The Malibu home of investment banker William J. Chadwick set for auction… (Tim Street-Porter )
This is what the housing downturn has come to: A custom-built mansion along an exclusive section of Carbon Beach in Malibu known as Billionaires' Beach will be sold at auction Sunday.
The auction itself is a rarity along a stretch of sand named for the size of its residents' bank accounts. But the price is even more surprising; bidding for the half-acre property will start at $22 million, about a third of the original asking price three years ago.
Tired of playing the waiting game, more wealthy owners are giving real estate auctions a try in hopes of a fast sale.
PHOTOS: Auction planned for 'Billionaires' Beach'
These are not foreclosure auctions on the courthouse steps or hotel ballroom events in which investors vie for bank-owned bargains, which have become common during the market's seemingly endless malaise.
Instead, the well-off are turning to auctions to jump-start offers, perhaps even bidding wars, in a style to which they've become accustomed. The Malibu affair, for instance, will pamper participants with music and catered nibbles.
"Auctions can be very glamorous affairs," said Elizabeth Currid-Halkett, an assistant professor at the USC School of Policy, Planning and Development, who has studied the ways of the wealthy. The evening art auctions at Sotheby's and Christie's are "a buzzy collection of who's who in the art world and high society coming together to bid millions on anything from a Picasso to the darling of the contemporary art world, Damien Hirst."
Comparable home sales in Billionaires' Beach include the nearly $37-million closing in October of the late Nancy M. Daly's 12,875-square-foot home on three-quarters of an acre. Apparel executive Charles Perez sold his 5,800-square-foot beach house to Microsoft co-founder Paul Allen in June 2010 for about $25 million.
The line of oceanfront properties had been thought to be protected from housing market changes because owners the likes of DreamWorks co-founder David Geffen and Oracle co-founder Larry Ellison simply never "have" to sell. But investment banker William J. Chadwick and his wife, Cherry, are ready to move on to Chicago and no longer willing to wait.
"They tried the regular process and it didn't happen," said listing agent Carol Bird of Westside Estate Agency. "They wanted to try something that creates a sense of urgency and attracts attention. It puts a fire under the chair."
The Chadwicks' property has 150 feet of beach frontage, 4,500 square feet of deck and a two-lane, 75-foot beachfront pool with a spa. The Cape Cod-inspired house has a 16-seat home theater, a pub, a gym, a wine cellar, an aquarium that fills one wall, six bedrooms and 9 1/2 bathrooms in nearly 10,500 square feet.
The couple use the light-filled beach house, built in 2005, as their primary residence. Other than the library with the aquarium, two children's bathrooms, the theater and staff quarters, every room faces the ocean. There are balconies off the master bedroom and each guest suite.
Even in good times, it can take years for Southern California's highest-priced homes to sell.
"We have more than three years of inventory in Malibu, and it doesn't look like it's getting better," Bird said.
Malibu's median sales price dropped 22.9% during the first half of the year from the same period last year, according to DataQuick, a San Diego real estate information service.
Although the one-day auction of a nondistressed property is a first for Billionaires' Beach in the current housing market, this is not the first time a house has been auctioned in a prime Malibu location.
"Eyebrows were raised when we auctioned a house in the Malibu Colony," Bird said. "But I worked out a procedure to secure the privacy of the people there. We pulled it off and never had a glitch."
That 4,000-square-foot house sold for slightly less than $5.2 million in February, when six of eight registered bidders showed up to try for the property, which had been listed at one point for $8.4 million. The opening bid was $3.7 million.
A crowd is not expected at the Billionaires' Beach auction either, said Tony Fitzgerald, a broker with Premiere Estates Auction Co. who handled the Colony event and also will handle the Chadwicks'.
"There will not be an awful lot of bidders because of the price level," he said. The auction has been generating interest mainly locally but also from as far away as Tokyo and Frankfurt, Germany.
The seller sets a minimum price, called a "reserve" — a confidential figure somewhere above the $22-million starting bid. The final price, once the bidding has cleared the seller's reserve amount, will be decided by the market, he said.
"In the good-old days, auctions doubled in price," said Fitzgerald, who estimated Premiere's auction business is up a third over a year ago. "Now the real estate market is so thin across the board. The buyers are going to get a deal."
To qualify for a bidder's paddle, participants had to show proof of funds from their bank and will need to show up with a $150,000 cashier's check in hand. The successful bidder will be required to put down a 10% deposit that day.
Potential buyers most likely won't be at the event themselves but will be represented by a proxy such as their legal representatives. Some proxies will work from instructions, others with their ear to their cellphones.
The owners won't be on hand either.
"It's emotional for the seller," Fitzgerald said. "It took him five years to get the house through the Coastal Commission, and it's been his home since 2005," Fitzgerald said.
And there's always a chance that the auction might be called off.
"I would not be surprised if it sold before," Bird said. "Many buyers would rather negotiate a deal one on one when they have the sellers' full attention."
PHOTOS: Auction planned for 'Billionaires' Beach'