U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 06-28-2018, 11:49 PM
 
Location: Houston
1,032 posts, read 350,706 times
Reputation: 915

Advertisements

Do they charge the buyers “as if” the actual house was still there or do they only charge for the land plus a premium? I just bought a house in a gentrifying neighborhood. The older couple next door wants to raze the broken down house and sell the land (I suppose). They paid almost nothing for it. Does that make sense? Maybe the old house is beyond repair? The owner on the other side of the property may want to contribute half with me to buy the land. Not sure what the owner would charge for it though.
Reply With Quote Quick reply to this message

 
Old 06-28-2018, 11:56 PM
 
Location: midvalley Oregon and Eastside seattle area
2,961 posts, read 1,362,517 times
Reputation: 2444
Sellers are or should be charging what the future value of the land with new improvements. for example, a tear down could sell to a buyer who wants wants to have a SFH on a 6000 sft lot. Seller is willing to sell for $500,000. Buyer realizes that it will take $150,000 to bring the house upto modern standands to make his total cost to be $650,000. The Lender (Freddie) see's the $500,000 and says No Way for a SFH, Buyer says I'll do the 20% down on the $500,000 and pay cash for the renovation. At this point the bank says OK, we will make this a construction loan of $$400,000 at prime rate +5. So at the end the Buyer has a property that is worth a little better than $650k.

Now suppose he can make new 3 townhouses on this property. ...

Last edited by leastprime; 06-29-2018 at 12:17 AM..
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 05:40 AM
 
Location: The Triad (NC)
26,905 posts, read 58,020,547 times
Reputation: 29346
Quote:
Originally Posted by Hopelesscause View Post
How does owner of a “tear down” make $?
In short... they don't.
If the house had any value they would either stay or sell it as a house.
Tear downs come when the house isn't worth working on... but the land is.

Quote:
The older couple next door wants to raze the broken down house and sell the land .
Does that make sense?
Enough. But usually the buyer will do the work.
Are the older couple planning to redevelop the lot?
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 08:24 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,469 posts, read 50,738,531 times
Reputation: 28779
In Seattle, a tear down on a 5,000 sf lot will still go for $550k-900k, depending on location. With city permitting, it would most likely be replaced by a 4 unit condo building, each unit selling for $600k. That's 2.4 million, more than enough to cover the demolition, construction and come out with a nice profit. For developer, there are just not any vacant lots left,

so an old beat up house is the most cost effective way to go.


This was two years ago, and the market has gone nuts since then:


https://www.oregonlive.com/hg/index....00_double.html
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 09:38 AM
 
10,280 posts, read 6,533,002 times
Reputation: 10861
Quote:
Originally Posted by Hopelesscause View Post
Do they charge the buyers “as if” the actual house was still there or do they only charge for the land plus a premium? I just bought a house in a gentrifying neighborhood. The older couple next door wants to raze the broken down house and sell the land (I suppose). They paid almost nothing for it. Does that make sense? Maybe the old house is beyond repair? The owner on the other side of the property may want to contribute half with me to buy the land. Not sure what the owner would charge for it though.
Tear down is the value of the land. In some towns that have room to build a tear down land will have more value if it already has plumbing and sewer lines, etc, if the land has to be cleared and all utilities have to be put in it's more expensive. You also have to take into consideration the tear down and removal costs.
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 01:34 PM
 
Location: Raleigh
7,038 posts, read 5,224,011 times
Reputation: 9508
Quote:
Originally Posted by Hopelesscause View Post
Do they charge the buyers “as if” the actual house was still there or do they only charge for the land plus a premium? I just bought a house in a gentrifying neighborhood. The older couple next door wants to raze the broken down house and sell the land (I suppose). They paid almost nothing for it. Does that make sense? Maybe the old house is beyond repair? The owner on the other side of the property may want to contribute half with me to buy the land. Not sure what the owner would charge for it though.
To hear you describe it, this is a property they've owned for a while. Tear downs come in two varieties: One is a home that is in such poor repair as to be unworth fixing, the other being a serviceable home that isn't nice enough for the neighborhood it sits in anymore. Three blocks over from my house, there was a neighborhood of split level ranches on 1/3-1/2 acre lots, walking distance from excellent schools, the train to Downtown Chicago, and the nice downtown area of the village. Every one that has sold has been razed, even though there isn't anything wrong with them. One had a 3 year old kitchen and 2 year old roof. A death of one half the couple and the declining health of the other meant that she sold it to go into a Senior Apartment. It was knocked down. The same thing happened to my grandfather's house, which surprised me since it was in nice shape, if dated, and 2000 sf. But, someone decided that it was a big lot, and 4000 sf was better, and that was that.
Quote:
Originally Posted by MrRational View Post
In short... they don't.
If the house had any value they would either stay or sell it as a house.

Tear downs come when the house isn't worth working on... but the land is.

Enough. But usually the buyer will do the work.
Are the older couple planning to redevelop the lot?
Or the land is at such a premium as to command a much larger structure be put up.

So to answer your question, they make money on the appreciation of the lot itself.
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 01:44 PM
 
Location: Raleigh NC
7,797 posts, read 6,149,667 times
Reputation: 6908
pretty much what has been said. If it's an area with teardowns, it's what the LOT is valued at. The real "profit" for a seller is if their lot is large enough to accommodate subdividing the lot and having 2 acceptable lots and 2 houses.

As noted in the Seattle example, it also depends on what can be built there. Where I am, residential zoning is single-family, so you couldn't tear down one house and put up a condo building.

For a simple example ....

House sits on a 0.4 acre lot. City zoning allows 0.2 acre lot, most homes in the 'hood are between .2 and .33 acres. OP's "lot" was 0.3 acres and sold for $200K. The old people's lot is likely worth anywhere between $350K and $400K - that is, 2 not quite as good lots (about a 10% discount) or 2 equal lots.
Reply With Quote Quick reply to this message
 
Old 06-29-2018, 02:04 PM
 
3,608 posts, read 1,531,002 times
Reputation: 9959
If you bought a house in 1964 for $8000, and today you can sell it for lot value at $300,000, that's how.

Or, if you inherited the same house.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top