As the Los Angeles housing market has risen up and up, some rolling-stock real estate players are selling their mega-mansions – surprisingly – at a loss.
Trevor Noah recently sold his Bel Air Mansion for $ 26.4 million, more than $ 1 million less than he paid for it in 2020. Michelle Pfeiffer and David E. Kelley sold a Pacific Palisades home for $ 6.5 million, $ 1.2 million less than they paid for it in 2018. Earlier this year, Sandra Bullock sold a condo in the West Hollywood Sierra Towers in an off-market deal to Joker director Todd Phillips. According to Dirt.com, she paid $ 5.1 million for it in 2017 and landed it at $ 3.6 million, making a loss of $ 1.5 million.
Director Simon Kinberg was one of the biggest losers, selling his Hollywood Hills property, which he bought for $ 31.5 million, for $ 28.5 million. But they are not the only ones. LeBron James, Simon Cowell, Justin Bieber and Channing Tatum have also sold property at a loss in the last few years.
How is this possible in a booming market? Several factors come into play. Agents point out that the ultra rich often buy on a whim, pay the best dollar, and can indulge their new acquisitions just as quickly.
For those in the public eye, the need for secrecy can come at a high price. “Celebrities are very concerned about privacy and security, so they are drawn to off-market lists. Off-market listings are often overpriced; creates a perfect storm, ”says John Iglar of Douglas Elliman. Such lists are often overestimated to 20 percent.
In addition, homes in the $ 20 million category can be particularly difficult to assess. “It’s more like buying art, so it’s a little tricky,” says Michael Nourmand, president of Nourmand & amp; Associates. “You have regular homes where there are sales that are much more similar in the past, and you have some of these bigger and more expensive homes where they are kind of once. It’s harder to come up with how much they cost. The shares are higher. There is less choice. It’s harder to compare prices. It’s not like buying a quarter of a milk, where you can search online and see what everyone is asking for. “
Idiosyncratic renovations can also make it harder when it comes to making a profit from real estate investing. “Sometimes you have someone [where] money is not an object. Don’t think about its resale part. They do it for themselves, ”says Nourmand. “As a real estate agent, I always tell people, don’t do that. You should always prepare your home with the idea that at some point, someone else will own the property. “
According to multiple brokers, the Sunset Strip neighborhood, particularly Bird Roads, has seen a decline in resale value in recent years (one recent seller has lost $ 10.5 million). “There are too many banal, undifferentiated homes on the market in that neighborhood with staggering numbers, at $ 20 million, $ 30 million, $ 40 million,” says one anonymous agent. “And a lot of them aren’t interesting.”
For the ultra-wealthy, stock market volatility, rising interest rates and inflation also mean that cash earned from sales at a loss can be worth the influx of cash and capital. “Sales at a loss are starting to happen a little more now, because I think the perception of value is no longer there,” Nourmand says. “I think you had people make a lot of money, buy very expensive properties.”
But as one anonymous broker notes, the loss of money on selling a home in the current market is simply avoidable: “Honestly, if you’re selling at a loss and you’ve bought in the last few years, seriously, you must make every mistake in the book. You want to try to lose money because the market has risen by 25 percent. If you have lost money in this market, you should not be in real estate. “
A version of this story first appeared in the June 22 issue of The Hollywood Reporter. Click here to subscribe.