It totally depends on the location.

You don't mention location. Is this Philadelphia? What about grounds? Mews? Garden? What size?

When I was looking, I was offered a little house in a top area that had that kind of bad Home Depot "update" in a charming '40's house that would have to be ripped out--including a style scrambled facade. It was in the flats on a nice street, but sidelong to an alley with commercial on the other side. Great yard. Way overpriced for the neighborhood, though perhaps appealing to the schools at any price people. A toehold. And, again, overpriced for something that needed a good portion of the price over again to fix the bad updates.

The historical draperies aren't worth much. Perhaps the original furniture is--but more than $100K? I doubt it. If so, rather than being "included" they'd be offered separately with appraisals. So...where's the other $2M greater than "true mansions"?

What does historical details buy you where you are? Here, comps are comps. You're paying for location, size, lot size, location, location, amenities, location, schools, location, parking and streets/traffic/access, location and location. A similarly sized house, on a similar street, in the same neighborhood, is going to bring a similar amount of money. And greater house size doesn't make that much more money. There is a premium for turnkey, which generally implies professionally designed according to the current trends, and very neutral. Otherwise, the details, etc., might bring an extra 10%. Not 50%.

Is the lot worth more as R3? Perhaps it's being sold as a tear down?

Sellers can slap whatever number they want on a place. That doesn't mean someone will pay it. People who want to live a $5M grand lifestyle want a prime location. What's the point of a ballroom if your guests have to take a bus and walk past the office building to get there because they can't park with all those apartments on the street? Unless the office building has a large, underground lot they're willing to rent to your valet service? Can you get a long term contract from them so that they don't decide it's an insurance nightmare right after you close on the place?

That sounds like the kind of place that's fun to find to be in the thick of things and live in shabby grandeur, but it only works if there's a significantly lower price than a similar place situated on Millionaire's Row would cost. In other words, if a true mansion is $2.5M, I might be tempted by this tarnished jewel if it were $1.5M.

Buying a place that is so much more expensive than anything else in the area is usually a bad investment.

What, is there something wrong with 12x12 granite tile and 6 panel doors? Those are upgrades for the majority of the population. I agree that it depends entirely on location; those things wouldn't be out of place in the $1+ million houses in my neighborhood but I have no idea for houses 5x as expensive. My own house is worth less than 1/10 that amount and we have no 12x12 tile, but that's because I didn't feel that it fit the style of the house, not because I thought it was a poor finish. (I know, I know, apples and oranges.)

If I had 4.9M to spend, I'd buy land, not a honking big house; but again, I think the question of whether buyers would be willing to spend that much and still have to change things is all about location.

4.9 million is not just a home, it is an investment. I would compare it to a .9 million dollar house, and investing 4 million at 5%. I would want a pool and a stable with pasture and views for that price. How much land? How far to the city (groceries, airport)? I wouldn't balk so much at replacing a few doors with something to my taste, but the remodel budget becomes part of the price negotiations.

Sounds overpriced, as if somebody thinks their taste is worth money to a buyer. I wouldn't hesitate to spend a few thousand on something I like (I might buy a red fridge!). But not extra millions. If you are smart enough to earn that kind of money, you are smart enough to keep it.

At any price, especially if it's a large home, there will be rooms that need an update. People rarely do a whole house at once so something, somewhere is usually outdated.

Plus frankly a nice high end kitchen even in an urban area can be done for 200k. Maybe 300 at worst. If you do the math, that's a small fraction of the value. What I always wonder about is fabulous pricey kitchens in parts of the country where houses just don't go for 5mn...

This house is about 7x the average list price of houses in the general part of the zip code and over twice the price the typical true mansion in the neighborhood...for reference.

i don't understand this. does anything you listed make this property worth 7x the average house in the zip code or twice the typical mansion in the neighborhood? even after 200k of upgrades?

someone would have to REALLY like the location or the house to buy it, i would think. sounds crazy to (poor) me, lol!

OK I'll bite with a different perspective.

We purchased our home a year ago. It sold at 6 times the average price of homes in the general part of the zip code and maybe nearly twice (about 40% or so) over the price of other mansions in the neighborhood. We purchased it with furnishings included and historic draperies (the draperies are worth several thousand dollars by the way...per set. Antique textiles can be worth astonishing amounts of money).

