Realtor Laura Duggan, who runs West Austin Properties in Texas, represents clients offering that magic combination of location, landscape and features: 10.5 acres overlooking Lake Austin, with 500 feet of waterfront, for $13.5 million—a high price, even for this desirable area. Yet Duggan thinks that despite a slowing national market, the sellers will have no difficulty getting this price because the estate is private and features a heliport and separate staff quarters. The neighbors, too, are unlikely to intrude. Michael Dell owns 1,500 acres on the other shore, and he’s not likely to develop it, Duggan says. “You’re always going to have privacy.”

“Anyone can go out and buy bricks and mortar. The number one thing is really your setting.”

Buyers should also assess the neighborhood. Desirable streets and coveted blocks of similar-size and maintained homes will enhance value. However, investors should avoid a relatively new urban phenomenon: the “McMansion” in aging neighborhoods. As interest rates plummeted in recent years, developers bought modest midcentury homes on big lots, replacing them with large, luxurious houses that were inconsistent with the architectural style of the neighborhood. When interest rates began to rise, construction slowed, leaving investors who had envisioned a neighborhood gentrification stranded in suburbia. Owners might pour money into renovating or even rebuilding a house, thinking it will be worth $5 million. But if it is in an $800,000 neighborhood, the sellers will not receive $5 million, says Barbara Candee, a director with Daniel Gale Sotheby’s International Realty on New York’s Long Island.

Sellers sometimes struggle to see their own homes as others will. This can pose a challenge when selling because most homeowners invest a great deal of emotional and financial resources into their properties. Candee recalls looking at Virginia Payson’s Land’s End in Sands Point, N.Y., five years ago and estimating its value at about $18 million. Payson rejected the price and listed it at auction for $50 million. When there were no bidders, however, Payson listed it with Daniel Gale and it fetched $17.5 million.

Gilt By Association
Homes often embody the reputations of their owners. The estates of admired people often become trophy homes when they hit the market. Others can just as easily suffer from negative associations. Charles Manson’s 1969 murders of Sharon Tate and her friends on Cielo Drive in Beverly Hills forever made the house where the crime took place a pariah. Alvin Weintraub bought it in the early 1990s and razed it in 1994 after he had trouble selling it. He then built a lavish, nine-bedroom Mediterranean estate. Weintraub first listed the property for $12.5 million, but it sat for three years with no takers. He reportedly lowered the price to $7.7 million, and the property sold for about $6 million.
 
Similarly, the 3,700-square-foot, four-bedroom condo in the Brentwood neighborhood of Los Angeles that was the scene of Nicole Brown Simpson’s and Ronald Goldman’s murders was difficult to sell. After the 1994 crime, the condo sat on the market for two years until selling for $590,000, about $200,000 below the then-asking price. The house number was changed and the condo remodeled, but its history continued to haunt it. In 2006, it was listed at approximately $1.7 million—roughly the same price as a smaller, two-bedroom condo in the vicinity.

Even land with a history of nonresidential use can run into difficulty. Investors should scrutinize a property’s environmental history and look into what businesses may have been nearby. Sometimes a careful site inspection will reveal potential problems. A few years ago, Duggan previewed a home built on land that was once part of a ranch. When she looked out a window, she spotted a small cemetery the sellers had failed to note on the disclosure forms. The graveyard proved a deal breaker. The buyer was not squeamish about living near a cemetery, but she did fret that her property would be bound by real-world deed restrictions, Duggan says.

But perhaps nothing makes an impression on a prospective buyer more than a seller’s choice of decor. While taste is subjective and never easily defined, homebuyers react strongly to both good and bad taste. After Brad Pitt and Jennifer Aniston’s divorce, their Beverly Hills home was listed for approximately $25 million in 2006. It required little pitching: The 11,000-square-foot estate already enjoyed distinction as a prominent property with an admired interior design by Waldo Fernandez. “There are certain individuals who are well-known in our community for having good taste,” Rey says.

And, of course, bad taste seems to have the opposite effect. In the fall of 2006, Duggan showed a client a 12,217-square-foot, medieval-style home built on the Barton Creek golf course in Austin. The prospective buyer admired the custom stonework, knights-in-armor standing in Gothic archways and elaborate wrought-iron torches, but declined to make an offer on the $9.75 million house. Duggan was not surprised. “There are only so many people who want to live in a medieval castle,” she says.

After the hibiscus-and-parrots wall­paper cost them $40,000, the former Naples homeowners are making more subtle decorative choices in their new residence in North Carolina, Jones says. “It’s come up every time they’ve made a decision about ‘what are we going to do.’ It’s amusing,” she says. “They’re not theme people, but there’s no question that their home in Florida had a Florida appeal, and their home in North Carolina will have a little more of a mountain lodge appeal. We’ve laughed about what they should do—and not do.”

High-End Homework

When investing in high-end real estate, experts advise individuals to take these steps:

• Gather sales data from the past 12 to 24 months for homes in your desired neighborhood.
• Research the neighborhood’s history; look for past environmental issues and learn any local lore about the desired property.
• Assess the quality of the property’s raw land; look for lots that are large for the area.
• Seek private, unique locations.

Illustration by Edwin Fotheringham.

Elizabeth Harris is a staff writer for Worth.

Additional Information
Best Practices: Real Estate: Landed Class: All Dressed Up