As the Los Angeles housing market continues to soar, some high profile 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 have sold a house of Pacific Palisades for $6.5 million, which is $1.2 million less than they paid in 2020. 2018. Earlier this year, Sandra Bullock sold a condo in the Sierra Towers in West Hollywood in an off-market deal to Joker director Todd Phillips. According to Dirt.com, she paid him $5.1 million in 2017 and dumped him for $3.6 million, which is a loss of $1.5 million.
Director Simon Kinberg was one of the biggest losers, selling his Hollywood Hills estate, 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 past two 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, paying top dollar, and could tire of their new acquisitions just as quickly.
For those in the public eye, the need for secrecy can come at a high price. “Celebrities are deeply concerned about privacy and security, so they’re drawn to out-of-market listings. Out-of-market listings are often overpriced; it creates a perfect storm,” says Douglas Elliman’s John Iglar. overvalued by up to 20%.
Additionally, homes over $20 million can be particularly difficult to appraise. “It’s more like buying art, so it’s a bit tricky,” says Michael Nourmand, president of Nourmand & Associates. “You have regular homes where there are past sales that are much more similar, and you have some of these bigger, more expensive homes where they’re kind of unique. It is more difficult to determine how much they are worth. The stakes are higher. There are fewer choices. It is more difficult to compare prices. It’s not like buying a liter of milk, where you can look online and see what everyone is charging for it.
Idiosyncratic renovations can also complicate the profitability of a real estate investment. “Sometimes you have someone [where] Money is not an object. They don’t think about resale. They just do it for themselves,” says Nourmand. “As a real estate agent, I always tell people not to do that. You always have to prepare your house with the idea that at some point someone else is going to own the property.
According to several brokers, neighborhoods on the Sunset Strip, especially Bird Streets, have seen their resale value decline in recent years (one recent seller lost $10.5 million). “There are too many mundane, undifferentiated homes on the market in this neighborhood at shocking numbers, at $20 million, $30 million, $40 million,” says an anonymous agent. “And most of them are not interesting.”
For the ultra-rich, stock market volatility, rising interest rates and inflation also mean that the money made by selling at a loss can be worth the influx of money and capital. “Selling at a loss is starting to happen a bit more now, because I think the perception of value is gone,” Nourmand says. “I think you had people making a lot of money, buying really expensive properties.”
But as one anonymous broker notes, losing money selling a home in today’s market is simply avoidable: “Honestly, if you’re selling at a loss and you’ve been buying in the last few years, seriously, you have to make every mistake in the book. You must be trying to lose money because the market has gone up 25%. If you lost money in this market, you shouldn’t be in real estate.
A version of this story first appeared in the June 22 issue of The Hollywood Reporter magazine. Click here to subscribe.