Every bathroom is done in lyno with inexpensive fixtures for the most part. The kitchen is on the back porch. The laundry is in the cellar (ok it was...I moved that pronto) and the house needs ummm maybe a million in improvements to bring it back to it's glory. We have minton tile fireplaces, amazing brasses and the historical wood is stunning...

You say this home is historical I think? It has superior historical features (it's not a remodeled or custom build I take it?). Even if many of the features are missing (those doors etc) that's not really a big deal in the scope of restoring the place if it's in otherwise good condition. 200k? I think that's a low ball if they're going to put in a new kitchen appropriate to the house, but still, so it's 500k or more, that's not a big deal if the purchaser is looking for a unique HISTORIC property with many of the important remaining features in place. Is that what this house is???? Is it really comparible to the 2M mansions you are comparing it to (ie are they of a similar historic fabric?)

If I have the home pegged, let's compare it to this situation...the other homes we considered were listed at less and more but close to the price of our home. They have been for sale for five years (the one a couple hundred thousand lower) and eight years (the one a hundred thousand above at the time we purchased).

So why did we buy this one despite the need to put more money into it? Because it had a unique historical profile and it's condition was superior to the others, though in many ways comparible, and of course location, but while we have a better location, those other homes are only a couple of blocks away in the same neighborhood without detrimental issues near them.

Someone who wants that house (if it's special) will purchase it and not bat an eye if there are comps for it. Or they'll pay cash (often necessary in cases like that but often normal to see in that price range). And they'll fix the features in the next few years if not immediately as we will do. It's the sum of the whole they're purchasing, not the current situation when it comes to historical homes.

As to the 12x12 tiles...I don't think Pal was saying that was a bad thing if in fact I'm understanding it's a historic home...they're inappropriate to the home, not "bad or evil" on their own, but not approriate given the particular application (much like my bathrooms). Thats little stuff when the fireplaces remain to most old home lovers (and they come in all income categories).

Is there a listing you can share with us Pal? I'd love to actually see the house :)

It's funny that people say they'd buy land, or that buying at 7 x the average price, yada yada or not buying land with a pool etc is crazy :) Obviously people want different things in life. If someone wants a historic home they want history, not land and new construction. If someone wants the city, they don't want a large property. If they don't swim perhaps they don't want to clean the pool?

We don't have the whole story without knowing the house and the neighborhood frankly, so I guess this crazy person would have to say...ya I'd obviously do it and expect about what you are describing to be something that wouldn't matter much to me.

For five million bucks, I'd expect oceanfront. The rest is just details.

I had added a lengthy post about location on a browser that tends to crash when you post and sometimes posts it first.

Location: Not quite Society Hill but close. Big yard for the city but basically a side garden the size of the house. Offices in historical bldgs on one side, a couple houses worth 1/4 the value (more typical for n'hood) to the east, then some $500K ish town houses. Other side of street is commercial for three blocks although directly across is an administrative building in a park like setting.

There is nothing wrong with 12x12 marble tiles, or six panel doors in particular, but for almost $5M there should have been marble or granite slabs or historical tile.
And, the doors should've been doors that at least acknowleged the historical doors which are mostly 4 panel. They wouldnt need to be direct replicas (which would probably cost $1000 each in paint grade) ...but for $5M thats what I would expect. I did $900 each custom four panel doors in my smallish condo because it was "correct" but I would never get a buyer that would pay for that directly. In a $5M house, perhaps you would.

I forgot to add that this house underwent an extensive 2-3 year remodel and restoration of interior plasterwork and frescoes, brownstone restoration and dozens of historically appropriate windows. This is above and beyond what is usually done. I am not sure if it was done by someone who intended to live in it or on spec but it went on the market right when the market tanked (relatively, here).

It has been unlived in since restoration so it should not need "updates". What makes it 7X the average list price. Well because this isn't the burbs, there is a huge mix of values and this house is in the same place as houses 1/10th the size that sell for maybe $300K or less...real mix of values.

