LOS ANGELES (Hollywood Reporter) - Homeowners looking to sell their properties have every right to be feeling a little grumpy these days -- or, given the circumstances, downright panicked. As a once-hot market continues to cool, homes are taking a lot longer to find buyers, which can put owners into a perilous financial state.
There are the exceptions, of course: Stephen Shapiro, co-owner of the luxury real estate firm Westside Estate Agency, says he saw sales for his company climb 70 percent in the fourth quarter of 2007, compared to the same period in 2006. Despite a recent DataQuick report that found Los Angeles County homes have decreased in appreciation by 12 percent this year, “The high-end business is stronger than ever,” insists Shapiro, one of the few voices of optimism in the current climate. “If a house is sitting on the market, the seller just isn’t motivated. If it doesn’t sell within a year, the problem is the price.”
But for those sellers who beg to disagree, there is a silver lining to be found, and it’s on the silver screen: By renting one’s home out for TV, movie and commercial shoots, as well as magazine editorials, owners can recoup thousands of dollars -- some tax-free.
This realization has caused location companies, which act as liaisons between the production companies and homeowners, to be flooded with calls from people eager to list their properties.
Most surprising, say the call recipients, is that a large percentage are coming from an upper echelon of sellers: multimillionaires with multimillion-dollar homes. In the past, for this group, the income of a movie or TV shoot might have been laughable.
“Literally no one -- and I mean no one -- would allow their homes to be used for locations when they went on the market because they expected a lot of activity and quick sales,” says former TV exec and Malibu Locations’ co-owner Marshall Coben. “Then, all of a sudden, we started getting calls from the realtors -- the same ones who would never return our calls.”
One of those calls was regarding an estimated 20,000-square-foot home in the coastal suburb of Pacific Palisades with city views.
“Mansions in Hollywood and the Hills are one thing,” says Coben, “but you don’t get mansions in the Palisades; and here is this home sitting on the market for around $20 million. Needless to say, these are not houses that would normally be in the business of filming, since a few thousand dollars here or $100,000 there, in income, is generally insignificant to the owner of a $20-million home,” he explains. “It really speaks to the desperation of the real estate market right now, that these homes are competing with each other for the few thousand dollars a film shoot can bring in.”
Another of Coben’s recent windfalls is a $17-million, steel-and-glass beach house in nearby Malibu that was booked for two weeks for the upcoming “Sex and the City: The Movie” (a house like this can earn up to $100,000 for a similar shoot).
“Never in a million years did I think we would get that house,” he says. “But houses are sitting on the market, especially the spectacular ones. And with people having put so much money into building them, they can’t afford to sell them at a loss.”
The owner of that Malibu home couldn’t have done better. By California law, if a homeowner rents his or her home for 14 days or less annually, the rental income is tax-free. An additional benefit, explains Westside Estate’s Shapiro, is that it enables a house to be turned into an income property.
“If you sell your home, you have to pay capital gains,” he says. “But if you convert it to an income property before you sell it, you can take the cash you made, put it into another income property and defer taxes.”
But with most people just looking to defray some of the mortgage and maintenance costs that accumulate from carrying a home longer than desired, how feasible is the idea of renting out the homes for locations?
“I definitely have some homes listed where the owners decided not to try to sell in this market, and use it as a film location instead,” says Cast Locations’ David Hatfield. “But it’s a misunderstanding to assume you’re going to fill up a home with back-to-back bookings. Plus, filming more than 14 days in one location can be a bad idea: The owner starts paying taxes and the neighbors start going crazy.”
In terms of accessing demand, homeowners should manage their expectations unless their property, like the “Sex and the City” steel- and-glass Malibu beach house, is unique.
“There’s a big difference between commercial and residential properties,” says Real to Reel Locations’ Hunter Davis, whose company books both. “If you have a vacant office floor with cubicles and the area is film-friendly, that’s a gold mine that will film all the time. But for an average, 3,000-square-foot home -- whatever that home may be -- at most it will probably film only once or twice a year.”
That said, “You never know,” says Davis, who urges clients to go ahead and take the chance. “You could get the home-run ball with a (TV) series.”
For those houses that do hit the home run, owners not only get extra income and bragging rights, but could increase their property values as well.
“Without a doubt, that happens,” says Madison Locations’ Sean Harrington. “Let’s say a popular show like ‘Grey’s Anatomy’ is filmed there, or take the house we represented that was in (2007’s) ‘Fracture’ and was bought after filming. The prestige appealed to the buyers, but so did the fact that they could come to list with us again and help their income. The (1991 and 1995) ‘Father of the Bride’ house in Pasadena has been filmed so much,” he continues, “you can almost bank on a residual income year after year. It’s fun, but it’s also lucrative. And realtors, if they’re smart, should really focus on that when they’re selling a house.”
Still, listing a house that’s on the market can have its downsides for both the owner and the listing location company. Cast Locations’ Hatfield requests at least a year-long commitment that the home will be available, before he takes the time and spends the money to photograph and market the home.