Is it a poor decision to buy a house near tear-down age?
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Just look at Cary, NC, pretty much the biggest subdivision in America. Gigantic houses right on top of each other on tiny lots. Why? If I'm gonna do the burb thing, I want my own space and a house with some personality.
Whether the lot is tiny or not is relative, as is the "personality" of a house, inasmuch as an inanimate object can have "personality." In most parts of the nation, a quarter acre lot is not considered a tiny lot. Nor is a 2500-3000 sq ft home considered gigantic.
I don't think a 30 year old house is a teardown, and I wouldn't rule out an older house in a desirable part of town.
Thank you for your comments thus far. Clearly, I need to provide more information. My question is specific to McLean, VA. For those out of the area, it's close to DC and is very desirable for its easy/short commute to DC and excellent schools. One of the subdivisions I am considering is comprised of 300+ homes built in the 1970s and early 1980s and are on .5 acre lots. The other type of home I am looking at is generally a home built in the late 1990s or later and is in an area with a mixture of older (1950s and 1960s) homes. The second type of home generally has a lot size of .25 acres and replaced an older home that was torn down because a developer saw a profitable opportunity. I don't think structural soundness plays into the decision much at all.
Virgo describes the situation very well. One difference is that the tear-down homes tend to be larger (2500 sq feet or larger) and with outdated interiors.
I posted the question because we plan to stay in the house for the next 20+ years, until retirement. I'm concerned that the house may decline in value despite location because many of the homes in the subdivision with .5 acre lots do NOT been updated kitchen, baths etc which is not typical for McLean as far as I know. If so, I may be subject to whatever a developer would pay. If that's the case, then I thought I would be better off to buy a much newer home.
Follow the old rule........Buy the ugliest house in the best neighborhood. Sounds like it is the "tear down" as you call it. But, if you are living in it, why tear down a perfectly good house. Live in it, update it....There will always be people that prefer the older homes.
I am looking for a home in a very popular area in Northern Virginia--Mclean. I am curious which is the wiser financial decision: a home that is 25-30 years old but on a .5 acre lot OR a newer home (<10 years) on a .25 acre or smaller lot in a slightly less marketable area of Mclean. I assume that the older houses will be torn down in the next 10-15 years. I don't know what that means for us if we are the owners. Do we profit because the location will be extremely marketable or do we make a tiny profit because the value of the house declined due to age and the value is the land but a developer will offer much less than he/she stands to make?
Any thoughts? What determines when a subdivision reaches the tear-down stage?
I live in a town that probably has more tear downs than any other town in the country. It's really incredible that this tiny town has so many construction projects going on all the time. I have plenty of experience with teardowns and here's my advice:
First, understand that the age of a house has nothing to do with whether or not it's a good tear down. What makes a good TD? If a builder can make a reasonable profit in that spot. Period. If there are plenty of homes in your area that are older than yours and in much worse condition then those will become TD's well before your home because they will sell lower and therefore provide a better profit margin for the builder. Also, all things being equal I would MUCH rather sell my house to a person who will live in it rather than a builder. A builder will not pay as much as an end user because they have profit margin on their mind. Someone who will live in the house thinks a lot less about short term profit.
The best advice I can give you is buy in the best location your budget will afford. The one thing you can NEVER change about your house is the location. It's without a doubt the #1 determinant of a home's value. Lot size is less important than location.
I too live in an area with a huge percentage of tear downs and like MikePRU know that the builders care only about the potential profit from new construction HOWEVER I know several builders that are smart enough to do the calculation of what various amenities can add to the marketability of new homes. In my area there is a pretty well known list of "features" that help in sale of homes for teardown and the subsequent new construction: zoning that allows for a home of sufficient FAR to comfortably fit the needs of today's buyers, convenience to commuter rail, top rated schools, easy access for construction / marketing BUT enough privacy to attract buyers. Similarly if the home is in "too good" condition the builders will not be interested in competing with "live in it" type buyers -- even if the home is only a three bedroom two bath home BUT has no "deferred maintenance" issues it is unlikely to attract tear down builders in today's market. A few years ago builders were tearing down homes in good condition if they could replace such a house with something with 5+ bedrooms and 3+ baths but there has been a shift of both the mindset of "start home" type buyers and the builders so that if a couple with no need for a wing of rooms to house their brood can snag a well maintained home with a decent kitchen it ain't worth the builders troubles. People are not as willing to sign up for high property taxes and all the other costs of having a McMansion if nice solid home makes more sense...
There are a few things you may do in order to convince your lender to loan you (You might want to try the following if you really really like the house).
1. Let seller's agent know that you are unable to purchase the property unless seller is willing to lower the price. If he is willing to lower the price but not down to $250k, you might have to put in more cash to make the purchase. Or go to next step.
2. The seller agent might contacting your lender and convince your lender to lend to you. In order to do this, he might schedule another appraisal for this house for comparison. You will ended up paying for this appraisal. If the second appraisal is higher than your buying price, the chances are, your lender will allow you to purchase the house at agreed price.
3. If all these doesn't work, why not try another lender?
Before you do any of these, why not let your agent know first. He/she might have better insight on how to convince your lender. Good luck with buying. When I purchased my first investment property, this is one thing that I am always afraid of... low ball appraisal...
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