With the added info, same answer as above, though perhaps given a garden that balances the size of the house, I might go as high as the other mansions, given the parklike and historical buildings that the commercial bits are. I think in the East you have more tolerance for the mixed neighborhoods, yes?

BTW, the reason I said the historical draperies weren't worth much is that textiles degrade in windows. And by "not worth much" I'm willing to agree with Igloochic about the "thousands". It's the tens and hundreds of thousands that I don't believe the furnishings are worth without an appraisal being tendered. Which leaves one with the house itself.

It sounds like they're trying to get out of it what they put into it. A more interesting number will be what they actually sell it for.

There isn't really a right or wrong answer to this question. There is another house that I will pose the same questions another day: more expensive, completely different type of house and completely different neighborhood.

I think the drapery are reproductions of the historic draperies and I would say that $10Ks would be about right for the draperies at multiple openings so the textiles could approach $100K? I am not sure there is much in the way of furniture like I thought. The Last time it was for sale it was pictured with furniture. Taken out, I would imagine some of the individual mantelpieces would go in the upper five figures to the right collector. My house originally had caryatid mantles in the main parlors that were taken by the developer and replaced with other period mantles from other parts of the complex. Unique mantles can be big business.

BTW this house last sold in 2005 prerenovation for $1.6M

Knowing what my piddling little plaster ceiling and cornice restoration cost in One Room, I can imagine buckets of money went into this property.

Igloo if you would like the link to the house send me an email: I have posted pictures of houses I have taken or houses I have offered on but I don't want to publicly list the address of a house I am critiquing and have no possibility of buying...

Oh! New old fabric could be worth a lot! Just not the kind that shreds when you try to dust it. :)

The salvage worth of any of the building materials, including the mantles wouldn't increase the selling price here, except in the case where it makes an emotional response from a particular buyer.

That $1.6M sounds about right. With livable reno, bringing it up to the $2.5M that the mansions are going for. At least around here you don't get your reno money back out, you just get an easier sale, no matter how beautiful the restoration is.

For 4.9 million I'd expect it to come with a full staff, one of which would be required to smack me upside the head every morning for spending 4.9 million on a house.

Society Hill? Wow, memories. My first apt was 10th and Pine in Philly.

Coffee....the great homes...the very fabric of our countries history would be lost if someone didn't spend 5 m or more on "a house". If they have the money...why would the price be an issue? I'd rather see this one purchased than a new one be built for the same money or less.

igloochic, personally I don't care if I won the lottery seven times over, I could think of a lot better things to do with my money than to drop 5 million on one property, ESPECIALLY if there are things that still need to be fixed so I actually love it.

I mean really, 5mil and you are talking about renovating the kitchen? That's just crazy to me.

Just because you CAN doesn't always mean you SHOULD.

If you really need to drop that much on a house then I would highly suggest finding something so awesome that it takes your breath away and won't leave you second guessing yourself.

(not you personally, igloochic, just using a general "you" for most of this)

Wow. All I can say is that people who want big, historic houses should come to Montana.

In another neighborhood (right on Rittenhouse Square) for *$5.9M* a similar, (but more historically significant) property is offered that needs a Complete rehab. It has not been lived in for 20 odd years and is somewhat deteriorated.

Across the square raw condo space is offered at $2M, and the expectation is that you would spend that in addition. Some were offered finished for about $4M. And with this one, there will be monthly condo fees.

These are in what is considered a premier location, and these are both reduced prices.

So, the big house for $4.9 may not be such a bad deal for the right person if you don't mind a more mixed location.

That's insane. A friend of mine went to grad school at U Penn decades ago, and her dad purchased one of those lofty condos in Rittenhouse for the duration. I think she sold it later. Too bad, it turned out to be worth more than her education!

There is no reason a large house is inherently "worth" $5 mil. It produces no revenue and is a consumption expense rather than an investment. We are now talking about the tiny, tiny fraction of the American populace that owns most of the wealth and income, which if you're in your 40s or 50s, is hard to get your head around because it's such a different situation from when we were kids in a largely middle class nation. At that level, people have vastly more money than they can possibly spend--that's what drives these insane prices.

