Did Jeff Bezos Make a Mistake When Buying His Home?

You may want to steer clear of this decision Bezos made when buying his home.

Jeff Bezos is best known for being the billionaire founder of Amazon. His business acumen is undeniable and impressive.

But when he purchased his home recently, it's very possible he made a financial mistake in doing so. And his potential error is one that most home buyers should avoid since their own finances could be far more affected by it than Bezos' would be.

This home buying decision may not have been the best one

In 2020, Bezos purchased a Beverly Hills estate for a total of $165 million. The property, called the Jack Warner Estate, was purchased from David Geffen, who is a media mogul and who had personally paid $47.5 million for the property in 1990.

At the time, the purchase was a record, as the largest previous sale in the Los Angeles area was valued at around $150 million for a property referred to as Chartwell Estate. There was speculation among real estate lenders that Bezos possibly paid too much for the home.

If he did, or if the deal wasn't actually a good one for him, it's likely because of the potential home buying error Bezos made: He did not use a real estate agent to represent him in the deal. Instead, he and Geffen negotiated privately to make the transaction happen.

Failing to use a real estate agent could be a big error

While Bezos is undoubtedly one of the best entrepreneurs of all time, the fact of the matter is, he's likely not as much of an expert in the local real estate market in Los Angeles as a top realtor who sells properties day-in-and-day-out would be.

Real estate agents spend their days looking at properties, assessing their value, and offering advice to their clients. They inherently know the market better than a typical buyer because that's what their career energy is focused on. They can develop a better understanding than the average buyer of what a property could be worth, as well as what to look for when entering into a real estate deal.

Agents might have been able to help Bezos more accurately determine the worth of the property, and they would have been able to negotiate the deal from the outside rather than as a person with a direct stake in the transaction -- and likely an emotional involvement in the sale. Bezos and Geffen reportedly negotiated the sale on Geffen's yacht, and the current and future owner hammering out the numbers while in a social setting is quite different from agents who are removed from the transaction haggling over numbers in a business setting.

Now, for Bezos, it may not matter much if he overpaid a bit for the property or if the deal doesn't end up being the best financial investment. But for most people, a home accounts for a huge portion of their net worth and is the largest purchase they make. And their mortgage debt is the largest they take on.

As a result, overpaying or entering into a transaction without professional advice simply isn't worth it. That's especially true since home sellers pay agents, so buyers can get the benefit of their expertise without incurring a direct cost. If you're buying a home, you may not want to follow Bezos' lead and may instead want to prioritize finding a real estate agent you can trust.