Wealthy people are decking out their homes with underground basketball courts and $500,000 panic rooms, but there's a hidden danger in the trend of customization

Indoor swimming poolTerry J Alcorn/Getty Images

  • The luxury real-estate market is hitting a point where homes are so over-customized that they're hard to sell.
  • High-end homes in luxury markets like Los Angeles, NYC and the Hamptons, and London are decked out with details like basketball-court basements, bedrooms converted into recording studios, extensive security systems, and $500,000 panic rooms.
  • These homes are being customized by both developers and homeowners.

From underground basketball courts to private recording studios, luxury homes are hitting a point where they're so over-customized that they're hard to sell.

Alec Traub, a Los Angeles-based real-estate agent with Redfin recently told Business Insider that the trend can be seen across wealthy LA neighborhoods including Beverly Hills, Hollywood Hills, and Bel-Air.

"Customization is price dependent: You see more as you go higher in price point," Traub said, noting that the "magic number" where homes start getting highly customized is around $5 million.

These homes are being customized by both developers and homeowners, Traub said.

Read more: Luxury real estate developers are building out elaborate basements for multimillion-dollar mansions, and they include spas, tennis courts, and even ballrooms

Developers, he said, will "add features they think people want or need, but they don't err on the side of caution."

As Business Insider's Hillary Hoffower previously reported, wealthy people are sparing no expense to keep their lives private and secure, whether that means removing their homes from the grid or hiring architects to conceal buildings. And yet, there is, Traub said, a level at which homes become overly privacy- and security-oriented in a buyer's eyes.

Wine cellar in custom homeGeorge Gutenberg/Getty Images

"I've seen examples where you walk into a house and every room has a camera," he said. "And not everyone wants that."

Similarly, wine cellars and home gyms, two details developers have been known to add to homes, appeal to a specific buyer, but not every buyer.

Read more: A property developer who's designed multimillion-dollar NYC penthouses says there are 2 major surprises in the luxury real-estate market right now

On top of that, homeowners add their own touches that cater to their personal, professional, and family-based needs.

"You'll see that entire rooms have been blown out to create recording studios," Traub said, "or a whole basement has been turned into a basketball court."

Traub also said that while customization has long been a trend in luxury real estate, it's become particularly prominent as the idea of live-work spaces has evolved. Rather than having separate spaces, the two functions merge into a single space.

Recording Studio in home Redfin customized homesA converted recording studio in a Studio City, California, home.Courtesy of Redfin

Evidence of over-customization hurting a home's chances on the market can be clearly seen in the likes of an $85 million NYC condo that comes with a $2 million construction credit in case the purchaser doesn't like certain layout details. Or the Bel-Air mega-mansion that comes with a 40-seat movie theater, a bowling alley, and a massive candy wall - and which, after two years on the market and a $100 million price cut, is still not selling.

Read more: Nobody wants to buy 'Versailles in Manhattan,' a $19.75 million Upper East Side townhouse that has been on and off the market for 15 years

While prominent in LA, the trend isn't localized to the West Coast - nor is it always visible to the plain eye. As Business Insider's Katie Warren previously reported, luxury real-estate developers are pouring money into basement-level layouts replete with spas, art galleries, and ballrooms in luxury markets like San Francisco, The Hamptons, and London. Similarly, some wealthy homeowners have paid up to $500,000 to install luxe panic rooms in their houses.

Ultimately, the problem with personalized touches in multimillion-dollar homes is that at higher price points, buyers tend to be selective and specific about what they want. As such, high personalized details don't help homes in resale: They actually hurt them.

Wealthy buyers, Traub said, "don't want to buy a fairly brand-new home and then put money into it to turn it into what they want. They'll just look at other homes that match their exact wants instead."

"The question isn't 'how much did this cost to build,'" Traub said. "Instead, it becomes 'how much would it cost to have this taken out?'"

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