For sellers, though, that means they really need to grab the brass ring--find that one-in-six-million individual willing and able to buy. If you strike out in the top tier of buyer, the next tier down is significantly less wealthy, so you're not looking at just a 5% or 10% price cut to get them.

The upgrades cost exactly the same whether they go in a $100M house or a $4,900M house. It's only the percentage of the total price that varies. An extra $25M in finishes is a catastrophe to a $100M house, but a drop in the bucket to a mega-house. No matter what the location, I would not expect any home depot-grade finishes in a mega-house.
Casey

:) the "you" is ok coffee :) given I'm the only person who does not think it's nuts lol.

But really, when it comes to historic properties, even the uber uber rich might have to make some concessions and change out a door or redo a kitchen. And really, this isn't yet in the uber uber rich level. Homes in the ten to twenty mill range are there but five mill for a city home, it's not remotely uncommon. Often times these are people who have purchased well and seen significant rises in value. They trade up in quality to say a row house in Boston ot manhattan using earned equity. Likely the home they buy did take their breath away, despite needing a new kitchen :). I think buying the five mill home pal is talking about is a lot more sensible than this who bought ranch houses is California over the last few years for over a million. But then I don't want to live in California so that's just me.

Marco, single family homes are not valued on the income they produce unless they are being used for commercial purposes. Given your philosophy that a home isn't worth x because it does not produce y...pretty much 90 % of the housing stock is worth what? Nothing because they are just consumption verses having value due to their income producing values? Again while you might like to think that the 5 mill homes are in the hands of this evil few in the tiny percent at the top....I'd challenge that and say you need to look at real estate and see that five mill does not buy what it did in the 50s. It's not hard at all to find homes in the twenty million plus range throughout America.

Twenty years ago if you'd have told me that I would ever buy a home fir over a mill without a kitchen I'd probably have laughed myself out of a chair. I'd have laughed just as hard if you would have told me that anyone would pay that much for a ranch home in California. Our expartner just purchased one for two mill...right before the bubble popped....woops at the same time he was searching for anything in Cali we were searching the country, and while we weren't in the five million budget we were searching high enough that I initially expected to purchase a home needing nothing....that take your breath away home and I can tell you now that even in the three range there was not a house we looked at that didn't need a new kitchen due to either horribly bad design (no too kitchens in those homes) or it was just totally out of date.

It's all relative and when it comes to historic properties it gets down to what the future owner wants in an old house. Why is a frank Lloyd wright home more expensive than another home in similar style and age? Because it has special historic value to this who want his work and there are only a limited number around.

The house on Rittenhouse is a good example of not finding the right buyer. I know the last buyer of this place, and he bought it in cash, and planned what I am assuming was a several million dollar overhaul until he got into a situation with neighbors and the historic commission and said basically screw it, and let the house sit idle for years. There was actually articles about it in the paper. So he had $X million available to do nothing for him as an investment as he stewed over what to do. He is trying to sell it now but not because he needs the money back.

So yes, an extremely limited market for these houses, and usually someone who has the money to buy it or not. renovate it or not, sell it or not. A seller of RR, Bentley, Maybach et al. told me when I asked about how people financed cars that cost as much as a house, told me "They don't, they usually write a check." Its a different type of person altogether.

The market in Philadelphia was so cheap and so depressed for years. (Two for one condos on the Square, anyone? --happened in the 80s) So now, when real estate has tanked mostly everywhere it has slowed down but not stopped here, because it's still getting caught up in a historical sense.

Ok, here are a few places that I would expect to pay $4.9 million for:

6-acre getaway in Hawaii with ocean views, 5300+ sq ft of living space and a GORGEOUS kitchen:
http://www.sothebysrealty.com/en/PropertyDetails.aspx?R=104206358&N=12+149+4294944495+4294943921+4294944445+4294944441+4294945214+4294942406+4294967260&curr=USD&Nrs=collection()%2frecord%5bP_USDPrice+%3e%3d+1750000+and+P_USDPrice+%3c%3d+5000000%5d&No=0&PSeq=0

