Will you get hosed buying a spec house?

264 Riverside Avenue, Dec. 2010, sells for $3.735M. June 2015, gets $4.4M.

264 Riverside Avenue, Dec. 2010, sells for $3.735M. June 2015, gets $4.4M.

The answer is no, obviously, but for some reason this myth persists. Truth is, buyers often make a profit when they buy and sell a spec house. Why, because they decorate it with nice furniture, wall paper, art work, etc., and that adds value!

Builders finally figured this out and now, many won’t show their new house until it is finished and staged. Smart.

Here are some fresh examples of successful re-sales of former spec houses:

264 Riverside Avenue    new: $3,735,000    used: $4,400,000.

17 Hendrie Avenue       new: $3,775,000     used: $4,100,000.

20 Marks Road             new: $3,327,000.    used: $3,325,000.

8 Dempsey Lane            new: $6,930,000     used: $7,375,000.

47 Shore Road             new: $3,250,000     used: $4,250,000.

Note: If the above links become de-activated, I’ll replace them with Zillow links. In the meantime, click “history” box (on non-mobile devices), top of listing, to get the full story.

 

9 thoughts on “Will you get hosed buying a spec house?

  1. For every success story there are at least two examples of people who have lost money on buying a spec home. I also notice that you have a selection bias in your analysis; it only includes OG and Riverside spec properties where demand has been high for an extended period of time. I should also note that spec builders don’t always make money either so it goes both ways; many lost their shirts in the last recession and some buyers got some great deals. I’ve been noticing that there is a growing number of spec homes that are sitting and even more that are about to hit the market in the next 6-12 months; it seems as though supply is finally going to start exceeding demand again which is usually proceeded by softer pricing.

    • FormSpec:
      One of my examples, Dempsey Lane, is off North Street, about 1/2 mile before the Merritt Parkway. As for my other examples, I searched for recent re-sales of houses built since 2004. Using that criteria turns up mostly Riv/OG properties.
      As to your prediction that an “over-supply of spec houses will lead to a softening of prices”, I disagree. The demand for new construction continues unabated.

      • There are always exceptions to the rule. I think most believe that the majority of re-sales will not exceed the original sale price. What % of re-sales fit into each bucket? That would be the true test.

        These sales seem to be cases where the original buyer got a great deal at the time, and the new buyer overpaid.

  2. Gids, congrats on finding four success stories. Like the others here, its hard to ignore that probably 70% of the spec homes built since 2004 including high end townhouses in the 1.8M+ range have sold for less on resale. You’ll have to bang the desk a little harder to convince many otherwise.

    • CosCobb & Anon:
      Dudes! I get it that you’re Greenwich real estate “contrarians” but ignoring facts doesn’t make them go away. I performed a very basic search of the MLS and easily found these FIVE examples (yes, I include 20 Marks, because it sold for nearly the same amount, one year to the next). I will shortly post on this controversy and try to clear up your confusion, but of course, you will cling stubbornly to your myth!

      • At a price point of $4 million+, why would someone buy a re-sale home when they could buy a brand spanking new one with builder warranty? I look at the sales above and am shocked since they don’t have much unique about them that would draw someone to that house over any of the many spec homes available.

        47 Shore and 17 Hendrie are literally surrounded by a dozen homes. Zero privacy!

        To me, the difference between these homes and other failed re-sales is spectacular staging. Nothing else.

      • Anony:
        Hmmm, ok, I guess I agree to some extent, although when people are actually living in a house, it’s not “staging”. But yes, we humans have no imagination when looking at an empty house. Yet fill the house with nice, thoughtfully placed furniture arrangements, beautiful rugs, artwork, dog beds, whatever, and suddenly, we get it! And we consequently pay more for it. A lightly used, former spec house that is beautifully decorated can, therefore, sell for as much as an empty brand new one!

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