Author: SavedbyGrace
March 4, 2008
| Asking Price | $1,738,000 | ::: | Sq-ft | 3,954 |
| Purchased Price | $788,000 | ::: | Lot Size | 9,417 |
| Purchased Date | 08/23/2006 | ::: | Beds | 5 |
| Days on Redfin | 32 | ::: | Baths | 5.5 |
| $/Sq-ft | $440 | ::: | Year Built | 2008 |
| 20% Downpayment | $347,600 | ::: | Area | Santa Anita |
| Income Required | $434,500/yr | ::: | Type | SFR |
| Est. Payment* | $8,787/month | ::: | MLS# | A08015473 |
*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%
“THIS MAGNIFICENT BRAND NEW CUSTOM BUILT ARCADIA ESTATE IS A SHOWCASE OF LUXURY, TOP QUALITY WITH EXQUISITE DESIGN AND IMPECCABLE CRAFTSMANSHIP. 5 SUITES, 2 DOWN STAIRS. MASTER SUITE HAS JACUZZI TUB, MAKE UP STATION AND UNIQUE BALCONY. GOURMET KITCHEN WITH SEPARATE WOK KITCHEN AND CENTER ISLAND. WET BAR IN FAMILY ROOM. ELEGANT HIGH CEILING ENTRY HAS CRYSTAL CHANDELIER. MANY MORE UNIQUE AMENITIES, TOO MANY TO LIST”
Many realtors like to write in the extremely annoying ALL CAPS format and it just drives me bananas. I’m not a realtor so I don’t know the reasoning behind it, but I suspect that they think it’s attention grabbing. To me it’s just a pain to read because I feel like they’re screaming at me with a loudspeaker.
$1,738,000 (asking price) – 6% commission – $788,000 (purchase price) -$889,650 (construction costs @ $225.sqft) – $56,880 (carrying cost @ $3160/month x 18 months) = approx. -$100k in the red
Purchase Price $788,000
Purchase Date 08/23/2006
1st Loan $500,000
Downpayment $288,000
This is a self-declared “custom built Arcadia estate” so I ask the question, what makes a house custom and what makes it an estate? Is a non-track home floor plan enough to qualify as custom? Or does it require designer paint, a gourmet kitchen, pergo floors, berber carpet and other extras to make the cut. Also what makes an estate an estate? Dictionary.com says it’s “A landed property, usually of considerable size.”
These are the images I get when I Google “estate” and this particular listing looks nothing like them. Maybe I’m too dense and missed it, but what “unique amenities” does this McMansion have over other McMansions? Is it the gourmet kitchen with center island or the unique balcony?
Here’s yet another flipper who bought during the height of the boom in 2006 and rebuilt this brand spanking new McMansion for profit losses. As some of our readers have pointed out, the seller may be more or less underwater depending on their financing options, construction costs and other factors. However, with the general assumptions above, they’re already $100,000 in the red if they manage to get their asking price at $440/sqft.
Over the past week and a half we’ve document flip after flip that took about one and a half years from the original purchase to its first listing of the finished house. That’s not exactly a quick turn around time and to add salt on the wound, these McMansions could be on the market for quite some time. Salt on the wound…ouch.
None of the light fixtures on the ceiling looks MAGNIFICENT to me. I don’t like the wooden staircase neither.
Not my cup of tea either.
SavedbyGrace,
I just found out this blog a few hours ago, and I can not keep reading all your posts. I love your blog! Thanks very much for your series on empty McMansion. Here I want to point out two issues on your profit/loss formula.
#1. Do you ever think that the building cost of these McMansions are actually lower than $150/sqft? I have a couple of friends in small Asian construction companies. According to them, for those ~4000 sqft new house, the typical building cost quote is between $500K to $600K, this gives about $140/sqft.
#2. The typical commission in SoCal is 5%, not 6%. Sometimes, those flippers use the same agent to buy old house and sell the new updated house, and only give this agent 1%-1.5% during the selling. Adding 2.5% commission promised to the buyer agent, this gives out total selling commission of 3.5%-4%.
With $140/sqft and 4% updated, many McMansion still nets in handsome profits. That is why there are still many McMansions coming out of the market in current market.
Welcome to AClover!
The discussion of $/sqft was discussed by several others in the comment section of McMansion #4. As I stated there, you can definitely get a house built for $140/sqft, but that’s barebone construction costs.
Soft costs such as permits, architectural fees, origination points, transfer taxes, title insurance, appraisal fee, overhead, hazard/cost of construction insurance etc. These can be significant and raise the $/sqft by as much as $35-$50/sqft.
Tack on the “custom” features the owner wants like stone floors, high end cabinetry, marble/granite counters, undermounted sinks, landscaping and etc and you’ll talking another $20-40/sqft. So when you add all that up, $225/sqft is may be on the high end, but it’s not too far off.
As for the % commission, I’m sure there is fluctuation in the market, but 6% is the norm so that’s what I used. I have no data that supports transactions are going through at 3.5-5%, but thanks for the heads up!