Anonymous
Post 02/27/2012 16:56     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:And yet, those midget 50s and 60s tract homes built for the lower classes WERE STILL CONSTRUCTED MORE SOLIDLY THAN HOUSES ARE TODAY!


Are you a home builder.


We live in one of those and we have had several builders knock on our door asking if we would sell it. We tell them know, we are going to renovate and add on to it and they offer to do the work becuase those houses are so sound it is easy to add a second floor on and create a much better house than they can build from scratch.


Additions still don't pay off the same ROI as new construction and you still have an old part that needs maintenance vs the new addition.


Not sure I fully agree with that, on new construction you will often take a depreciation hit and have the already mentioned issues of new construction like settling, nail pops, etc., all of which can be frustrating -- and "new" does not mean without flaw or not needing punch list type work or even repairs.

I represented a well known quality builder in NJ who our family dealt with for many years and the owner/president of the company even told me --- to my shock & surprise -- that he did not recommend buying a new house, even one of his ... "let someone else deal with the headaches & stress and give it a shakedown cruise for a few yrs."

Depending on what you do in an addition, you can still recoup substantial % of cost, on the work we're doing on a $500k reno/addition it projects to 65-70%+ recoupment, which means net cost of only $200k or so. Overall less expensive than moving and paying a whole new set of closing costs, RE commissions, VA transfer taxes etc.

If the old part of the house is well maintained and sound (ours is), I'm not sure there's a huge difference in maint. between old & new (we have new systems already in the 62 yr. old main house).

And there is no question the quality of construction in our 1950 Broyhill house is better than almost all the new construction I see including many in the $1.5M -2M range.


new homes have 10 year warranty and 2-5 year cosmetic warranty so those issue would work themselves out and be fixed for free.
Anonymous
Post 02/27/2012 16:49     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:The irony in all of this, OP, is that those 50s houses you think have no curb appeal are both very chic on the West Coast, where real estate trends tend to begin. The trend has been away from larger mcmansion style homes to smaller, more sustainable houses. Smaller rooms for better energy efficiency. Mid-century chick... Also, those 50s homes were constructed with far more craft and care than pretty much anything that gets thrown together today. Quite shocking the difference in quality.


Yes, some of the mid-century houses, like Eichlers, are now in National Register historic districts.

And speaking of that, anyone contemplating a teardown should confirm not only that there are no historic preservation requirements but also that there are no zoning overlays in place that would restrict teardowns.
Anonymous
Post 02/27/2012 16:44     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:* ratify a contract on an old house with a big lot
* during the inspection go with a home-builder you like (or architect in your case). They will OK the lot for various designs, and permit-likelihood
* close on the old house
* get designs ready, file for permits (~3 mos), line up construction fin w/builder
* builder does demolition and building (4-6 mos)
* refi if you want
* move in!

1st issue and probably the most difficult is finding a suitable lot, you will probably be in competition with spec builders and other people who want to do the same as you. Then you have to spend thousands up front on engineering/architect fees/permitting/disconnecting utilities/new utility hook ups, it goes on and on. Just removing the dirt once you have excavated will likely run over 15K. The builder can do all this for you but it will cost $$$$. Plus you need to pay for the property (land that you might have paid big $$$ for) while all the upfront engineering, permitting, utility, demo work is being done. It could be 3-4 months that you are making a mortgage payment before you even break ground. Builder's timeframe is depends on lots of different factors. Constructions loans are expensive. Best thing to do is go meet with a build on your lot builder. I have done this process three times, two times with loans, once where we paid cash for the entire house, except for the land which we has a loan for. It will take up a lot of your time and money but in the end you will have a great house.
Anonymous
Post 02/27/2012 16:12     Subject: How do teardowns work, and do they really 'work'?
* start interviewing builders or architects now and choose (either can help a lot with ALL of the process and facets. they also like that they don't have to pay the titling and realty fees either (on the flip or final product)).
Anonymous
Post 02/27/2012 16:10     Subject: How do teardowns work, and do they really 'work'?
* ratify a contract on an old house with a big lot
* during the inspection go with a home-builder you like (or architect in your case). They will OK the lot for various designs, and permit-likelihood
* close on the old house
* get designs ready, file for permits (~3 mos), line up construction fin w/builder
* builder does demolition and building (4-6 mos)
* refi if you want
* move in!
Anonymous
Post 02/27/2012 15:12     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:And yet, those midget 50s and 60s tract homes built for the lower classes WERE STILL CONSTRUCTED MORE SOLIDLY THAN HOUSES ARE TODAY!


