Just over 24 hours ago the announcement that Forrest and Charlotte Lucas, of Lucas Oil fame, had purchased the former mansion and residence of Stephen Hilbert: 1143 W 116th Street. 

Over the last day I have been belabored with calls and emails about the magnitude of the effect on local home sellers and homeowners. Is the problem as big as the mansion? 24,786 square feet. Or bigger? The house sits on 40 acres, an acre of land in west Carmel sells for at least $100,000. This is clearly one of the best deals on real estate in the country.

Does this sale set the bar?

I say no.

The sale of 1143 W 116th Street is unique. The property was unique and it does need money put into it. Frankly, some people do not even want that big of a home. That said, it is still a bargain.

Is it an isolated incident?

I say no.

How is that possible when I just said the sale was unique! It is not isolated because this is the textbook example of over pricing a property and chasing the market down. Here is the price history of the property:

6/13/2005                  $20,000,000

1/30/2009                  $15,000,000

9/1/2009                  $9,900,000

10/6/2010                  $3,000,000 – SOLD

I have it on good authority that there was at least one and probably a second offer in the $12,000,000 range a sometime after the property was listed for sale. Terms were never reached on this offer. Furthermore, it typically costs 1% of a property’s value to keep it up on a monthly basis with that much square footage and land I am sure it cost over $300,000 per year to maintain the property.

Even if they sold the property for $3M in 2005 they would have saved $1.5M in up keep.

What if they priced it $15M in 2005 (the peak of the hottest real estate boom in history)? Could have they gotten close to $10M? They still would have saved countless hours and a lot of money.

In short, the sale is isolated because of its scope and size but the pricing philosophy is the same whether it’s $100,000 home or a $20,000,000 one. You need to price the property where the buyers are; otherwise you’re fishing with your bait out of the water.

 

Jason O’Neil