Posted by Jonathan J. Miller -Monday, April 2, 2012, 11:35 AM
New York City has a slew of entertainment celebrities that buy and sell real estate. Like Wall Street and Silicon Alley, it’s a key segment of our market. Conventional wisdom (I know, I know) says that celebrities add additional value to a property sale.
Selling: Adding Value
When celebrities sell something, it is assumed that they receive a premium over what a regular Joe would receive. Bragging rights to a buyer somehow translates into more value. I’m not aware of any good studies on the topic (idea!).
Perhaps the same goes for when a celebrity buys a property like Justin Bieber’s situation – (hat tip to @NickTimiraos) they might overpay because they are not advised properly so when they go to sell it for less than what they paid for it a few years later, the “premium” works against them – but it’s because they initially overpaid rather than adding value to the property for gracing it with their presence.
I’ve personally seen more of the overpaying scenario than the adding value scenario.
George Washington (or A-Rod) slept here
…and the real estate agent marketing the property sings it loud and clear (hey, you gotta use what you’ve got). Or perhaps Lindsey Lohan lived here before she got her make-over., etc.
I’d even argue that in our celebrity, reality tv culture, there is even more of a stereotype applied today than a few decades ago since so many “celebrities” are celebrities for being celebrities without any discernible talents like Paris Hilton, The Khardashians, etc.
But I digress. Well I hate to burst anyone’s bubble here, but the celebrity premium is a myth or at the very minimum, there is no rule-of-thumb. It goes something like this:
Q: Have buyers paid more for a property that WAS previously owned by a celebrity?
A: Of course!
Q: Have buyers paid more for a property that WAS NOT previously owned by a celebrity?
A: Of course!
In housing markets that have a high concentration of celebrities like the bi-coastal entertainment meccas of New York City and Los Angeles, there is a lot of celebrity real estate activity and the minutia is scrutinized in the media. It sells newspapers because people like to read about it – I do.
Celebrities that buy and sell homes are an important part of the sales mix especially at the high end of the market. Throw in the fact that housing prices are generally higher in these entertainment meccas than I’m markets that surround them and voila! a correlation is made: Celebrities add a premium to a real estate property? The same logic probably applies to other markets.
I’m not saying the celebrity factor is not helpful – it’s a marketing angle and may attract more eyeballs to a listing and perhaps help it sell the property faster. However I’ve never seen it in the context as some sort of obvious premium to tack on to a property.
In fact, quite often the celebrity real estate scenario goes something like this:
- Over price the listing because it is a celebrity (on advice from an advisor or manager).
- Languishes on market.
- Drop the price.
- The property sells.
- Gets extra media coverage and readers don’t know the local market.
- Assume it sold for a premium which reinforces the stereotype.