Exquisite villa on 9 acres in TUSCANY!!!... with panoramic views of the Arno Valley and 5000 sq ft of living space:
http://www.sothebysrealty.com/en/PropertyDetails.aspx?R=4100015644&N=12+149+4294945214+4294944495+4294942406+4294943921+4294944445+4294944441+4294967260&curr=USD&Nrs=collection()%2frecord%5bP_USDPrice+%3e%3d+2250000+and+P_USDPrice+%3c%3d+5000000%5d&No=9&PSeq=8

5BR/4ba villa in Provence with astonishing views of the Mediterranean, a terrace with swimming pool and a neat kitchen with vintage-style appliances:
http://www.sothebysrealty.com/en/PropertyDetails.aspx?R=4100016459&N=12+149+4294945214+4294944495+4294942406+4294943921+4294944445+4294944441+4294967260&curr=USD&Nrs=collection()%2frecord%5bP_USDPrice+%3e%3d+2250000+and+P_USDPrice+%3c%3d+5000000%5d&No=28&PSeq=24

Stunning 5500 sq ft villa in Umbria, thirty minutes from Rome:
http://www.sothebysrealty.com/en/PropertyDetails.aspx?R=4100013219&N=12+149+4294945214+4294944495+4294942406+4294943921+4294944445+4294944441+4294967260&curr=USD&Nrs=collection()%2frecord%5bP_USDPrice+%3e%3d+2250000+and+P_USDPrice+%3c%3d+5000000%5d&No=53&PSeq=48

On the lower end of the scale (but this is what you pay for location), there's this 2300 sq ft house in Paris in the heart of Montmartre--words cannot express how rare it is to find a house with a private garden and a two-car garage in central Paris, and the kitchen is about 260 sq ft:
http://www.sothebysrealty.com/en/PropertyDetails.aspx?R=4100018789&N=12+149+4294945214+4294944495+4294942406+4294943921+4294944445+4294944441+4294967260&curr=USD&Nrs=collection()%2frecord%5bP_USDPrice+%3e%3d+2250000+and+P_USDPrice+%3c%3d+5000000%5d&No=26&PSeq=24

It varies so much. The most expensive home on the market here is 750k. It is a lakefront property, and its very nice, but nothing amazing. There is only one home that I am aware of that is worth a million .. maybe a little more, but who knows, it was built in the early 90's and has never been for sale. It is definitely a mansion, hidden inside a large wooded lot, indoor pool...

I think that if people simply refused to pay such high prices for ANY property, the market would change and the prices would come down. But that will never happen.

It would be too simple a fix.

Because people will pay it, that's what it costs to "preserve history" or have a tiny ranch in CA. If even the people who have the money to spend said "wait a minute, this is crazy, I'm not opening my checkbook just yet" we would all see a very big change in how these homes are priced.

It's not the house itself that merits the value, it's the person willing to pay for it that justifies the price.

Thought I'd post the listing.
I used to live around the corner in a 3b/2.5ba townhouse now worth about $500K.

814 Pine Street

coffeaddict, it is happening right now. Prices are headed downward, again.

I think what struck me about palimpsest's example is the huge disparity between this house and similar comps. There is a whole tier of folks in this country who are no longer remotely rational with their money, because they don't have to be. Personally, I prefer them to spend their cash on $6K shower curtains, because when they spend it on real estate or securities, they throw the entire economy out of whack!

Wozer, Momqs. That's quite a pad!

It happens with very elastic things all the time. Real Estate is a bit tougher.

In the 80s when Barbra Striesand, Steven Spielberg, Diane Keaton et al., were hot for Stickley, they would pay $100K for a rare sideboard because it wasn't a big deal for them, but it drove the prices of ALL of it up. Now that it doesn't have the same cache, some big names have sold off their collections and Stickley themselves reproduce the same pieces, values have fallen.

Compared to "more reasonable" real estate however, the fluctuations havent been so elastic, at least not around here> And urban houses May have more intrinsic value than a suburban development house, because in the burbs a newer sibling of the house may be a few minutes further down the road. Urban desirability may vary by the block. I had set a price when I started looking and in my target neighborhood found that it was simply impossible to find. I recently offered on a house that needed a full rehab but was full of potential. It was Not underpriced, and almost $100K over my (original, Unrealistic) target. There were four offers on it in a week, one for all cash, one for Over asking price, mine and another. Not in 2007, two weeks ago. Luckily, I don't Have to move right now and my target still well within my qualifying limit. Its pretty simple to say...just refuse to pay more than X...I could do that right now and live miles from here in a neighborhood that lacks infrastructure such as close grocery stores and public transportation, and perhaps even lacks a level of safety and security I desire. (and I am pretty adventurous when it comes to that).

