Sally Russell had something to prove.
As the 20th century became the 21st, she wanted to build a bigger, more beautiful house than any boys might dare. She would create a dazzling home on Bloomfield Hills acreage, a spec house to top them all. It would be so perfect the buyer wouldn't flinch at its extraordinary price: $14.75 million.
She built it. Nobody bought. And today, in the exclusive neighborhood where the 22,000-square-foot English country house sits on 3 1/3 manicured and terraced acres, the mansion is known as "the Sally Russell house," a dream turned to folly.
As auctioneers plan to sell the home to the highest bidder May 28, it might as well stand for the era that now lies, shattered, behind us -- a time of ever-rising home values, and spiraling expectations, when engineers became aspiring country squires and CEOs lived like potentates, and few imagined that what goes up might just as quickly plummet.
"It was never supposed to be my dream house," says Russell, 60, who wore shorts, work boots and diamond earrings in the home's hotel-sized kitchen.
"It was supposed to be adream house. ... I didn't have a crystal ball."
That's one of the few amenities the house doesn't have. ...
Article here, with photos. The article says the minimum auction bid is $2.5 million; the Russells originally planned to sell it for $15 million. How's that for housing price deflation? Meanwhile, they're paying property taxes and upkeep expenses for a multi-million dollar house they can't sell. The bigger problem for the Russells is this:
So many things had worked out for the Russells: They were wealthy, well-liked and cashed out. Chuck suffered medical scares -- two brain operations and one for the heart -- but survived. It was his idea, not hers, to showcase her talents with a spec house on steroids.
Sally Russell, cheerful, blond and blue-eyed, had been licensed as a builder since 1993. Eight years later, her children grown, she'd built one house, renovated many others and longed to prove herself.
After three years, the house was finished. Unfortunately, so was the real estate market.
Listed in 2004, the home's price gradually fell until it hit $7.69 million earlier this year before going on the auction block.
Never lived-in, it stands pristine, from the wine cellar to the top of its three-level turret.
Sally Russell has paid for her audacious plan. Reluctant to detail the financial fallout, she acknowledges her family's once-secure, affluent lifestyle is at risk. They've given up two private club memberships and placed their own home, also in Bloomfield Hills, on the market. "We'll buy a smaller house," if it sells, she says.
How much of their worth have they invested?
For a moment, she is still. "Everything," she says quietly. [emphasis added] ...
It sounds like they rode the market down, always keeping the mansion's asking price too high in what was a rapidly declining market. Thus, no takers. Now they find themselves having to put the house on the auction block, to salvage what they can from their investment.
Having invested much of their net worth ("everything") in an illiquid asset as a speculative investment, they now find themselves, each in their 60's, financially strapped, at least relative to their prior standard of living. A tough place to be, at a tough time. Of course, assuming that they financed the mansion out of their own money, i.e., without taking on debt, the Russells may not actually be poor, just poor relative to their previous financial position, and with a hard to sell major asset in a declining market.
We see similar mansion auctions in other markets. Here's a story from the Wall Street Journal, about couples in Florida and New York:
In today’s Wall Street Journal, I tell the story of Richard and Amanda Peacock, a multimillionaire couple in Vero Beach, Fla. The aptly named Peacocks enjoyed putting their success on display–with a 10,000 square-foot, oceanfront mansion, more than a half-dozen sports cars, an Italian speed boat, motorcycles and a second beach home a few miles away.
Their giant “trophy/game” room is filled with hundreds of antique road signs, gas pumps, pinball machines and stuffed animal heads, including an elephant, rhino and baboon.
But the Mr. Peacocks decided they had had enough of stuff. So they put the two homes, the cars and most of their personal possessions up for sale in a one-day auction.
The couple says the main reason for the sale was psychological. He recently had a cancer scare and they want a simpler life in a cabin in the Blue Mountains. Finances also played a role. They have millions of dollars in mortgage debt and his commercial-real estate business in Miami is facing more vacancies.
The sale is an example of the increasing number of so-called living estate sales–a kind of Richistan rummage sale in which everything must go.
Just this past weekend, Mark and Kathryn McLane of Waterville, N.Y., tried to sell their 52-room pile, called the Sanger Mansion, along with more than 400 items inside in a one-day sale.
“We want to downsize, and we’re moving to Florida,” said Kathryn McLane.
But just as with the Peacocks, the McLanes weren’t able to sell the house for the minimum price. So they are going to keep hanging on. ...
In this WSJ story about the Peacocks and their attempt to auction off their stuff, the high bid is $5.5 million for a house they had put $8 million into building and furnishing. They decide that's too low, and pull the house and most of the stuff off the block.
The couple now has a $2.2 million mortgage on their mansion, Mr. Peacock says, and a $1 million mortgage on a four-bedroom oceanfront home nearby that they used while building the mansion. Maintaining the house is also costly: $50,000 a year in taxes, $25,000 for insurance and more than $100,000 a year for indoor and outdoor maintenance. That's not to mention the upkeep on their other home.
Time will tell whether they should have taken the $5.5 million offer. The real estate market might go up from here, but it can always go down.
Mr. Peacock's auction marked a new moment in the fall of the latest Gilded Age. Fire-sale auctions of mansions, yachts, sports cars and other trappings of wealth have become increasingly common as the rich become less rich. But Mr. Peacock is in the vanguard in attempting to downsize in just one day. The event was less an auction than a lifestyle liquidation, a clearance sale on a decade's worth of conspicuous consumption.
He has plenty of company among the once-wealthy. Half of all millionaires have lost 30% or more of their fortunes during the financial crisis, according to a recent survey from Chicago-based Spectrem Group. Whether unable to pay their bills or loath to appear lavish at a time of national thrift, many millionaires and billionaires are unloading their baubles. In a twist on the estate sales of deceased celebrities, "living estate sales" have become increasingly popular.
Todd Good, president of Accelerated Marketing Group in California, recently auctioned off a 15,000-square-foot mansion in Walla Walla, Wash., along with a collection of more than 70 motorcycles, a large wine cellar, antiques and artwork. The house, which was listed for more than $13 million, sold for $3.5 million. ...
When the bubble bursts, those sitting at the top of the bubble fall far, fast.