John E. Miller
The market hasn’t been kind to most people in the country (with the obvious exception of investors and homebuyers). Celebrities and the rich and famous, though, seemed to have largely dodged the bullet because their properties usually sell, sometimes even for a profit.
The celebrity effect has long been an acknowledged factor in real estate. In most markets, even during the typical down cycles, real estate associated with celebrities usually benefits from being associated with genuine star power. Buyers notice these hot properties before other homes because news gets out and tends to raise the profile of these star-crossed homes. Plus, the homes themselves are often luxurious, with state-of-the-art amenities and dynamite locations.
Of course, these days, in this market, even celebrities aren’t immune to real estate problems.
Remember Home Alone? It turns out the stately colonial home that was featured in that movie – located in an upscale village just to the north of Chicago – has been on the market for quite a while and recently saw its listing price cut by 10%, to $2.175 million.
Another celebrity home – this one owned by America Ferrera, the star of the hit TV series “Ugly Betty” – is also on the market but hasn’t gotten any takers. The Beachwood Canyon home is listed for $1.395 million, less than the $1.415 million in 2008, and hasn’t had any bites. The price is almost $250,000 less than the original asking price in 2010.
There’s also the case of celebrities who are facing foreclosure on their homes and are trying to avoid that unseemly fate through short sales and other deals. Just over the past year, celebrities like Mel Gibson, Timbaland, Sergei Federov, JaMarcus Russell, Allen Iverson, Wayne Newton, and R. Kelly have faced foreclosure or have had their properties foreclosed by the bank.
Well, in terms of celebrity homes that are on the market and can’t find buyers, a lack of privacy may be the culprit. The Home Alone property and the house owned by Ferrera both do not afford the level of privacy that affluent homebuyers want. If you have millions to plunk down on a hot property, you probably want your privacy intact – not violated by star-gazers or tourists. If you are in a top location, like secluded portions of Los Angeles that are star friendly, you probably don’t mind – which is why homes in those specific areas still sell well.
In terms of the other cases – situations like the list of celebrities above in which homes just don’t sell at all and face foreclosure – the reason is probably because the home was overpriced to begin with. Even celebrities can be victims of paying too much for a property. In fact, because they have so much discretionary , they are more likely to overpay – which results in higher-than-desired asking prices that scare buyers away.
What can buyers and investors learn or gain from this situation? For starters, the market is full of prime real estate – real estate that can be purchased for significant bargains and resold at a later date, when the market recovers, for a nice profit. If you can find celebrity real estate, so much the better, but even if you can’t, “normal” real estate is still a prime opportunity.
Another lesson to be learned is that buying in the right timeframe is crucial to the success of any real estate venture. These celebrities obviously made the wrong call, but that doesn’t mean you have to repeat their mistake. Waiting too long will have you buying on the upswing of a recovery, in which the balance of the market begins to tilt toward sellers. With low interest rates and an abundance of available property, you can find an attractive bargain in virtually every market.
And might pick up a celebrity home or two while you’re at it.