LOL - the pics I linked to are of the $4.9M house, not mine! Mine was a 1450 sq foot townhouse built in the 70's.

In this location though comps don't actually make sense. Homes are so small that people will pay a lot for a little bit of extra space IF it's in the right location.

Attached to the listing are actually two 2b/2ba condos - one up and one down. They are worth about $500 a piece. Around the corner is my old townhouse - bigger than the condos and the same price. The condos have a better location.

I think in an urban environment location and sq feet make a huge difference. On the east coast you can add historical value to that list, but it is amazing to see the differential.

All anything is worth is what someone will spend on it. There aren't many places in California where a small ranch house will top a million dollars. There are a few where it will. Those are places where tons of people want to live, and few properties are available. So the seller holds out for the most she can get. And she can get $1.1M for a fixer that hasn't been touched in 25 years. Just like any of us would want the best deal we could get. Who among us is going to sell the house for $500K when someone is willing to give us $1M?

Palimpsest is right about when people who have silly money skew the market, but that's still because of supply and demand and what the market will bear. There have been severe housing shortages in parts of Europe for decades because of attempts to control the housing market and keep it "fair". Where developers feel they can't make a profit there is no development. Where there is no development, young people can't find places to move to, young families can't spread out, old folks can't downsize, because there's just nothing to be had for love or money. I'd rather have some people priced out of some neighborhoods but able to find a nice home nearby. It seems much more fair to me.

One thing I have learned about houses is, no matter what your budget, no house is perfect. If it's old, there is often something awkward about it somewhere (and I love older homes). If it's new, it is often lacking in neighborhood and/or character or developed landscaping. Sometimes if it has great views, but it lacks curb appeal because it is built into a hill. etc etc etc

PS it's too funny that this is block and half away from my very first apartment, a few cities and two houses back!

igloo, you are not alone. You have to love Historical property to really appreciate the work and money to restore.

When buying historic properties, the perception of value in the buyer's eyes can be the determining factor in a lot of cases - especially where there's no pesky little thing like lack of funding to deal with! Anybody (with the $) can build or buy a new mansion but a historic mansion in a major city carries a certain perception of class not necessarily attained with a new property. It depends on whom you're trying to impress - or your definition of success - or where you want to live. Other buyers of old properties put extremely high value on original details, or the age, or the streetscape, or the architect that the average buyer would never apperciate; it's almost a given that kitchens & baths will need to be updated, if only to suit the new owner's tastes.

And then there's the problem of comps - it's not like there's an identical one in the same block or even the same city. There may be a lot of similar ones scattered about but with a slew of variations that your average appraiser, realtor, or assessor will not account for or care about; a 'remodeled, builder grade gut job' may comp out the same as one with high quality original details if it's in the same block with the same sq. footage. When the house was built, it may have been as common in that block as townhouses built today, but demolition & alternation have left it as somewhat of a rarity & that adds to the price tag. Double the price of other area mansions seems high but the others might have 100 year old mechanical systems or need other extremely expensive repairs.

http://211vendomerd.com/ I expect that for 3.2M. 18,000 SQ feet, famous architect, great neighborhood, 10 bedrooms, historic importance as the original owners were from the Walker family (the whiskey company). Oh yeah, and an 8 car garage. Beautiful property too, tennis courts and a rose garden. YUM.

Haha, in my dreams right! Imagine the heating costs of that bad boy. Luckily not a lot needs to be done in terms of renovation, the owners have been very loving.

Seeing the property, 4.9 seems not so bad. It's amazing and the detail that remains, that's priceless to an old home lover.

coffee, that's called a market adjustment and it happens naturally in cycles. Which is why our partners ranch isn't worth multi millions anymore :) People quit buying. But you can't force that on people...that's not America :)

I"d just want a stretch of beach, a wrap around porch, an enormous kitchen with dual islands, and a daily cleaning service.