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Real Estate Center

Deed Analysis, January 5

Publication: The East Hampton Press & The Southampton Press
By PhelAN wOLF, eSQ.   Jan 1, 2012 7:13 PM
Jan 2, 2012 10:13 AM

8 Barclay Court, East Hampton, $2,400,000

This 5,000-square-foot home in the Northwest Woods of East Hampton was built in speculation in 2006, near the 2007 market top.

The house is a cut above the typical builder’s home—it’s traditional, with five bedrooms, built in a vaguely Queen Anne style, with multiple sharply pointed gables and variously styled shingles, giving extra texture and dimension to the façade. As one would expect, inside there is a double-height living room with fireplace, open-plan common rooms, including paneled dining area and chef’s kitchen with oversized island,

en suite

bedrooms and attractive trim throughout. Outside there is nice patio work and landscaping, including a free-form gunite pool with spa.

The builder purchased this 1.2-acre vacant lot, which is on a cul-de-sac, for $200,000 in 2004. When completed, the house was listed in 2007 at the top of the market for $3,600,000, but didn’t sell until the beginning of the crash, in 2008, for $2,800,000.

The 2011 sale represents a decline in value of 14 percent over three years. Assuming a value of $400 per square foot, plus $500,000 for garage, pool, patio and landscape, the 2008 sale valued the improvements at around $2.5 million and the land at about $300,000—a ratio of the improvements being worth roughly eight times the value of the land. Such a large ratio is often associated with builder’s products, as builders attempt to maximize profits by building bigger and more elaborate homes.

Over the long term however, it often pays to have a house that is a teardown, or close to it, with most of the value in the land, which has the potential to appreciate, rather than structures, which tend to depreciate. In addition, large structures require additional maintenance, insurance and taxes, which further reduces total return over the long term.

180 Mid Ocean Drive, Bridgehampton, $10,375,000

This property combines two of the most popular elements in real estate in the Hamptons today: modern design and green building.

The property is spectacular—1.6 acres directly on Mecox Bay with a dock, and across the street from the ocean, which is accessed via a private trail through the dunes. It was purchased as vacant land in 2007, at the market top, for $3.5 million.

Purchasing environmentally sensitive land is always a gamble, but one that paid off here, with permits for a 5,500-square-foot home, large enough for five bedrooms and six baths. The house is a fairly simple design, roughly rectangular, with a long wall at one end sheltering the pool area. The interior design is the clean and simple style much in demand today, with white ceilings, warm wood floors and large expanses of floor-to-ceiling glass, creating a strong indoor/outdoor connection.

The latest and most fashionable materials and technologies are present, including Toto toilets and Crestron home automation. Green elements include whole-house water filtration, solar panels for electricity generation and geothermal cooling.

All of these construction elements are extremely costly, and it is quite possible that the retail value of this house could approach $800 per square foot, plus $250,000 for pool and deck. Even at those valuations, it is hard to imagine the all-in cost of land and construction exceeding much more than about $8 million.

Given the exceptional location, design and construction quality here, it is no surprise that this project likely resulted in a profit of around $2 million or more.

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