Tuesday, 26 May 2020

Jeff Bezos Didn’t Use an Agent to Buy His $165 Million Estate. Here’s Eight Reasons Not to Be Like Jeff

Written by Jaymi Naciri Posted On Wednesday, 19 February 2020 05:00

Have you heard the big real estate news? Amazon CEO, Jeff Bezos, just plunked down a whopping $165 million for his new Beverly Hills pad— a record-breaking deal for L.A. County real estate that surpasses the $150 million or so that was paid for Bel Air’s Chartwell estate last year. Bezos bought the famed Jack Warner Estate, an historic Georgian-style main mansion that was previously owned by media mogul David Geffen; Geffen purchased the estate for $47.5 million back in 1990 (Soooo, tidy little profit there, Dave!).

The property is, admittedly, stunning. Geffen reportedly “auctioned off about $11 million worth of original furnishings, which he deemed too musty and museum-like,” after he purchased the property,” said The Los Angeles Times. “But he did keep an imported wood floor—"said to be the one upon which Napoleon proposed to Josephine—as well as the paneled walls supposedly carved by a Chippendale.”

Other impressive features, according to Architectural Digest, include “a George III–style cut-glass chandelier, early-19th-century French wallpaper in the dining room, and a sunroom featuring Gothic-style wood paneling. A screening room with floor-to-ceiling built-in bookshelves also features some secret tricks and levers—including projectors hidden behind a panel that is opened by moving a Buddha statue’s head, alongside a screen that can be raised with the help of a water pump. A Mexican-style bar adjacent to the screening room has a circa-1820 Mexican chandelier.”

But $165 million is…A LOT. Some real estate leaders have wondered aloud whether he overpaid. Others have mused that you can’t put a price on a veritable museum. But what stands out for us is that Bezos and Geffen made the deal without involving real estate agents on either side. Before you start thinking, “Well if it’s good enough for one of the world’s richest men, it’s good enough for me,” check out these xx reasons you should definitely use an agent on your next purchase.

Because you don’t have Bezos’ money

Part of what a good buyer’s agent does in advising clients is: Find you a home you love, but also one you can comfortably live in and afford. No one wants to be house poor. 

There’s no worry of that with Bezos, despite the exorbitant price tag. The $165 million is approximately one-eighth of one percent of his $130 billion net worth. A measly little $165 million isn’t going to break him. As The Verge pointed out, “If you make $60,000 a year, that’s like spending $75 on a house.”

Also, it’s not the only property he has purchased recently. “In addition to the Warner Estate, Bezos recently purchased a $90 million plot of undeveloped Los Angeles land, which he is considering “an investment,” a source told the Wall Street Journal. ‘And last summer, the Amazon chief made headlines when he purchased not one but three Manhattan apartments overlooking Madison Square Park for some $80 million.”

Bezos also reportedly owns several condos that overlook NYC’s Madison Square Park, a 30,000-acre estate in Medina, WA, a huge ranch in west Texas, and two additional properties in Washington, D.C.

But what happens if you buy too much house? When you don’t have billions of dollars as a safety net, you need to know you’re in good hands with a professional who has your best interest at heart.

Because you don’t have that $165 million in cash

There hasn’t been any word on whether Bezos intends to mortgage his new manse, but we doubt it. Not surprisingly, his past purchases have been rumored to be all-cash deals. 

But it reminds us of a story we love. After L.A.’s 924 Bel Air Road sold for $94 million in October 2019—a huge cut from the original $250 million list price—the anonymous buyer turned around and “took out a $58.2 million, 10-year loan from HSBC Bank USA, according to property records,” said The Business Times. That would make the monthly mortgage payment about $650,000!

Carry the nine, multiply that by x…and, yeah, the possible mortgage payment on a $165 million home makes our collective heads hurt.

All-cash deals are on the rise among luxury homes, which is hard to comprehend for us regular folks who are just doing the best we can to cobble together a minimum down payment. When your money is on the line, you want to do everything you can to protect yourself. A real estate agent acts as a fiduciary of sorts, with training and expertise that can help give you peace of mind, whether you’re spending $165,000 or $165 million. 

Because you don’t have a yacht

I mean, aren’t all real estate deals made on a $590 million superyacht? “Jeff Bezos and David Geffen hammered out the Amazon chief’s record-setting $165 million purchase of Geffen’s Beverly Hills estate while socializing on the former music mogul’s famous yacht, the Rising Sun,” said The Real Deal. 

Because you don’t want to do your own negotiating

Really, you don’t. Check out this article from Inc. that called Bezos’ and Amazon’s search for its new HQ2 a “master class” on negotiating. Or this Business Insider piece that discusses how “Bezos can be a demanding boss who taps into his competitive side to keep Amazon at the top of its game.”

Bezos’ competitiveness and business savvy are legendary. Not that we’re saying yours don’t compare…but, let’s be honest. Unless you’re a real estate agent or an attorney—or some other type of professional who gets paid to negotiate and/or argue for a living, it’s just best to leave this to the professionals. 

Because you don’t know what you don’t know

“You might be far out of your element when it comes to reviewing and understanding the multiple documents involved in a real estate deal, and you should have a thorough understanding of what you're getting into regardless of whether you're buying or selling,” said The Balance. “Purchase agreements alone can top 10 pages in 2019, not to mention federal, state, and local document requirements.” 

Home buyers may be tempted to purchase without using their own agent in certain circumstances, like if they happen into an open house and talk to the seller’s agent or if they are buying new construction. But there are important reasons to work with your own agent in either case. 

Yes, a seller’s agent might be able to work both sides of a deal, but having your own agent better ensures that you have someone in your corner whose priority is getting you the deal you want. 

Buyers are sometimes unaware that they can work with their own real estate agent when buying a new home. Each development has its own rules, but, in general, the agent must accompany you on your first visit to the community or they will forfeit any available commission. That commission may also be lower than what the agent is accustomed to; this will generally be advertised as a “broker co-op” or “broker participation,” with a percentage set by the builder or development. 

Working with a real estate agent on a new construction home may not yield you a better price; builders are typically reluctant to lower the prices. But, an agent will generally be more successful in negotiating builder concessions such as options, upgrades, and closing cost assistance.

Because that’s just too much house

Seriously, who needs 13,600 square feet on nine acres, with “expansive terraces and gardens, two guesthouses, nursery and three hothouses, tennis court, swimming pool, nine-hole golf course and motor court complete with its own service garage and gas pumps,” as Architectural Digest puts it. No one. No one NEEDS this. But, clearly, this purchase wasn’t about need.

A good real estate agent will surely show you what you ask for, but a really good one will also zone in on what you need to help you make the right purchase.

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