I’m just back from inspecting a spec house – its exact location isn’t necessary because there must be dozens of spec houses in the same circumstances, but I can say that it’s on an undesirable street in a section of town that trades at a discount from more popular neighborhoods. The design is the usual builder eclectic, meaning a mongrel kind of style that isn’t particularly disagreeable but nothing that will elicit appreciative oohs and ahs. Kind of reminds me of my own mutts growing up – nice, friendly dogs, but dogs all the same.
Inside, there’s a (small) dining room where a dining room has no place being, a “living room”, also small, on the other side, with a walk through to a very nice library bumped off to the right and a family room, smaller if possible than that living room, straight ahead. Kitchen’s fine, if the usual, and that’s it for the first floor.
Upstairs is just bizzarre. A master bedroom suite is comprised of a bedroom so small that the person given the right hand side of the bed will have to pass within a foot of the fireplace, if she doesn’t end up in the fireplace itself, a long hallway leading to a “sitting room”, destined to be used, if at all, as a spare bedroom for one spouse when the unhappy couple is on the outs, no walk-in, master closet, another “sitting room” – I kid you not, and the ubiquitous huge bathroom.
Four childrens rooms, all tiny, make up the rest of the second floor and an unfinished “bonus area” awaits the homeowner’s pleasure on the third. The back yard is flat and level, but the expensive sod job is dieing. My guess is the sod was laid over too much rock and too little topsoil – this entire lot was blasted into being and the builder probably used up his landscaping budget on dynamite – and the fact that the water drains diaganolly across the yard to the north while the sod was laid east to west – the grass has drowned.
So far, so what? Lots of badly designed buildings out there and this one’s no different. What sets it apart, maybe, is that it was initially priced at over $5 million. This place was never worth that. At the height of the craziness, some fool might have been persuaded to spend $3.5 for it or, just for fun, let’s suppose it could have fetched $3.9. The latter number is about where the builder has priced it now, but the marked has moved away from him and whatever he could have grabbed in 2007 is no longer available. I figure that you could move this house today for $2.9 -$2.5 million; it’s 5,000 square feet of new construction and someone ought to want it at that price. But if you were to buy the place with an eye toward resale you presumably will want to make a profit on the deal, so you pay the builder, what? Maybe $2.2 million, tops.
And that would be fine, too, if there weren’t a $4 million mortgage encumbering the property. $4 million! I don’t necessarily fault the builder because builders are by nature incautious optimists, but what about the lender? Who at that bank did any sort of market analysis before giving out so much money? This project was doomed from the start with that kind of loan, just on location alone. Banks may have no ability to distinguish good from bad design (although if any banker wanted to start a course on the subject, a tour of this house would serve to excellent pedagogical effect), but surely the comparative values of different locations can’t be beyond their ken. You’d almost think they didn’t care whether they were repaid, just so long as they earned a loan fee upfront.
For What It's Worth 