Most big cities have areas where houses are being torn down for new home construction. This trend is continuing to expand and into a wide range of older neighborhoods. This free guide to selling a tear-down house will help you to determine if your house is a tear-down, to understand the various aspects of it’s value, and to see that selling it is easy.
2 Factors that Make a Neighborhood Prime for Teardowns?
1. Desirable Community Features
First, the good thing is that the area is still very desirable, home buyers want to live there. They might like the school districts, activities, low crime rate, central location, and the community.
So, whatever it is about the community they like, makes the area and property in demand.
2. Buyer Wants A Current House, Modern Conveniences
Now, just because a buyer likes the area, doesn’t mean they will live in any old house to live there. Equally important to them is having the house they love. And most houses from the past don’t meet the standards of today’s buyer. Most buyers like new, low maintenance homes. They also want a home with modern conveniences and that fits their lifestyle. So, as a seller, keep these points in mind when selling a house in a teardown area.
For a buyer to get their expectations met from an older, obsolete house is a challenge. Why? Well, the buyer could buy an old house and try to rehab and add-on to it, but those solutions are rarely practical. Often, it costs too much money, time, and effort to get the desired result. It would have been better to just tear down the house and build a new one.
Hence, this is the reason why teardown construction has become so popular in certain areas. To put it simply- People love the area; They have the money to spend on the house they want; So, they buy a house for the lot, tear it down and build a new home.
The Tear-down Home Value is in the Lot
Now, just because someone loves an area and has money, doesn’t mean they will overpay for a teardown property. The numbers need to make sense. People don’t like to pay an unfair price, especially, if they can get what they want from another property. And, of course, there is a budget, appraisal, and bank requirements to meet.
Actually, what happens with pricing in a teardown area is that it becomes standardized. There aren’t huge price fluctuations from one property to the next. For example, there can be an entire subdivision with a variety of house designs and sizes, but there will be very little difference in price. Why? The house has almost nothing to do with the value of the property. The value is in the land or lot. The buyer is only going to pay for the value of the land.
Selling a house with this in mind will help you with the process of, realistically, evaluating the sale price of the property.
Seller Trying to Get Too Much for a Tear-down House
Unfortunately, many people don’t understand these teardown principles. They think, “I can sell my house for more money, especially if it’s fixed up.” They hope for a buyer to come along that wants to live in their area and who won’t mind living in an older, obsolete house. So, they put the house on the market above the value of the lot, sometimes even wasting money on rehab and repairs.
What happens? The house sits and sits for months, even years. Where are the buyers? They are purchasing properties in the teardown area that are priced right, at the value of the lot.
Instead of hoping for an unrealistic price, the owner would be better off marketing and selling the property at the real value of the lot. Imagine the time and money that could be saved. The monthly holding costs, updates and repairs add up fast. And many times, the amount spent on those expenses exceeds any money that might have been made if the lot even sold above the lot value. Also, think about this. After spending all that time and money to overprice it, you’re still at square one, stuck with a house and needing to sell it. A lot hassle that could have been avoided and house that could have been sold long ago.
Selling Your Tear-down House
The great part about selling a tear-down house is that you don’t have to do any work to sell it. And you don’t have to worry about showing the house, because the buyer wants the lot, not the house. Simply, put the house on the market, and advertise it as tear-down home build.
The methods for selling a tear-down house are pretty standard, which is to list it with an agent or sell it yourself. Essentially, it comes down to if you like to handle negotiations yourself or if you like someone else to handle them. Because of the ease of not showing the house, many owners handle the sale themselves. Often times, they may not have to do any advertising, because they have been approached by a buyer or know how to find one. And, if needed, they can hire an attorney and title company to help close the deal.
Regarding your buyer, they will either be a builder, an investor, or an owner-builder. Typically, they are all qualified buyers and serious about buying the property. So, you don’t have to worry about tire kickers.