that range sold, according to RealEstate Business Intelligence, a subsidiary of the MRIS multiple listing service.
On the Eastern Shore, there were nearly 300 listings above $1 million in June. Number of sales? Seven.
Trophy homes typically take longer to sell than the average house, no matter how strong the market, but for sellers finally reaching the limit of their patience, that's where an auction comes in.
"What we do is, we make real estate liquid," said William R. Bone, president of the Alabama-based National Auction Group, who said his firm looks for "motivated sellers." "When you hire us, you know your property is going to sell."
Auctioneers said they are starting to get more calls from owners, like O'Brien, who have held off, growing impatient as they wait for a buyer. These sellers may also be more willing to accept that prices won't return to the pre-crash heights: 1234 Cherry Tree Lane in Annapolis, listed in 2011 at $15 million, went to auction in May and brought $4.2 million after settlement in July.
"It's all about price," said Joe Cooper, president of Alex Cooper Auctioneers, which sold a five-bedroom Colonial brick home in Owings Mills at auction for more than $1 million in June, just slightly above what the original owner paid in 2006. "We try to explain to people what they might get. By doing that, we eliminate some people's dreams, but we sell their properties."
DeCaro Luxury Real Estate Auctions sold about 36 luxury properties around the country last year and expects to do 50 this year, including O'Brien's Penderyn Estate, a 22,500-square-foot, Georgian-style home originally built for the son of the Chef Boyardee fortune, and 11743 Springhaven Court in Ellicott City, a seven-acre property with six bedrooms, four kitchens, two pools and a tennis/basketball court.
Both homes sold in the $5 million range, said firm founder Daniel DeCaro, who declined to specify price because the deals haven't settled yet.
"This correction is taking substantially longer for the high-end market, the luxury market," DeCaro said. "As people start to come to grips with this and to the realization that this market is not correcting and not changing more rapidly, more and more people are choosing to take the approach that we offer."
Auctions, long associated with the the stink of economic ruin, started to shed that reputation in the 1980s. While still a small fraction of the market, they have become increasingly common, as technology increases the reach of marketing campaigns and allows online bidding. For the super-rich, accustomed to buying art, thoroughbred horses and one-of-a-kind furniture from well-heeled auction houses such as Sotheby's and Christie's, the strategy can feel like a natural fit.
"I look at this as I've been a capitalist all my life," said O'Brien, who also tried to sell Penderyn, as well as surrounding lots, more traditionally. "If you make a property widely available and everybody gets a proper chance to look at it and bid, you're probably going to find out what the fair-market value is."
Selling by auction typically involves an intensive 30- or 60-day marketing campaign and open houses. Buyers are responsible for settling fees, and the auction company takes a cut from a buyer's premium, anywhere from 5 percent to 10 percent of the final price. A seller can either reserve the right to reject the bid or opt for absolute auction, as O'Brien did.
In addition to the marketing, sellers also may be gambling on what they know about the psychology of their wealthy peers.
"If you have the slightest interest in the place, you have to get motivated, you have to get going and then the competitive juices get flowing," O'Brien said. "To me, it's a pretty compelling way to get a lot of folks' attention."
One-of-a-kind homes make pricing especially difficult, another reason for an auction to seem like a good option, some said. And as the market appears to be recovering, some may be worried that their brokers aren't aiming high enough.
"[The sellers] end up getting very concerned … that it might not be priced right, that the traditional real estate people that they're dealing with may be behind the priceline," said Stephen J. Martin, chairman emeritus of the Gwent Group, an Indiana-based management consulting firm that used to track auction trends. "They're hoping that they'll be able to take advantage of an upswing in prices, and it only takes two people at an auction to really drive up the price."
It doesn't always work. A Harris Creek estate offered for online auction with a reserve last fall failed to sell. A 3.27-acre waterfront property in Worton advertised with a suggested $950,000 opening bid drew no serious buyers to its May auction.