The Perils of Overbuilding
When does a big house become too much house?
I toured one of these overbuilt homes in western Wisconsin a few weeks ago. The architect builder took an existing structure and turned it into a two-year remodeling project. The scope of the project appears to have gotten a bit out of hand, and now he's faced with a mansion that won't appraise and won't sell.
He's proud of the house and I don't blame him. Some might describe the house as an architectural masterpiece, with innovative design and ultra-high quality finishes and features. The problem is, it's located in a rural, mostly agricultural area, surrounded by farms, over an hour drive from the east Twin Cities metro area. There's nothing like his finished masterpiece within miles of its rather isolated location, making the work of finding comparable properties for appraisal a huge challenge.
This remodel was originally intended to be a spec home, according to the builder/owner. I asked him if he'd thought about who would buy the place when it was completed. I also asked if he'd consulted with an appraiser, real estate agent or area lender before undertaking the remodel.
The idea of doing some market research before beginning his two year labor of love was apparently forgotten.
Now the seller is struggling to find a buyer. He's quick to point out that he'll be losing money at the current list price. And he's obviously trying to recover as much as he can in a sale. He needs to find a buyer who is either (1) completely undaunted about the long daily commute to the Minneapolis & Saint Paul metro area, or (2) independently wealthy, retired or otherwise unconcerned about making a living in rural Wisconsin. He also needs to find a buyer with cash, as he's going to have a terrible time getting his home to appraise at anywhere near the asking price.
The grand vaulted ceilings, beautiful resawn and restored beams and floors, magnificent kitchen and other unique features sadly do not matter enough to get the place sold. Very few people want to buy this museum piece of a home, mostly because it's located in the middle of nowhere. It's a long, long drive over winding country roads to shopping malls, grocery stores, banking and service providers. You've gotta love driving to buy this place. And in winter, you'll need a truck or maybe a Hummer to get home at the end of the day.
In the course of doing business, we see overbuilt homes in both our Twin Cities real estate market and on Lake Superior. Some are "McMansions" thousands of square feet in size, with features that were intended to impress, even astound. We have encountered homes that look more like a lodging establishment or golf course clubhouse than a single-family dwelling. Some of these overbuilt monstrosities were the grand vision of well-meaning architects and developers. Others were more of an ego exercise.
Overbuilt homes are agonizingly slow to sell. And the seller can literally count on losing money in the process.
There's a lesson to be learned from examining these overbuilt dwellings. Identify your motivations for building something so grand that it puts everything else within miles to shame. Figure out who is going to buy the place when you tire of living there, as well as how they are going to be able to finance the purchase. And expect to lose money when the process is finally concluded.