So much for Miami's first $100 million sale.
The South Beach mansion, once owned by Italian fashion designer Gianni Versace, sold for $41.5 million to the mortgage holder, VM South Beach, by Fisher Auction.
The price marks a sharp fall for a house that got widespread media attention and listed last year for $125 million.
Although the listing price was later reduced to $75 million, many expected the house, called Casa Casuarina, to become the most expensive ever sold in Miami, far exceeding the record of $47 million.
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When the 19,000-square-foot estate on Ocean Drive was home to Versace, he entertained Madonna, Princess Diana and others at the house. He was shot and killed on the front steps in 1997.
The property has a mosaic-tiled pool lined in 24-karat gold, an elaborate courtyard, 10 bedrooms and 11 baths. It was marketed by the "Jills" — the Miami real-estate duo of Jill Eber and Jill Hertzberg—and was featured on NBC's TODAY show and other shows.
The current owner, telecom entrepreneur Peter Loftin, bought the property in 2000 for $19 million. He placed it in Chapter 11 bankruptcy this year after a financial dispute with VM South Beach. VM's principals include the Nakash and Gindi families, both of New York.
While some may see the sale as a sign that the white-hot Miami market is cooling, many luxury real estate brokers say Casa Casuarina had unique problems. It is in the middle of Ocean Drive, which is often mobbed with visitors, tourists and partygoers. Wealthy buyers looking for a family home in Miami would be continually assaulted by noise and crowds, brokers said.
"It's really not practical as a single-family residence," said Jorge Uribe, senior vice president of One Sotheby's International in Miami. "I don't know any clients who would want to live there even as a second or third house."
The property also has drawbacks as a business site. While it could be turned into a hotel, it has only 10 rooms—hardly enough to generate the revenue that would justify a big acquisition price.
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Many have also talked about making it a members club, such as the nearby Casa Tua or Soho House. But because Casa Casuarina is much smaller, it would have trouble accommodating enough members to be profitable, Uribe said.
"The real value would be if you could tear it down and build a tower," Uribe said. "But I don't think that would be allowed under preservation."
—By CNBC's Robert Frank. Follow him on Twitter @robtfrank.