Sex, Murder and Real Estate: Notorious Homes a Hard Sell

Sept. 24, 2009 — -- The light-filled, Caribbean-style home that recently hit the market in Palm Beach, Fla., has everything wealthy buyers covet.

The waterfront, 10-room estate includes 22-foot-high beamed ceilings, terracotta tile floors and a ground floor surrounded by lushly landscaped atriums. Even Its $8.5 million price tag is, by Palm Beach standards, appealing.

Yet the home has another distinctive feature. It was owned by notorious Wall Street swindler Bernard Madoff. The disgraced financier and his wife, Ruth, turned it over to federal marshals along with two other properties to be sold in order to help compensate victims of Madoff's $65 billion Ponzi scheme..

"It's an excellent property," says James Reynolds, a veteran Florida real estate broker who is not connected to the property's sale. "But would you really want to live where Bernie lived?"

From the Brentwood, Calif., home where Nicole Brown Simpson was murdered to the Hamptons, N.Y., estate where Peter Cook, the husband of former supermodel Christie Brinkley, was found having an affair with a 19-year-old employee, homes tainted by gruesome murder, high-profile sex scandals or messy tabloid divorces are a tough sale, say property experts.

Real estate professionals call them stigmatized properties, and trying to unload them under the best of market conditions can be tricky. But with many areas still reeling from tanking sales, these homes pose an additional challenge to sellers as buyers have their choice of more properties.

"The home could be in great condition and priced really well," says Greenwich, Conn., broker Chris Fountain. "But there will always be people who just don't want to live there."

Fountain should know. Two years ago he tried to sell the red brick mansion rented by real-estate mogul Andrew Kissel in Greenwich. The property developer had been renting the home in the leafy Manhattan suburb for $15,000 per month when he was found bound, gagged and stabbed to death inside it in 2006.

Though it sat on 2.1 lush acres on a quiet, tree-lined road, the four-bedroom home languished on the market for more than a year at a price of $5.2 million.

The owner eventually had the home razed and replaced it with a stone-and-shingle mansion. The new home hit the market in September 2007 and still hasn't found a buyer -- despite a price cut from $10.7 million to $8.4 million.

There are different degrees of stigma, of course. Appraisers and brokers say murder is by far the toughest kind of notoriety to minimize, in particular multiple homicides and cult killings. Suicides and hauntings come next, followed by illicit sex and celebrity infidelities.

When celebrities aren't involved, sex scandals appear to have little impact.

A couple of examples from Los Angeles in the 1990s underscore how the taint of murder can exceed that of a sexual scandal. The Brentwood, Calif., home where Nicole Brown Simpson and Ron Goldman were murdered in 1994 hit the market the following year with a $795,000 price tag. 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 madam" 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.

Christie Brinkley and her ex-husband, Peter Cook, haven't been as lucky. After Cook's affair with a teenager made intense tabloid headlines for weeks, the couple removed from the market the $15 million house where the trysts allegedly took place.

The North Haven, N.Y., property has returned to the market several times since then with an asking price as high as $16 million. But it has yet to find a buyer.

"The real estate market out here a slowed a bit," says Hamptons real estate broker Neil Bersin. "But I suspect as things continue to pick up, a home like that will get sold despite all the fanfare."

But if similar scenarios are any guide, the values of the Cook-Brinkley home 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 Kennedy's death in December 1997 in 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.

The East Hampton estate of Ted Ammon shows the impact of a high-profile murder. Ammon, a well-known Wall Street financier, was found bludgeoned to death in the six-bedroom home in October 2001.

The murder occurred days before he was to divorce his wife, Generosa.

The case attracted coverage in the New York media through 2004, when Daniel Pelosi, Generosa 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 Generosa Ammon died of cancer in 2003. For the past few years, it has served as a summer rental for $250,000.

The property has not been offered for sale since Generosa Ammon's death, according to an attorney for the estate.

Time also softens most stigmas, say experts. The Boulder, Colo., home where 6-year-old JonBenet Ramsey was found strangled in 1996 received an avalanche of gory press. The home has sold three times since 1996, appreciating 60 percent over the three transactions, public records show. That is nearly three times Boulder's rate of appreciation in that period.

The same is the case with Gianni Versace's South Beach, Fla., mansion. The fashion designer was shot to death by serial killer Andrew Cunanan on the doorstep of the home in 1997.

Versace paid a combined $6.6 million for the property in 1992. It was bought three years after his death for $19 million and turned into a hotel and members-only club.

Stigmatized properties make up a small portion of the overall real estate market, but they have been the subject of research, embroiled in high profile lawsuits and posed a challenge for brokers.

Appraisal groups regularly include the subject in seminars, and the National Association of Realtors publishes a handbook on how to market and sell stigmatized homes and deal with buyer reluctance to own them.

Experts estimate that a highly stigmatizing event can cut as much as 15 percent to 25 percent from the price a home would otherwise fetch.

Yet real estate brokers say that the effect of scandal can also be mitigated by a strong real-estate market. Sales data show that homes located in desirable areas tend to sell well.

Despite an explosive financial scandal, the Montauk, N.Y., estate owned by Madoff sold recently for more than its $8.75 million asking price.

"If it's a solid property in a good area it will eventually sell," added Fountain, the Greenwich, Conn., real estate broker.