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Why Is This House Not Selling?

Why Is This House Not Selling?

Update: 2019-12-05
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On today’s show we are talking about a specific case study of a property that has been on the market for nearly 5 years.


This story is a cautionary tale of what can happen if you choose a property in the wrong location.


This property is a gorgeous 7,000 square foot home, that’s about 650 square meters for those of you who measure in metric.


This home is located just outside Portsmouth NH in a beautiful residential neighborhood where all the homes are on large estate lots of about 2 acres. All of the homes in the area range in price from about $800,000 to about $3.5M with numerous homes in the $2.5M range. It is located less than a mile from the ocean.


The interior of the home features an extraordinary kitchen with a granite island that is large enough to play ping pong on it. This exceptional property is architecturally driven at every turn.


Walls of French doors lead to the deck from the dining room, living room and entry hall. Magnificent center hall invites you to the rest of the house. Master suite includes bath with Rare Egyptian Alabaster counter tops, custom designed mahogany vanity, Onyx tile floor, oversized walk in shower, 18X13 walk in closet and access via rear stairwell.


The solarium is a beautiful space with a spectacular view of the garden. The entire back of the home is a wall of windows.


The area is a bedroom community for the wealthy who may have built businesses in the Boston area.


This is a truly gorgeous home.


It was built in 1997. It was purchased in 2003 by a friend of mine who owned several luxury properties in the northeast. He was an investor in several of our projects over the years and sadly he was diagnosed with cancer and died a couple of years ago. His lovely wife still lives in the home, and quite frankly they’ve been trying to sell it since 2014 to enable them to focus their energies on their homes in Martha’s Vineyard.


They bought the property in 2003 for $1.65M. They listed the home for the first time at $2.3M back in 2014. It was not selling and in fact was only occasionally getting showings once every couple of months.


They lowered the price to $2M back in 2015. Then they lowered the price another 5% in 2016, and then another 10.5% later that year.


The home is currently for sale at $1.6M,  $50,000 less than the purchase price in 2003. The property has been on the market for 144 days and it’s still not selling.


Let me put this in perspective, if you bought this home today at $1.6M, this 7,000 SF home would be selling at $233 per SF. You could not build the home in today’s market at that price. With the level of custom finishes in the home you would spend easily $250 per SF in hard construction. If the add the cost of the land, the design, the permits, you would be well over $350 per SF to build a comparable home today. On the surface, at $233 per square foot this looks like the very definition of a bargain.


So why has the home sat for 144 days on the market and not sold?


It turns out that the property taxes in this community are a bit high. In fact the current property taxes back in 2017 were a little above $31,000 a year.


Even if you buy the house in cash with zero debt, your monthly home ownership cost is over $2,500 a month just in property taxes.


I believe that the high tax environment is what is keeping buyers from jumping onto this bargain. You know that if the value goes up, which is something that almost every home owner wishes for, the property taxes will go up too.


There is nothing physically wrong with this property. It’s a gorgeous home in a beautiful location. It’s been impeccably maintained, and the buyer could buy it below replacement cost.


Unfortunately the cost of ownership is off the charts because of the property tax structure. I don’t know of any people who would willingly move to take on that high a property tax burden.

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Why Is This House Not Selling?

Why Is This House Not Selling?

Victor Menasce