Home-Buying Lessons From Owners of Mega-Mansions
But existing and would-be property owners from all economic backgrounds can nonetheless learn some important lessons from these luxury homes and their owners, all of whom have a story to tell:
Lesson #1: Bigger Doesn't Mean Better
One common theme among owners of gargantuan, high-end homes is this: They've come to realize that they simply do not want or need enormous-sized estates, particularly amid a tough economy. Thus, many individuals selling humongous properties are doing so in order to "downsize" and simplify their lives.
Case in point: Designer-developer Mohamed Hadid, who this month sold his 48,000-square-foot mansion in Bel Air, Calif. for more than $50 million. The exact sales price of the home, which resembles a French chateau, hasn't been disclosed. But Hadid did confirm to the Los Angeles Times that it went for between $50 million and the $72 million asking price – making it the priciest home sold in America thus far in 2010.
When asked why he was unloading the mammoth property, Hadid said he was "downsizing" his lifestyle.
He's not alone.
The National Association of Home Builders reports that homeowners everywhere are now opting to buy smaller homes. According to NAHB, the size of a new, single-family home sold in 2009 shrank by nearly 100 square feet to 2,438 square feet – a decline that reversed a 30-year trend toward bigger houses.
Like Hadid, homeowners nationwide seem to have a growing recognition that they can be perfectly happy in a more modest-size residence – as opposed to a very large one.
As Michael Rubin, a certified financial planner in Portsmouth, N.H., puts it: When it comes to your home, and your finances in general, "You don't have to be cheap; you just have to be fiscally responsible."
Lesson #2: Don't Buy or Keep a Home Based on Wishful Assumptions
Albemarle House, a 26,000-square-foot English country manor which belongs to Virginia socialite Patricia Kluge, lies on 300 acres. Originally listed last October for a hefty $100 million, the home's price was slashed this past spring to $48 million.
In putting the 45-room home on the market, Kluge said she too wanted to downsize, as well as travel more and focus on her winery business. Kluge now lives with her husband in a five-bedroom, six-bathroom Colonial built in 2008.
More telling, though, is that Kluge is also selling because she finally accepted the fact that her 26-year-old son, who lives and works in New York, would not be returning to Virginia to make his home at Albemarle House.
"I had to decide one of two things: One was to hold on and hope he changes his mind, making me in effect his caretaker, or live simpler and focus on growing our brands, nationally and internationally," Kluge told The Associated Press. "I opted for the second."
Most people will never buy a palatial mansion like Albemarle House. Indeed, only 1 percent of all U.S. homes cost $1 million or more.
Yet countless Americans still buy or hang onto larger, more expensive houses on the assumption that the kids or grandkids will one day move back home. In reality, as Kluge has learned, when children transition into adulthood, they typically want to move out of the house in order to gain their independence, build their careers or start their own families.
Lesson #3: Your Home Will Always Be a Work in Progress
Jaws dropped last week when timeshare mogul David Siegel put his 90,000-square-foot residence in Windermere, Fla., on the market. The sheer enormity of this monumental house, which Siegel nicknamed Versailles, led the Wall Street Journal to say that the home "raises the bar on excess."
Still, the most-discussed aspect of this new listing wasn't the gigantic property's 23 bathrooms, 13 bedrooms, 11 kitchens and three pools. Nor was it the children's wing -- highlighted by theater facilities, a video arcade, a two-lane bowling alley and a roller rink -- that set tongues wagging.
What was most shocking to many observers is that Siegel's mansion is still under construction (see photo above). Despite being sold "as is," the unfinished abode is priced at a staggering $75 million.
The asking price skyrockets to $100 million if a buyer wants the Siegel mansion to be finished.
Forget about price (if you can), and set aside (momentarily, at least) the obvious criticisms about whether Siegel or anyone "needs" or "should" construct a home of hotel-like proportions. And what's left?
This super-sized home certainly offers a reality check about when "enough is enough." Most important, it provides a much-needed reminder to everyone about a basic truth of homeownership: Like Siegel's mansion, all homes are a "work in progress" and require an enormous amount of time and energy – not to mention money – to maintain.
So if you're buying or building a home, you likely won't be constructing a 6,000-square-foot master suite like Siegel did. But don't be fooled. You'll be pouring plenty of cash and sweat equity into your property too -- for years on end.
Whether it's painting, replacing a roof, renovating a kitchen or bathroom, adding a new room, finishing a basement, bumping out or building up, or simply tending to a front lawn or backyard garden, there's a never-ending list of things to do to properly care for a home.
This truism applies to both older homes and brand new houses. It's also equally true for mega-mansions, even when their owners can afford to pay for help in maintaining these huge properties. Kluge, the 61-year-old owner of Albemarle House, has said that as she's gotten older, keep up with her sprawling luxury home has been "exhausting."
Lesson #4: Homeownership Doesn't Guarantee Profits or Riches
Greg Oberland, an executive vice president at Northwestern Mutual, notes that during the housing boom, many people used their homes as piggy banks and bet that home prices would continually escalate. "We had this period where people thought it was OK to buy a home beyond your means, fix it up even more, and then it would be a huge asset that would help you achieve your financial goals, like paying for your kids' college education or funding your retirement," Oberland said.
Those days are gone, thanks to falling home prices and tighter bank-lending practices.
In fact, many people who over-improved their homes – even owners of trophy properties – are losing money when they sell their houses, or never getting to fully enjoy their homes the way they'd planned. That's the case with real estate businessman C. Frederick Wehba Sr., who spent four years and $65 million building a Beverly Hills mansion – only to conclude he doesn't want to live there after all.
According to the Los Angeles Business Journal, Wehba and his wife decided to sell the 36,000-square-foot property, and never lived in it, "because such a prominent display of wealth no longer made sense during the protracted economic slump."
Even if Wehba gets his $68.5 million asking price, he will still probably lose money on the deal, after paying a Realtor's commission, transaction fees and holding costs. In the long run, though, he likely made a shrewd economic decision to extricate himself from home in which no expense was spared.
The L.A. Business Journal reported: "While many parts of the house are complete, some fixtures are still being installed, including a hand-carved marble fireplace in the library, an 11-foot by 9-foot crystal chandelier in the two-story circular foyer and 24-karat, gold-plated front door knobs that weigh 15 pounds apiece."
"We were never trying to flaunt, but it looks like it now," said Wehba, 63. "We were trying to have it as a house that is open for fund-raising for our church so that people can enjoy it. Maybe times will come back like that, but times are recessionary."
That's the reality -- and a lesson, too -- for the ultra-wealthy crowd and average wage earners alike.