Bragman declined to name the buyer or the selling price. But he said it isn't real estate mogul Donald Trump, who recently offered to buy McMahon's home and act as a landlord.
"For Mr. Trump, this acquisition was not business-related, but, as he has stated, was meant to help out an American icon," said Michael Cohen, special counsel to Trump. "If another buyer should emerge who will create the benefit Mr. Trump sought for Ed McMahon, then he is clearly pleased."
Bragman said McMahon and his wife, Pamela, will move out of the home when the sale is complete.
The couple's property is located in a hilltop gated community that is also home to Britney Spears.
McMahon has faced money woes for months, with creditors filing lawsuits against him for everything from unpaid prescription medicines to loans.
His home was facing foreclosure after he defaulted on a $4.8 million loan.
McMahon has said he was experiencing financial troubles because he was unable to work after falling and breaking his neck in March 2007. The 85-year-old has for years worked as a pitchman and recently resumed that role, appearing with comedian Jimmy Kimmel to advertise Pontiac vehicles.
While McMahon's foray into California's lagging real estate market may be near an end, his legal battles are not.
He sued Cedars-Sinai Medical Center and two doctors in July, accusing them of discharging him with a broken neck after his fall in 2007. He also alleged the hospital botched two neck surgeries.
The hospital responded in court filings on Wednesday by asking a Los Angeles Superior Court judge to throw out many of McMahon's claims.
Attorneys for Cedars-Sinai wrote that McMahon's lawsuit failed to prove allegations of fraud, battery, elder abuse and emotional distress. They also want to prevent McMahon from seeking punitive damages.
A hearing on the lawsuit is scheduled for Sept. 18.
Other lawsuits are seeking more than $750,000 from McMahon for unpaid loans and fees attorneys say McMahon agreed to pay to handle his daughter's divorce in New York.
AP Entertainment Writer Josh Dickey contributed to this report.