Are you a home builder.


We live in one of those and we have had several builders knock on our door asking if we would sell it. We tell them know, we are going to renovate and add on to it and they offer to do the work becuase those houses are so sound it is easy to add a second floor on and create a much better house than they can build from scratch.


Additions still don't pay off the same ROI as new construction and you still have an old part that needs maintenance vs the new addition.


Not sure I fully agree with that, on new construction you will often take a depreciation hit and have the already mentioned issues of new construction like settling, nail pops, etc., all of which can be frustrating -- and "new" does not mean without flaw or not needing punch list type work or even repairs.

I represented a well known quality builder in NJ who our family dealt with for many years and the owner/president of the company even told me --- to my shock & surprise -- that he did not recommend buying a new house, even one of his ... "let someone else deal with the headaches & stress and give it a shakedown cruise for a few yrs."

Depending on what you do in an addition, you can still recoup substantial % of cost, on the work we're doing on a $500k reno/addition it projects to 65-70%+ recoupment, which means net cost of only $200k or so. Overall less expensive than moving and paying a whole new set of closing costs, RE commissions, VA transfer taxes etc.

If the old part of the house is well maintained and sound (ours is), I'm not sure there's a huge difference in maint. between old & new (we have new systems already in the 62 yr. old main house).

And there is no question the quality of construction in our 1950 Broyhill house is better than almost all the new construction I see including many in the $1.5M -2M range.
Anonymous
Post 02/27/2012 14:41     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:And yet, those midget 50s and 60s tract homes built for the lower classes WERE STILL CONSTRUCTED MORE SOLIDLY THAN HOUSES ARE TODAY!


Are you a home builder.


We live in one of those and we have had several builders knock on our door asking if we would sell it. We tell them know, we are going to renovate and add on to it and they offer to do the work becuase those houses are so sound it is easy to add a second floor on and create a much better house than they can build from scratch.


Additions still don't pay off the same ROI as new construction and you still have an old part that needs maintenance vs the new addition.


not when you bought your clos ein Bethesda hosue for 200 and throw in another 200 into it makes it just like the 1.5 million houses.
Anonymous
Post 02/27/2012 14:38     Subject: Re:How do teardowns work, and do they really 'work'?
OP here. I guess I don't stand a chance of getting a reasonable deal if the area is full of aggressive realtors trying to make money off of novice home-buyers like me. I'm ok with paying the realtor a fee (Well, actually, I'd rather not, but I don't think I can outsmart the system as it currently stands)


OP, you seem very inexperienced to be taking this on yourself. Are you aware that one of those "aggressive realtors" can work FOR you, walk you through every step of an incredibly complicated process, WITHOUT being paid a fee by you?

What about this supposed decrease in US property prices--the DC area seems to not following the national pattern. I moved here in 2010, so missed the peak apparently, but prices still here are quite high, I think.


All real estate is local. "US property prices" have nothing to do with "DC area property prices" as all market conditions differ widely. And as far as "DC area property prices" go - depends where you're looking. You can find a $22K teardown in close-in Prince George's County. Or a $650K teardown in close-in Montgomery or Arlington Counties. See how that works?

Anonymous
Post 02/27/2012 14:35     Subject: Re:How do teardowns work, and do they really 'work'?
OP - just an FYI - you will need to have the cash to pay for pretty much the entire renovation, b/c nowadays lenders will not give a mortgage for more than the sales price. It used to be that you could get a mortgage for what the renovated house would appraise for, but no more.

I *think* construction loans can be available, but they are usually at a very high interest rate and I'm not sure how available they are to a first time homeowner.

All this is to say that if you do the teardown route, you'd likely need to go with a builder who would finance the construction and build it into your sales price.

You - for example - won't be able to buy a property for $400k with the expectation of doing any renovations, and get a lender to give you a mortgage for - say - $800k so that you can use the difference to finance the construction.
Anonymous
Post 02/27/2012 14:26     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote: People on our street get letters every spring asking if they'd do a friendly sale, the other 50 letters are from real estate brokers hoping they can get 3-6% from selling land, or better yet 3-6% fees on the land plus a $600,000 new build.


