Built the right house on the wrong lot and lost 88k finding out
Finished and closed last month. 2,340 square feet, two story, four bed, in an established neighborhood where similar houses trade between 545 and 590.
Mine appraised at 508 and sold at 501 after 94 days.
Here's what went wrong, and it wasn't construction. Build came in at 402k on a 411 budget, which is the one thing I got right. Lot was 96k. Soft costs 34, carry 27, sale costs 30. All in at 589, out at 501.
The lot backed onto a commercial parking lot. I knew that when I bought it. I told myself the fence and the tree line would handle it, and I priced the lot at a 30k discount to the interior lots on the street, which felt like plenty. It wasn't. Every buyer walked to the back of the yard, looked at the loading dock, and I watched their face change. The appraiser marked it as a location adjustment I couldn't argue with because he had two comps on the same rear boundary that also sold soft.
The second mistake compounded it. I built to the top of the street. Nine foot ceilings, upgraded trim, a kitchen that belonged in a 590 house. My reasoning was that finish would offset location. What actually happened is I spent 38k of upgrades to get a house that couldn't clear the location ceiling, so the upgrades converted straight into loss. A 480 house would have cost me maybe 355 to build and I'd have made money on the same lot.
The 94 days on market cost another 7k in carry beyond my plan and I dropped twice.
What I'd do differently: I'd have priced the exit first and built backward to it. The lot discount told me what the market thought of the location and I treated it as a discount to capture instead of information about my ceiling. And I'd have asked the two agents who sell that street what the rear boundary does to price before I closed, which would have taken one afternoon.