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A Primer on Teardowns

Posted by Calvin Wagner on August 29, 2019
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When you’re in the market to purchase a new home, it usually feels like you have two options: buy an existing home, or build a new one from scratch. However, there’s a third option: a teardown. Many buyers don’t typically consider a teardown, but they really should, as it can be the perfect way to get the home you’ve always wanted. What’s a teardown, and why should you know about it as a prospective homebuyer? Read on, and we’ll tell you all about it.

Teardown 101
Much as the name implies, a teardown is when you buy an existing home because you like the location and the property, then tear down the home and build a new one in its place. While you probably wouldn’t tear down a perfectly good home with good bones and functional layout, you might tear down an older home that may not be worth rehabbing. Maybe it’s too small, or maybe the inside is too carved up into tiny rooms. Maybe there aren’t enough bathrooms, or maybe it’s too much effort to make it energy efficient. Maybe it’s outdated for some other reason and beyond repair. Whatever the reason, the house isn’t viable, but the property upon which it sits sure is.

As a buyer, it’s a good idea to be on the lookout for potential teardowns. It’s a chance for you to build a new house, but not have to live with the remoteness of many new home communities; you’ll be in an established neighborhood, yet you’ll still enjoy all the benefits of a new home.

Wait, Can I Really Do That?
Yes, you really can! There’s a relatively minor amount of red tape: you’ll need to secure a demolition permit for your teardown, and you’ll likely need an inspection for any toxic building materials, such as asbestos and lead paint, prior to any demo work. Finally, the utility companies will need to disconnect your teardown and then be on alert to reconnect once you rebuild.

But really, the benefits of a teardown significantly outweigh the drawbacks. You get a brand new home, with many of your personalized touches. It’s energy-efficient, it’s got a highly functional layout, the electricals are up to date, and it has the exact number of bathrooms you need. Plus, it’s in an established neighborhood that’s the right distance from things like school and work.

Finally, many cities are surprisingly welcoming to home buyers who opt for a teardown. That’s because the older homes have relatively low value, and that means lower tax revenue. A new home built on a teardown lot, on the other hand, bring in more tax revenue and eventually increase the value of the homes in the entire neighborhood.

Steps to a Teardown
If you’re serious about a teardown, a good first step is to find a realtor who specializes in teardown projects. He or she will likely have a good lead on potential properties for you to look at; specifically, you’ll want to stay away from neighborhoods protected under historic designations or have other rules against significantly altering their character. Plus, a knowledgeable realtor can walk you through the steps necessary to get the lot prepped for construction.

Then, you’ll need to find a builder to create your new home from the ground up. The chapter of the National Association of Home Builders near you is a good place to start, though your realtor may have some good suggestions as well.

Finally, you’ll need to finance your teardown project, and this is somewhat more involved than applying for a simple mortgage since you’re paying for three things instead of just one: the original house, the demolition of the original house, and the longer-term mortgage for the house you’re building. Again, a good realtor with experience in teardown purchases can probably recommend the right places to go for financing your project.

Teardown or Renovate?
Whether you like the character of the original home or are incentivized by local ordinances, a partial teardown and renovation may be another option for you. Depending on the structural integrity and look of the home, you might be able to retain the foundation, or you might keep the exterior (in whole or in part) and create your new home within it.

Also, depending on the municipality in which you buy, you may find yourself up against pretty rigid rules and regulations when it comes to demolitions. A renovation instead of a total teardown means you won’t have as many logistical headaches. Plus, if what you plan to do with your home qualifies as historic rehabilitation, you may be eligible for tax credits.

However, while the renovation is often a really nice idea, it isn’t always possible. This is especially the case in older homes, which may have damage from water or mold, serious pest infestations, foundation issues, or substantial rotting. If you’re set on a partial teardown and rehab home project, be sure that you inspect for any potential problems before you make your purchase.

Great, if You Can Make it Work
A teardown isn’t for everyone. It’s definitely more involved than simply buying a home or even building a new one on a vacant lot. However, if you can make all the pieces of the teardown puzzle fit together, you come away with exactly what you want: a beautiful home, with everything where you want it, in the perfect location.

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