Troy McMullen on how messy divorces, murder and mayhem influence the price of real estate.
The red-brick mansion that just went up for sale in Greenwich, Conn., has about everything a buyer could want. Set on 2.1 lush acres on tree-lined Dairy Road, it has four bedrooms, four bathrooms, two fireplaces and a pool. Its $5.2 million asking price is, by Greenwich standards, appealing.
The home has another distinctive feature. The basement is where real-estate developer Andrew Kissel — who had been renting the home for $15,000 per month — was found bound, gagged and stabbed to death in April. “To say the broker will need all the luck he can get finding a buyer is an understatement,” says Greenwich broker Chris Fountain, who isn’t connected with the property’s sale.
It’s the convergence of two American obsessions: real estate and scandal. In the latest manifestation, tabloids reported last month that architect Peter Cook — husband of former supermodel Christie Brinkley — was having an affair with a 19-year-old employee. Shortly afterward the couple, owners of numerous properties in New York’s Hamptons, removed five homes from the market, including the $15 million house where the trysts allegedly took place. Separately, in June, the Chicago home of federal judge Joan Lefkow sold for $759,000. That was well below the $900,000 it was listed at a year ago, a few months after Judge Lefkow’s husband and mother were murdered inside.
GOOD VIEWS, BAD HISTORY
Some houses that have been the scene of scandal, and how the news may have affected their value.
LOCATION STIGMA BACKSTORY
Boulder, Colo. JonBenet Ramsey’s body was found in the family home in 1996. The house has changed hands three times since the murder. In 1998, a group of investors purchased it for $650,000 and sold it six years later for $1.05 million. The house is currently on the market for $1.7 million.
Chicago U.S. District Judge Joan Lefkow’s husband and mother were murdered in their house here in 2005. About a year and a half after the murders, the house sold for $759,000, or about $140,000 below its original asking price. Brokers say the notoriety hurt the property’s value.
East Hampton, N.Y. Financier Ted Ammon’s body was found in his home here in 2001. This six-bedroom house has been on and off the market since 2003, according to area brokers; its asking price each time was $10.5 million. An attorney for the estate disputes this, however, and says the house has not been for sale since 2003.
Greenwich, Conn. The body of real estate developer Andrew Kissel was found in April at the estate where he lived, bound, gagged and stabbed. Mr. Kissel was expected to plead guilty to fraud charges at the time of his death. He was found in the basement of the mansion, which he was renting for $15,000 a month; it is now renting for $20,000 a month and went on sale last week for $5.2 million. It was last on the market in 1998 for $3.495 million.
Los Angeles Roman Polanski had sex with a 13-year-old girl in 1977 in a sprawling hilltop house owned then and now by actor Jack Nicholson. Mr. Polanski, the Oscar-winning director of “Chinatown,” “Rosemary’s Baby” and “The Pianist,” fled the U.S. after he was convicted of statutory rape. The Mulholland Drive estate hasn’t come on the market since.
Miami Fashion designer Gianni Versace was shot to death on the doorstep of his South Beach mansion in 1997. The fashion designer was murdered by serial killer Andrew Cunanan. Mr. Versace paid a combined $6.6 million for this property in two transactions in 1992. It was bought three years after his death for $19 million and turned into a hotel and members-only club.
— Conor Dougherty
Real-estate professionals call homes tainted by murder, sex scandals or messy divorce “stigmatized properties.” While they make up a sliver of the market, they have been the subject of academic research, provided fodder for lawsuits and posed a challenge for brokers. State real-estate agent and appraisal groups regularly include the subject in seminars, and the National Association of Realtors publishes a “Field Guide to Dealing with Stigmatized Property,” offering insights on everything from how to market and sell stigmatized homes to dealing with buyer reluctance to own them. One scandal-dampening suggestion from the guide’s “tool kit”: Enhance the home’s facade by painting it or replanting shrubs and flowers.
