Even after factoring in the substantial costs of buying the old house, tearing it down and building a new one, the developer stands to make a six-figure profit — a typical experience for Seattle teardown projects.
A crumbling, toxic West Seattle house too dangerous to enter became the poster child for the region’s heated housing market when it sold a year ago this week for $427,000, following a bidding war that the listing agent called “insane.”
If you forgot, or blocked it out of your mind: The one-story house on Belvidere Avenue was covered in a blue tarp, hiding a roof that could collapse at any moment. The floors were giving way under rusty old appliances. It had five feet of standing water and air too toxic to breathe, creating its own gross ecosystem. Only licensed contractors who signed a legal waiver could enter.
And yet, the winning bid of $427,000 topped 40 other offers. In the year since, housing prices have only climbed. And the buyer of that decrepit house, a housing-redevelopment specialist named Jimmy Tang, is taking full advantage.
Last weekend, after completing a brand-new luxury house on the site, he put the property back up for sale at an asking price of just under $1.2 million — or about three times what he bought it for a year ago.
Just a few months ago, he estimated the new home would sell for $1 million, but since then, housing prices surged again to record heights.
The old house is gone, demolished and replaced by a huge box home with modern features, big windows, an open interior and views of the water and the downtown skyline. The 2,845-square-foot, four-bedroom house is a full story taller than the old house it replaced, and even has a backyard — a rarity for new homes.
The original deal was all about the land, which has become among the scarcest and most valuable resources in all of Seattle, as more and more people move into the city and housing prices soar faster here than anywhere else in the country.
Home teardowns have become big business in Seattle, with about one per day on average, as developers — with no more land to build on — try to profit on the land they can get by replacing modest, old homes with big luxury houses or stacks of townhomes.
In Tang’s case, he said he spent about $415,000 on the demolition and new home rebuild (he saved a bit by keeping the old home’s original 1951 foundation). Home sellers have to pay various fees, commissions and taxes that, in this case, would likely top $100,000.
But even after adding in all those costs, he would easily turn a six-figure profit if the new home sells for his asking price of $1.2 million. Tang said on Monday that he hoped to share “good news” on the listing on Wednesday, when he and his agent are set to review offers.
“We’ll do OK,” Tang said. “We had a lot of foot traffic during the three open houses we had this past weekend.”
Two similar-sized houses a block away each sold for about $1.1 million last year, while a new box house nearby fetched $1.28 million last month.
“Given the current state of the market, I’d be surprised if they didn’t get the asking price,” said Larry Johnson, Windermere’s branch manager in West Seattle, who isn’t involved in the listing. “Great neighborhood, good street, new construction and lack of inventory is working in their favor. They are priced accordingly for square footage as well.”
Tang’s experience matches up with the typical teardown developer, though his profit would likely top his peers.
On average, the new single-family house that pops up on a teardown lot sells for three times what the old house sold for, and the new house price usually tops $1?million, according to county property records. Teardown developers say the entire process usually takes about a year and that they hope to take home about a 15 percent profit off the cost of the final house, which typically amounts to more than $100,000.
But the potential for profits has only grown as the housing market keeps heating up.
In February, Tang guessed he’d put the new house up for about $1 million.
But in the three months since, the median home price in Seattle has climbed nearly 14 percent, to a record high of $722,000. West Seattle, once an affordable enclave, has seen its median home price soar 21 percent in the past year, to $580,000, though the neighborhood where the teardown house is located has home prices close to the citywide average.