Possible he bought it thinking he could subdivide; but builders that I know usually check.

Around here, builders usually have a wife in the business, or if they don't, some sort of deal. A realtor that I used to hang out with, used to call them as soon as she had a listing, so they'd get 1st pick.

Sounds to me that he thinks he got a bargain at $800k and $1.2M and wants to immediately realize a hefty profit with little to no work.

I mean, if he can get his asking price, he would make $350k on the smaller and $800k on the larger house. Minus commissions and the small updates that he paid for, that's one hell of a profit in a few months for doing almost nothing. For comparison: If you make $100k/year it takes you TEN years to earn what he thinks he can make on this sale. Ka-Ching. Jackpot!!

It sounds like he ordered the 'flip it and make millions' tapes from a late night infomercial.

I think if you are interested in either house, you have to forget about what he paid. Just ask yourself, if this a great deal for me?
I know people in FL who buy houses, do nothing except clean out the trash and then sell them to flippers or investors. Both parties get a good deal. Neither makes a huge killing, but all are happy because they are getting deal they might not otherwise get.

"I think if you are interested in either house, you have to forget about what he paid. Just ask yourself, if this a great deal for me?"

If you do that we all pay the consequences.

This practice of flipping has really taken its toll on places like florida where people cannot afford to have a decent place because of all the greed.

If the owner didn't do squat to the house but let it sit there and collect dust, it's not worth a penny more in my opinion than the last sale price.

I don't understand what the builder paid for the houses has to do with their value today? The builder paid what they were worth to him at a particular moment in time. A future buyer should do the same thing. Forget what he paid for them. What are the houses worth to you at this moment in time? That's your offer. Real estate does not come with an entitlement to sell at more than you paid. Or, even to sell at what you paid. It's an open market commodity. So, look at recent sales comps (not listings) in your area for the past 3 months & go from there.

Tricia

I would offer $850k on the smaller house if you can afford that.

A friend of mine owns a small house on a large lot in NJ. He is trying to work with the adjoining neighbor (whose lot is also large and odd shaped) to tear down both houses and put in 6-7 houses. They will make a mint. They are waiting out the market since they don't need to do it now.

Since the two houses are next to each other, my bet is that the builder planned to tear them down and build more 4, as you were thinking. However, with the down market he probably realized his effective price for land was too high (once you factor in the cost to tear down and dispose). Or he is having some financial problems and wants to unload some properties that are easy to sell.

I agree, ignore what he paid, find todays' market value, offer that.

quirkyquercus - I don't understand how we all pay the price for that concept. Also, nothing wrong (or immoral) about flipping, it is just a person finding a niche in the market and using it to their advantage. Doesn't look like this developer was planning a flip, probably wanted to redevelop the lots, but changed his mind. Again, nothing wrong with that, we live in a free market. He buys the property, he can do what he wants with it.

It could be the builder bought or took them in trade as partial payment for the previous owners buying one of his new houses. We did that back in the 80's, we weren't scammed by him lowballing and it made the move so much easier with no house to sell or "fix up"

Rose, interesting theory on the first pick thing, may be right

PK, I doubt he did that but I learned something from your post, never knew that was done.

As for ignoring what he paid
I just find it odd that he paid so little (am curious as to how he managed that) for both (one I could see but not both) and at the same time, the location is a little less than ideal so I find it odd that he is asking so much for these houses in a buyers market

As for comps, they are all over the place. First there is not that much that has sold. A lot was either taken off or is still sitting. However, one house that I looked at but was out of my range realtor had key adn obviously nothing better to do! sold in November for way more than I predicted. It is worth between the Two and sold closer to 1.2 (I predicted 1.1 and the agent had agreed with me), however other things have sold at a discount

I have no problem with flippers but I do not think he did anything to the property that is significant and the market has declined substantially since last March which is probably when he arranged to buy. Meanwhile they have been sitting for nearly a year

"quirkyquercus - I don't understand how we all pay the price for that concept. Also, nothing wrong (or immoral) about flipping, it is just a person finding a niche in the market and using it to their advantage."

I'll be happy to explain why I feel this way. Please understand that while I don't fault flippers/investers per se, it is negatively impacting many hardworking folks and here's why.
You buy a house for $150 and sell it a month later for $160. Wow that was neat! Can't wait to do it again. And so does everyone else and their bro. So, the market heats up with investers and flippers like it did in florida, especially with the miami condos (But that's a disaster for another topic) and what you wind up with are houses that are severely inflated and *worth* significantly less than what was paid for them. Worth is not a good word to use in this case because of course in real estate, the house is worth whatever the market will pay. But I can't think of another word to use in its place at the moment.

A $150 house can become a $300 house very quickly as we've all found out in recent years what can happen especially with the market in florida when a hurricane wipes out the inventory. But it is still a $150 house with a $300 price tag. 10 people made a profit flipping that house in say 5 years time, but not a single one has done a single thing to really add value to it other than pay the tax bill and wait for pages on the calendar to be torn off.

