Failed Anatomy of a Spec Home Deal (HA 1640) - a podcast by Steven Butala & Jill DeWit

Failed Anatomy of a Spec Home Deal (HA 1640)
Transcript:Steven Butala:
Steve and Jill here.Jill DeWit:
Hello.Steven Butala:
Welcome to the Land Academy Show, entertaining real estate investment talk. I guess this is the house academy show. I'm Steven Jack Butala.

Jill DeWit:And I'm Jill DeWit, broadcasting from the valley of the sun.

Steven Butala:Today Jill and I talk about the failed anatomy of a spec home deal.

Jill DeWit:So this is interesting, because now where we are with housing, right? People are talking about housing shortages. People are talking about getting things rezoned, so you could have more homes, like LA county, have more homes on a lot to make it for, so there's more places where people to live, right, and affordable. And it's interesting. And there's a lot of building going on. Not just renovating now since COVID and people are home, but a lot of people are moving and choosing to buy land. Yay! Happy for us. And put houses on there. And it's just mind boggling to me, some of these, I think very risky decisions that they're making. Especially, it's one thing to buy your own piece of dirt and hire your own architect. And it's your own money. You're not going to sell it. You're buying it to build for you and you're going to move in. That makes sense to me.

Steven Butala:Jill's emotional about this topic. Let's take a question first. And then we'll get into the show.

Jill DeWit:Save it. [crosstalk 00:01:25]

Steven Butala:Let's take it. Question posted by, members on LandInvestors.com. Online community is free, and don't forget to subscribe on the Land Academy YouTube channel and comment on the shows you like.

Jill DeWit:Host wrote, how would you price a mailer if the sold comps are 50% low than the for sale comps? So, sold is $40,000, for sale right now is $80,000. And each data set consists of approximately 200 comps. Well, first of all, I'd be high fiving myself because this is going up. It's becoming more expensive area. Is there more to it or is at the end?

Steven Butala:That's it?

Jill DeWit:Okay, got it. So, what do you want to say?

Steven Butala:There is brilliance and simplicity. And this is an absolute brilliant question from somebody in Discord that I have never heard of. I think they're new, and they're clearly smart. What they're saying is, I pull the data set and what we teach is you got to look at everything that's for sale, you got to look at thing that's sold, and this person's saying, there's 50% variance in this stuff. All the sold comps say they're 40,000. All for sales comps say they're 80,000. One of the moderators came in Kevin and said, first thing I check for is an error in data. Meaning, you might be the error Host, but I don't think that. It's what Jill said. Jill's initial thought was, hey, the market's going up so fast.

Jill DeWit:It could be.

Steven Butala:So that's one... No matter what, we can all agree this is a data exception. This is not usually what happens. So it fascinates me innately. Data exceptions fascinate me, not the normal stuff. We all know the normal stuff. So, maybe it's a hotness, market hotness thing like Joe says. Maybe it's a data exception like Kevin, our moderator says. Or maybe, you just do what I say all the time and follow the program. You take the $40,000, you take the $80,000, you average them out. That's 60,000, and you offer 10 or 20% of 60, 10% of 60,000 is six. So if you offer between six and $12,000 and you're right or wrong, at between 40 and $80,000 on the sale side, you win

Jill DeWit:That's easy. I would make sure too, that they sold $40,000 comps, one thing I forgot to add. I go in and toggle and back and forth and play with the... When was that? Because if all your sold comps and it's going back to the beginning of time, that's not good. But it's the last 12 months, now I'm feeling good. And everything for sale, because it really could be going up. Some areas it is this nuts.

Steven Butala:

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