An article in the New York Times today focused on a new phenomenon: The absolute auctions of multi-million dollar mansions. In an absolute auction, there is no minimum price, and the buyer agrees to accept the winning bid. The home chronicled in the auction was appraised at 14 million only two years ago, but sold in auction for 2.5 million last week, sending the home owner into personal bankruptcy.
The article was a sad story, as it highlighted the increasing interest in selling mansions at auctions–often pushed by creditors to do so or on the brink of foreclosure. The day before the home was auctioned, its belongings were auctioned. And still in the case of this homeowner, it was not enough to stave off financial disaster. In a way, it seems that selling homes at absolute auction, while a way to get something for the home, doesn’t give always give the homeowners all the money they need. But it depends on the situation: another man was able to sell his home in an absolute auction, still cover the cost of his mortgage, and only take a $200,000 loss. Nonetheless, the auctions are a sad phenomena of the weak market for luxury homes and the recession itself.