Wages/Salaries in these sun belt cities are not climbing as fast as the housing costs are increasing. So the middle and working class are having a hard time affording decent housing because of greed. And not only that, they are having a hard time finding housing (or were) because for a while a great deal of new construction was being snatched up by investors. I've said that before and I'm repeating it now and I hope you see why. I've been on both sides of this. I have been a greedy seller trying to take advantage of a hot market and I have been frustrated by the results of others doing the same.

The only thing people can do to combat this is to say this really is a $150 house and I'm not going to pay $300 for it.
I can't think of too many things in life where people spend so much money yet have practically zero regard for VALUE.

So on you go.. back to the topic.
(I can't really comment on this posters issue since I can't imagine the complexities surrounding shopping for a million dollar home other than to say it probably wasn't long ago that it was a $400 home)

The smaller one was probably worth about 500 5 years ago

"The only thing people can do to combat this is to say this really is a $150 house and I'm not going to pay $300 for it.
I can't think of too many things in life where people spend so much money yet have practically zero regard for VALUE"

The problem is that while most people in a buyers market will not pay 300 for the house, it will not go back down to 150 any time soon because there will be a point where someone views it as a bargain and snatches it up before it goes down to 150, whether to resell or to live in

"The only thing people can do to combat this is to say this really is a $150 house and I'm not going to pay $300 for it."
But if you want to look at it that way, is it really a $150,000 house.... because I know places in Vermont where you can buy the same thing for $100,000. I think as others have said, it's worth what the market will say it's worth at a given time. And thank God it's only $300. I know some places where it would be $600.
I'm not a flipper,but I've owned a bunch of investment property...and in Florida too. I just get a kick out of watching people get caught up in the frenzy and then the reaction when the market dies. I know some people recently that had been flipping new condos in Florida. Well, the last one was right at the end of the boom. They had $200,000 of their own money down on this condo and had to either walk away without their money or close on this place for 1.4M (borrowed money). They closed and managed to sell and only lose $50,000. End of the flipping career:-)

Flipping can be good and bad. Where I live, we have a military base very close, so people come and go. If for some reason they can't sell it, they leave any way, the house gets boarded up. They can sit like that for years. There have been houses here that would be total eye-sores if it wasn't for flippers. The prices weren't that bad after they got done with them, for the most part.

The problem is that while most people in a buyers market will not pay 300 for the house, it will not go back down to 150 any time soon because there will be a point where someone views it as a bargain and snatches it up before it goes down to 150, whether to resell or to live in

Right, which is also what does happen down here. I'm about 1 1/2 hours from NYC. Prices in North Jersey are high. People can come down here and get something a lot cheaper as long as they don't mind commuting. The problem is, they are the ones driving the prices up. They have no problem paying the inflated prices, and it was because of the NYC boom that houses that went for $80,000 3 years ago, are now going for close to $200,000.

"I think if you are interested in either house, you have to forget about what he paid. Just ask yourself, if this a great deal for me?"

If you do that we all pay the consequences.

quirkyquercus - The above post of yours is what I was first questioning. I then added a comment about flipping. Was the above comment about flipping in your mind?

I have to agree with quirkyquercus. The market was artificially inflated by investors and buyers who believe the values will increase at that pace, and wanted to buy now before prices go up and they might lose out.
We are seeing the price correction from coast to coast, we ran out of buyers, until the inventory as far as real estate and buyers levels out to normal, those "couldn't wait" buyers, who now have to sell, will have to be patient or reduce their price and/or sell at a loss.

Saphire- I agree thats why it's such a big problem.

Cmarlin- perhaps I read too much into your comment and/or misunderstood.

The way I assess a value to what a property is worth *to me* is somewhat complicated to explain. But if I were looking at a resale, I would definitely look at the prior sale price and question why the price has increased since then. If no improvements have been made and the price is $200k more because other homes (comps) in the area have rapidly appreciated, I would take that into consideration but historically what other homes are going for is of very little importance to me. I start with what it cost to build, land (all based on the lowest cost markets in the country) add in improvements and things that are included such as appliances, subtract for repairs and at the very end that's when I establish how much more I'm willing to pay to live in a particular neighborhood or city. I would come up with my own figure for the property and compare it with the lowest cost markets in the country. And if the listing price is more, I'd ask why and attempt an offer. If it's less then it's a good deal. My last purchase came out far less than my figure and to this day I'm still talking about what a great deal I got.

This is a much different process than your average home buyer today. They find out the maximum they can afford and start looking at listings about 5% higher than that! They are shown a limited number of homes in a limited period of time and they usually make their decision because they have to for some reason or another. Nobody seems to look too carefully at what you're getting for the money but instead they compare the listings they have seen. They just accept it as being just the way it is and to pay it because they don't have a choice.

It's a fair question to ask me why I bother doing this and the reason is I have come to expect a certain quality of life and I like to live very well within my means. So 'what I get for my money' as opposed to 'the best that I can afford' is important to me. For investment purposes I try to buy low and sell high just like stocks so I wind up in new construction in new areas with a lot of development where the only place to go is up. Instead of buying a resale that has been bought and sold so many times it may not appreciate very much if at all. Not surprisingly, I have never lived 'in town' although I came close once. Maybe some day.

