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As the Los Angeles housing market has continued to soar, some high-profile real estate players are – surprisingly – selling their mega-mansions 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 home in Pacific Palisades 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 Sierra Towers in West Hollywood in an off-market deal joker Director Todd Phillips. According to Dirt.com, she paid $5.1 million for it in 2017 and dumped it for $3.6 million, making a loss of $1.5 million.
Director Simon Kinberg was one of the biggest losers, selling his Hollywood Hills estate 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 properties at a loss in recent years.
How is that possible in a booming market? Several factors play a role. Agents point out that the ultra-rich often buy on a whim, pay top dollar, and could just as easily tire of their new purchases.
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 offerings. Off-market listings are often overpriced; it creates a perfect storm,” says John Iglar of Douglas Elliman. Such offers are often overvalued by up to 20 percent.
Additionally, homes in the $20+ million category can be particularly difficult to value. “It’s more like buying art, so it’s a bit tricky,” says Michael Nourmand, president of Nourmand & Associates. “You have regular homes where previous sales are much more similar, and you have some of these larger, more expensive homes that are one-offs. How much they are worth is harder to determine. The stakes are higher. There is less choice. It’s harder to compare prices. It’s not like buying a liter of milk where you can look online what everyone is asking for it.”
Unconventional renovations can also complicate the return on a real estate investment. “Sometimes you have someone [where] Money does not matter. They don’t think about the resale part of it. They’re just doing it for themselves,” says Nourmand. “As a real estate agent, I always tell people don’t do that. You should always prepare your house with the idea that someone else will eventually own the property.”
According to several realtors, the Sunset Strip neighborhoods, particularly Bird Streets, have seen their resale value decline in recent years (one seller recently lost $10.5 million). “There are too many mundane, undifferentiated homes in this neighborhood in shocking numbers of $20 million, $30 million, $40 million on the market,” says an anonymous agent. “And most of them aren’t interesting.”
For the ultra-rich, stock market volatility, rising interest rates and inflation also mean that the money made from selling at a loss can be worth the inflow of cash and capital. “Selling at a loss is a little more common now because I think the perception of value is gone,” says Nourmand. “I think you had people who were making a lot of money and buying very expensive real estate.”
But as one anonymous realtor notes, losing money on a home sale in the current market is quite simply avoidable: “Honestly, if you’re selling at a loss and have been buying seriously for the past few years, you must be earning every mistake in the book.” You have to try to lose money because the market is up 25 percent. If you’ve lost money in this market, don’t invest in real estate.”
A version of this story first appeared in The Hollywood Reporter magazine on June 22. Click here to login.
