Ten days after closing the year’s most expensive mansion sale in Delray Beach, Florida for $19 million, luxury real estate broker Senada Adzem got an unexpected phone call.
“The buyer called me to say they would be selling the home. Honestly, we were surprised,” Adzem said in an interview. She recounted how the buyer explained his plans had changed. He and his family could no longer move to Florida.
“I’ve never been involved in a situation where the client invested such time and effort to purchase a dream home — only to have to turn around and sell it less than two weeks later,” Adzem said.
The client relisted the home, known as “The Rockybrook Estate,” with an asking price of $23 million, which was $4 million more than he paid for it a few weeks earlier. Adzem said she expects the unintentional short-term flip will pay off.
“We’re confident — given the red-hot luxury market in South Florida, and the dazzling, resort-style splendor of this property — that the seller has an excellent opportunity to turn a significant profit on this deal,” she said.
The scenario isn’t an isolated case. It is playing out in several U.S. real estate markets as the rising value of stocks and other assets has helped boost the spending power of the wealthy. With many of these buyers looking to live in a limited number of markets, the availability of luxury properties can be scarce.
Delray Beach is one good example. Inventory for multimillion-dollar luxury listings in the city on Florida’s southeast coast is at a 10-year low, and down 45% compared with 2020, Adzem said. In the first quarter, the average sale price for a luxury single-family home there is up more than 53.7% from the previous quarter, according to the Elliman Report.
“The low inventory of megamansions, especially in a booming housing market like we have in South Florida, works in favor of the seller,” she said.
In Southern California, broker Andy Stavros also had a buyer who became an unintentional flipper. Stavros sold his client an $8.7 million home at 14 Sandy Cove in Newport Beach, California. On the same day she closed, Stavros said the buyer decided she would list it for sale.
Stavros said his client’s plans changed because she saw a bigger home she preferred in the area for $13 million and she bought it. That meant she no longer needed the four bedroom, eight bath home she had just purchased. When she asked Stavros to sell it, her asking price was $8.9 million.
According to Stavros, his client’s intention wasn’t to make money, but it could happen. Before the listing went live, potential buyers were already calling.
“All of a sudden, I have multiple showing requests,” he said,
Deciding to sell a multimillion dollar property the same day you close on it isn’t usually a profitable strategy. But if the property is desirable and located in a hot market with low inventory, an unintentional house flipper can turn a sizable profit, according to South Florida real estate broker Devin Kay.
“We are getting surprised on a daily basis in terms of what things are selling for,” Kay said.
Case in point: An unexpected short-term house flip in Miami Beach, Florida by Adam Wyden, the founder of hedge fund ADW Capital. In late December, the former New Yorker purchased a home on Miami Beach’s La Gorce Island for $4.15 million.
La Gorce Island is a small guard-gated community that Cher, Ricky Martin and Billy Joel all once called home. Wyden said he intended to tear down the outdated 4,500-square-foot residence on the half-acre lot and build a larger new home.
“Immediately after I went into contract, someone offered $400,000 for my contract,” Wyden said in an interview. He added that he declined the offer because he wasn’t a flipper. He and his wife planned to permanently relocate to La Gorce Island and a few hundred grand in profit wasn’t going to change their plans.
“The intent with my wife was to build a house,” Wyden said.
But soon after, the Wydens realized they weren’t up for all the headaches that come with building a new home, so instead they put an offer on another South Florida home. In February, they relisted the unimproved property at 31 La Gorce Circle for $5.5 million — a whopping $1.35 million more than they paid for it.
“I thought people could say I was crazy, or there could be a bidding war,” Wyden said.
Even Kay, the Wydens’ real estate broker, was shocked when six days after relisting the property, it sold for the full asking price. “I didn’t have any confidence in my head that we were going to get $5.5 million for it,” he said.
Wyden said, “I’m not in the real estate speculation business,” but just like the stock market, when demand increases and supply drops, prices inevitably go up. La Gorce Island is just 1.2 square miles so there’s a very limited supply of homes and even fewer teardown development opportunities.
“As a result of a highly competitive market and that there’s nothing else for sale, we were able to flip it for 33% profit,” Wyden said. He added, ”I probably undersold it. I probably could have gotten six [million dollars] for it.”
Wyden’s flip outperformed the Miami Beach market, where prices for luxury single-family home sales rose 20.2% in the first quarter from the prior quarter, according to the Elliman Report.
Not just luxury markets
And it isn’t just luxury markets seeing very profitable unintentional flips. Los Angeles real estate agent Spencer Daley turned a surprising profit for himself on a quick flip in Idaho.
“These are prices that Boise has never seen before. This is uncharted territory,” Daley said in an interview.
The 31-year-old Douglas Elliman broker bought himself a piece of land in the town of Caldwell in September. It was an undeveloped 0.8 acre lot overlooking the Timberstone Golf Course inside a subdivision, unaffiliated with the golf course, about 20 minutes from Boise. Real estate records show he paid $120,000 for it.
“It wasn’t like I bought it and I was gonna flip it,” Daley said. “I bought the land to actually build on it.”
He had the architectural plans and was quoted costs of about $380,000 to build. Daley expected it would take a year to complete the project and then he planned to put the house on market for somewhere north of $600,000.
But three months after buying the land, Daley said something he never expected happened: A buyer called with an off-market offer that he couldn’t refuse. He sold the propert for $250,000.
“It was more than double what I paid for it,” Daley said.
Warren Johns is the local real estate agent, licensed with Mountain Realty, who represented Daley. Johns said he helped another client, also an unintentional flipper, buy and sell an undeveloped lot on the same street. According to Johns, the buyer paid $95,000 for the lot and sold it for $250,000.
The unintended flip earned his client more than 163% on his original investment in less than five months.
The supply of real estate inventory on a golf course in the Boise metropolitan area is low, Johns explained. The lots in the Timberstone area also have an added benefit, which also boosted the demand. He said it’s one of the few subdivisions in the region where lot buyers can bring in their own builder.
“Builders weren’t able to get into other developments that were controlled by other powerful builders,” so those builders came to the Timberstone subdivision as land buyers looking to develop and then sell. Both lots Johns helped his clients flip went to buyers who were builders, and he has a third lot in the subdivision that’s also now under contract with a builder.
Daley said that giant short-term profit made his decision obvious.
“If the profit’s there and it’s less risk, then I don’t know why you wouldn’t,” he said. “I netted more from selling the lot than from selling a finished spec home.”