Well I must live in a town since that is where we work.

I still cannot understand why this builder has so overpriced these houses. He did put new appliances into the kitchen but not on the level that should go with this house, more like a 500k house

saphire--he priced them high so somebody can make a lower offer. Builders make all kinds of mistakes--I have some for clients. They build for a living and buy and sell often and sometimes don't know when to stop. Its a business --if you want one of the houses and can afford it, make an offer; it doesn't have to be full price. The fact that the new appliances don't look snazzy tells you he has a financial problem. (Unless thats the Viking package that builders get a deal on.) Builders don't get emotionally attached to property so they will bargain.
If he doesn't accept your offer or you cannot qualify--move on. There are plenty of houses on the market.

Margenorman,

Is there any way he will let it go for around what he paid? He is carrying this one and another that is 1,5 x more that has taxes of over 2k a month,

Meanwhile the market is not what it was when he bought. Obviously you are not a mind reader but I posted because I wanted some insight into how builders think, as opposed to your average consumer who will not sell at a loss unless they really need the money or are getting divorced

I am actually bummed he did the kitchen, I do not love what he did although it is not awful, I can live with it for a few years , the kitchen needs to be enlarged anyway which he did not do and now he will expect to get back 150% of what he put in

I could not see from the new pictures what brands but he put in a microwave above the stove and he used a stand alone stove although it has two drawers and is stainless. In the market he is in, if you are doing a kitchen, it is a cooktop with a large updraft fan and a separate double oven, either Thermador, viking etc. I doubt the dishwasher is Bosch or

Where I am looking most houses need new kitchens but when the new owners come in, they like to go all out (unless of course they are house poor) and kitchens are not usually a stumbling block, it is assumed you will rip out and replace as you would want it

quirkyquercus - I like how you shop around! Thats how I bought a house. I didnt know anything about buying a house, though, so when the realtor brought out the comps I was confused. I asked her why I would care what other houses went for when this is the house I want and the price is what I can afford?

I can say, I've learned a lot from this site.

I have to wonder the same thing as the OP, if the market has dropped off in the area the guy probably wont be able to sell these houses for what he was expecting.

saphire,

I'm going to disagree here a bit. In my experience as having hundreds of builders for clients they most certainly do get emotionally attached to their properties. The smaller the builder, as in those building less than a half-dozen homes/year, the more likely he/she has emotional involvement come time to sell. To the small builder, the homes they build are often dream homes in their minds. They put their heart & soul into some of these properties. They bring their 'dream' to me sketched on the back of an envelope & squabble about why I 'need' plans & specs before granting them the construction loan. Their response is almost universally, "Why? Can't you SEE this house is worth every penny of the loan amount I need?!" They are builders not business people.

I've teased many a builder...sitting in front of my desk wanting to know if they should accept an offer...that they are too proud of their "erection" & need to take a couple steps backwards. :)

To hear you or another potential buyer comment that you don't like something they've chosen to put in the house is insulting to them because you aren't seeing 'their' dream. It takes small builders longer to come around to changed market conditions than it does lenders. Eventually, his lender will give him a hard nudge towards seeing the 'light' & refuse to grant another construction loan until he sells something...

Since the builder wants nothing more than to get moving with his next dream...that is the point at which a potential buyer finds negotiating with these guys the easiest. Small builders uniformly, in my experience, lose interest in a project at about the 65% complete stage &, in fact, pushing them to reach 100% is like pulling teeth with a string & a doorknob! They've got another sketch they want me to look at.....

Market conditions now should be such that even these small builders are ready to negotiate.

Oh, another reason they lose interest is because even though they're not supposed to...they live on their construction loans. They draw out profit as the build progresses. One way, or another...they ALL manage to sneak their cable bill into the draws! By the time they reach the point in construction you're describing they have little motivation because they've already pulled out most of the profit they expected anyway. They don't have the same enthusiasm for their lender getting their money back as they do for building their dream & getting those draws.

I love small builders. They have hearts of gold & are 'salt of the earth' type of people, usually. That's the biggest reason I love construction lending...the builders themselves are just great/fun people. But, don't kid yourself...they DO get emotionally involved.

/tricia

"I can't think of too many things in life where people spend so much money yet have practically zero regard for VALUE."

Lets take housing out of this for a hypothetical moment: I'd like to buy a 25 pound bar of 24 carat gold. Back when it was $300 an ounce, I might have been able to afford that, had I sacrificed and skimped on everything for my dream. Now that evil speculators, immoral flippers, and greedy investors have bid that bar up over $400,000 its pretty much out of reach for me.

So your contention is that all the people who bought gold, on the assumption that they can someday sell at a profit, are denying poor people the opportunity the chance to buy something that has exceeded its inherent value anyway, and that isn't right?

If we are going to adopt a paternalistic approach to helping the people priced out of the housing market, working stiffs should continue to be excluded from ownership in the housing market until prices have fallen to the point where the downside risk is minimized.

If we are not going to adopt a paternalistc approach to the markets, then bubbles and busts will happen. C'est la vie.