There are different degrees of stigma, of course. Appraisers and brokers say murder — in particular, multiple homicides and cult killings — is by far the toughest kind of notoriety to minimize. Suicides and hauntings come next, followed by illicit sex and celebrity infidelities. When bold-face names aren’t involved, hanky-panky appears to have little impact. “If real-estate values were hurt for every house where the owners were unfaithful, we’d have a fire sale out here,” says Steven Gaines of East Hampton, N.Y., author of 1999’s “Philistines at the Hedgerow: Passion and Property in the Hamptons.”
The 2.7-acre East Hampton estate of Ted Ammon, for example, shows the possible impact of a high-profile murder. Mr. Ammon, a well-known financier who made his mark at leveraged buyout firm Kohlberg Kravis Roberts & Co., was found bludgeoned to death in the six-bedroom home in October 2001, days before he was to divorce his wife, Generosa. The case attracted coverage in the New York media through 2004, when Daniel Pelosi, Mrs. Ammon’s boyfriend at the time of the murder (she later married him), was convicted of the crime. The home has been off and on the market with a $10.5 million price tag since Mrs. Ammon died of cancer in 2003, say local brokers, who add that it is currently being rented for the summer for $250,000. (An attorney for the estate says the home has not been offered for sale since Mrs. Ammon’s death.)
“Would you want to live there?” asks Bridgehampton real-estate broker Neil Bersin. “It’s a terrific property, but I don’t think there’s a polite way to tell buyers that a murder was committed here.”
Murder Trumps Sex
A pair of examples from Los Angeles in the mid-1990s shows how the taint of murder can exceed that of sexual impropriety. The four-bedroom Brentwood, Calif., home where Nicole Brown Simpson and Ron Goldman were murdered in 1994 hit the market the following year with a $795,000 asking price. It sat on the market for more than two years before selling for $595,000, public records show. Meanwhile, the Beverly Hills home of Heidi Fleiss — the “Hollywood Madame” indicted in 1993 by a Los Angeles grand jury for operating a call-girl ring out of the house — sold in 1994 for its $1.8 million asking price. (The buyer, dental-products manufacturer Federico Pignatelli, recently had the property appraised at twice that amount.)
Highly stigmatizing events can cut as much as 15% to 25% from the price a home would otherwise fetch, according to appraisers who specialize in such homes. The largest markdowns, they say, are associated with explosive scandals that receive broad media attention. After two or three years, the stigma begins to diminish. “Time passes, people forget,” says Frank Harrison, an appraiser in Woodstock, Ill., who has researched and appraised dozens of affected properties.
A broader examination of scandal-tinged homes shows the impact may, in many cases, be minimal. In a 2000 study, James Larsen, a finance professor at Wright State University in Dayton, Ohio, surveyed more than 100 stigmatized homes, including those associated with sex scandals or murders, or deemed to be haunted. The homes sold for just 3% less than those not associated with scandal, yet stayed on the market about 45% longer. A key factor affecting sales price: the length of time between the incident and when the home went on the market. In some cases, the study reported, it took between five and seven years for the effects of some scandals to subside.
Brokers say that the effect of scandal can also be mitigated by a strong real-estate market, and sales data show that homes located in desirable areas tend to sell well. But currently, the cooling market may pose an additional challenge to sellers of stigmatized homes, as buyers have their choice of more properties. Total housing inventory levels rose 3.8% at the end of June to 3.73 million existing homes available for sale. That represents a 6.8-month supply at the current sales pace, up from a 4.4-month supply in June 2005, according to the National Association of Realtors.
In the case of the Cook-Brinkley properties, the attorney for Mr. Cook, Norman Sheresky, would not speculate on why the homes were taken off the market. The couple’s broker declined to comment. Among their holdings: a 20-acre main residence in Bridgehampton that most recently listed at $26.5 million.
But if similar scenarios are any guide, the values of the Cook-Brinkley homes may not ultimately suffer. In 1997, newspapers reported that Michael Kennedy, a son of Robert F. Kennedy, had had an affair with his children’s teenage baby sitter in his home in Cohasset, Mass. Six months after Mr. Kennedy’s death in December 1997 from a skiing accident, the home sold for $2.3 million, more than double the $874,000 that he and his wife had paid for it six years earlier, public records show.