OP here. I guess I don't stand a chance of getting a reasonable deal if the area is full of aggressive realtors trying to make money off of novice home-buyers like me. I'm ok with paying the realtor a fee (Well, actually, I'd rather not, but I don't think I can outsmart the system as it currently stands) but I'm sure the agents have a vested interest in getting top dollar even for the less desirable houses and tear-downs. So no bargains to be had. What about this supposed decrease in US property prices--the DC area seems to not following the national pattern. I moved here in 2010, so missed the peak apparently, but prices still here are quite high, I think.
I'd actually want to hire an architect to design my house rather than go with one pre-selected by a builder. I'm sure it would add significantly to costs, but it would allow me to have the "Wow factor". (Maybe i've seen too many episodes of the british show "Grand Designs" where someone builds an amazing, unique house). This is where the idea of getting a tear-down comes in. I guess I'm living in fantasy land.
Anonymous
Post 02/27/2012 13:42     Subject: How do teardowns work, and do they really 'work'?
I find it hard to believe that a family who paid off their house in 1967 really cares that they aren't getting that extra 25K, but whatever. Have you considered that maybe, gasp!--they love their home and its memories and plan on leaving it feet first?


We don't find that hard to believe at all. People on our street get letters every spring asking if they'd do a friendly sale, the other 50 letters are from real estate brokers hoping they can get 3-6% from selling land, or better yet 3-6% fees on the land plus a $600,000 new build.
Folks see the $800,000 their neighbor got in 2006 and the $550,000 the similar guy got in 2011 and get angry. Meanwhile, many just let their homes go, because (a) taxes & bills have increased so much and they're on a fixed income, and (b) they know they won't be selling to a move-in family.
Anonymous
Post 02/27/2012 13:27     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:

But eventually when the whole street has turned over (as ours has in Bethesda, but for the lone small, ugly split level from the 1950s that doesn't look ANYTHING like those nice Palm Spring mid-centuries), the street looks very nice and uniform again. It's the in-between stage that looks awkward. Ours was the first new house on the block and I didn't want to buy it because of that, but now it's an entirely different neighborhood. Went from old folks with no kids, to tons of families with kids.


Very interesting, PP. (OP here again). So maybe it'd be a good move to buy a tear-down in an awkward-looking neighborhood (by awkward I mean 50% or less new homes, 50% or more older ones), and then ride it out!! I guess that would mean that I'd need to plan staying put for a number of years.

How long did it take for your neighborhood to evolve? And ....if that last holdout 50s split were to go on the market, would it be too expensive (based on neighborhood) to make a logical tear-down case?
Anonymous
Post 02/27/2012 13:26     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:
What sort of things? Won't you have a better chance of having to replace items on an older home and have major problem come up like water intrusion, basement issues etc... roofing. New home come with a 10 year warranty.


I"m skeptical as well. A lot of this stuff is dictated by building codes, which only improve over time. I own a 50's house (rental) and a teardown (circa 2007). The difference in the electrics and plumbing is marked, since the requirements now are much stricter.

You even see it from a safety standpoint. The fresh air/venting requirements when the gas furnance was installed in the 50's house way back when are much more lenient (unsafe) than they are now.
Anonymous
Post 02/27/2012 13:23     Subject: Re:How do teardowns work, and do they really 'work'?
Anonymous wrote:
Related topic. What about the 50's ones that have been expanded? Some of them look somewhat unsuccessful aesthetically.


This is where it gets complicated, because the structure value goes up then. I live in a Bethesda neighborhood with lots of teardowns. If it's the original 50's house, then it will sell for $500-700k and get torn down. However, if it was expanded, it may be more like $800-900k. So the structure is more valuable, and the teardown economics don't work as well.

My parents' house is in this category. They did a tasteful (used an architect) expansion of their 50's house and I think it's worth $900k these days. At that rate, a buyer will be buying for the house, not the land, since it's too costly to make it work as a teardown.
Anonymous
Post 02/27/2012 13:19     Subject: How do teardowns work, and do they really 'work'?
Anonymous wrote:
Anonymous wrote:

Additions still don't pay off the same ROI as new construction and you still have an old part that needs maintenance vs the new addition.


How long are you planning to stay? Once your new house is 5-10 years old, it will start needing as much maintenance as an older house.


What sort of things? Won't you have a better chance of having to replace items on an older home and have major problem come up like water intrusion, basement issues etc... roofing. New home come with a 10 year warranty.