How to justify the price on this deal?

[Michael Stole]

The house is for sale at $790k. The lot is 50*90.

There is a lot (just a lot) cross the street, 70*95, for sale at $750k. Assume that this lot sells at its list price, $750k, and assume that the per sqft price of land is the same for the two lots, then the lot of the first house worths $750k*(50*90)/(70*95)=$458k. This further suggests that the seller of the first house is selling the house itself for 790-458=$332k.

But this is a 2000 sqft house built in 40's probably, and comparable analysis shows that this is a fair price.

Then how can I justify the price on the first house? Am I making any mistake in the calculation?

[Jon Holdman]

Huh?

Which price is the fair price? $790K or your calculated $332K?

What make you think the $750K price for the lot (no house, right?) has any validity?

Or that a $/sq.ft. is a meaningful metric for a lot? In some places, it might be. But in others a lot is a lot as long as its buildable.

[Jon Holdman]

Huh?

Which price is the fair price? $790K or your calculated $332K?

What make you think the $750K price for the lot (no house, right?) has any validity?

Or that a $/sq.ft. is a meaningful metric for a lot? In some places, it might be. But in others a lot is a lot as long as its buildable.

[Michael Stole]

Originally posted by Jon Holdman:

Huh?

Which price is the fair price? $790K or your calculated $332K?

[u]$790k for the first house plus the lot is a fair price. Well the fair price is $750-$800. So if the house plus the lot sells for $790, then according to my calculation, the house itself sells for $332. It is this $332 just for the old house that I can not justify. It is just too expensive!

What make you think the $750K price for the lot (no house, right?) has any validity?

If the lot sells for less than $750k, then this makes the land worth less, and the first house worth more than $332. That is a even more ridiculous price to me.

Or that a $/sq.ft. is a meaningful metric for a lot? In some places, it might be. But in others a lot is a lot as long as its buildable.

[Michael Stole]

$790k for the first house plus the lot is a fair price. Well the fair price is $750-$800. So if the house plus the lot sells for $790, then according to my calculation, the house itself sells for $332. It is this $332 just for the old house that I can not justify. It is just too expensive!

If the lot sells for less than $750k, then this makes the land worth less, and the first house worth more than $332. That is a even more ridiculous price to me.

Originally posted by Jon Holdman:

Huh?

Which price is the fair price? $790K or your calculated $332K?

What make you think the $750K price for the lot (no house, right?) has any validity?

Or that a $/sq.ft. is a meaningful metric for a lot? In some places, it might be. But in others a lot is a lot as long as its buildable.

[Wayne Brooks]

For Sale prices mean nothing....if they were asking $1.5M tomorrow, would you assume the other one is now worth $916K?
Comparable sales of similar house is what matters. Yes, you could probably build a brand new house for less than $125/SF ,or so.

[Michael Stole]

Then I can buy this lot for the listing price, $750k, build a 4000sqft house for 4000 sf *$125/sf= $500k, then sell it for $1.4m and net $150k.

Originally posted by Wayne Brooks:

For Sale prices mean nothing....if they were asking $1.5M tomorrow, would you assume the other one is now worth $916K?
Comparable sales of similar house is what matters. Yes, you could probably build a brand new house for less than $125/SF ,or so.