Historically, properties deemed stigmatized were those that were close to toxic-waste sites and other environmentally compromised areas. The AIDS epidemic was lumped into this category in the 1980s and 1990s, when brokers began fielding more questions from buyers who worried that the health of a previous owner could affect them. Though there was no evidence to suggest that these properties were dangerous, prospective buyers were “psychologically impacted” by these factors and were less likely to purchase the home, according to research by the Real Estate Center at Texas A&M University, which has studied the effects of phobias on housing values. Now, as sensational criminal cases receive non-stop coverage on cable-television shows and Web sites, the general definition of tainted real estate is expanding, industry professionals say.
“Heightened media coverage of an event allows people to know much more about a property’s history,” says Randall Bell, an economist and appraiser in Laguna Niguel, Calif. Mr. Bell began specializing in stigmatized property after appraising the home of Ms. Brown Simpson following her 1994 murder.
Currently, 34 states and the District of Columbia require a mandatory property condition disclosure — known factors that can affect the value or desirability of a property. Yet these disclosure laws don’t always require the selling broker or owner to reveal events such as heinous crimes or suicides. Instead, disclosure laws typically require a seller to notify a buyer about a home’s physical condition, material defects or major repairs that might affect a buyer’s decision to purchase the home. In the study conducted by Prof. Larsen of Wright State University, real-estate brokers who didn’t disclose a home’s past often sold the property quicker and closer to its asking price.
Stigmatized or psychologically affected properties have cropped up in the courts over the years. In 1983, a California appellate court upheld a buyer’s right to rescind a purchasing contract after she discovered that a family of five had been murdered in the house. In a 1988 case, a buyer attempted to void a purchase contract after learning that the previous owner died of AIDS; that claim was refused by a New York court. But in 1991, a New York appellate court allowed a purchaser to rescind a contract on a property when the buyer later discovered that the new house was widely reputed to be possessed by ghosts.
One sure way to avoid problems with selling a home that has been tainted by scandal is to keep it, as actor Jack Nicholson has shown. In 1977, his Hollywood Hills home became embroiled in scandal when director Roman Polanski was accused of drugging and raping a 13-year-old girl there. Mr. Polanski eventually pleaded guilty to charges of having sex with a minor and later fled to France to escape imprisonment. The Mulholland Drive home quickly became a must-see site for gawkers and continues to be listed on dozens of star maps.
Mr. Nicholson, who has never put the home on the market and continues to live there, has gone on to acquire more properties with unique backstories: Last year, he bought the house next door, which for years was owned by Marlon Brando. It was there that Mr. Brando’s son, Christian, shot and killed his half-sister’s boyfriend in a dispute; he was convicted of voluntary manslaughter. “It’s hard to find a place on Mulholland that hasn’t been in the papers at some point,” says Beverly Hills real-estate broker Mark Wollman. “But Jack’s real-estate sense is pretty good. … With or without the scandal, that home is probably worth five times what he paid for it.”
And as researchers have found, time softens most stigmas. Case in point: the Boulder, Colo., home where 6-year-old JonBenet Ramsey was found strangled 10 years ago. Despite an avalanche of sometimes gory press accounts, the home has sold three times since 1996, appreciating 60% over the three transactions, public records show. That is nearly three times Boulder’s rate of appreciation in that period, according to Colorado real-estate data. The home’s current owners, Tim and Carol Milner, paid $1.05 million for the 6,866-square-foot Tudor-style property in 2004. The couple is relocating to California and recently put the home back on the market for $1.7 million.
“There’s no doubt that some people will be put off by the home’s history,” says Mrs. Milner. But it is easy enough to get over, she adds: “I really believe that, like we did, the people who ultimately buy this home will simply appreciate the property and not worry too much about all the headlines.”
Source: The Wall Street Journal Online (by Troy McMullen)