Looking for land or teardown in inner-ring suburb, where to start? (Edina: real estate, loan)

[Hadenman]

We currently live in the north metro, in an inner-ring suburb. We've halfheartedly looked for a bigger house than our 60's era split level, but didn't find anything worth the effort to move. I'd love to stay in the 694/494 loop to keep my commute sane, but would really like to build - a teardown or subdivided lot seems like the best way to do that.

I've seen teardowns and subdivision of double lots get snapped up quickly in the area. That led me to wonder how people hear about this stuff before it even gets on the market. Are they knocking on doors and seeing if people want to sell? Do they have a realtor with a sixth sense? Or do they just prowl MLS like the rest of us, and get lucky?

[MichaelItman]

Hi Hadenman,

Your best bet is to connect up with a well-connected real estate agent. That way you've got the best MLS search constructed for your needs so you see any available homes immediately when it comes on the market, but you'd also find out about great opportunities before they come on the market through your realtor's contacts. For example, I just helped a client find a great home before it was listed, because it was a property that a colleague of mine was about to list, and she let me know about it first.

Good luck in your search! Please let me know if I can be of any help!

All best,

Michael

[Captain21]

I think it is important to let you know there is nothing magical in this process. Almost all real estate is sold on the MLS, but most of the public don't understand that online websites are NOT the MLS. They have old and inaccurate information all the time, and it is difficult to act on a property fast once it becomes available.

You need these things to get ready to do this:
1) Get a realtor in the areas you are searching for. He/She has the market knowledge and contacts to best serve you. It is free to work with a realtor since the seller pays the commission. I for example work Roseville and the surrounding suburbs.

For example, do you even know what price point tear-down lots are going for? Do you realize this probably won't be financeable? That is because the house is in so much disrepair it is selling close to lot price. There are still ways to do all of this, but there are so many scenarios to go over with the Realtor and lender to make sure you are only looking at situations you can financially handle.

Another example is Lot size when considering what you can build on the lot and city code. Do you know what you want to build and how much it will cost?

2) Besides the loan officer you should already be speaking with builders to get an idea of cost.

3) Get set up on a MLS search so you are notified immediately when a property comes on that meets your criteria. Between the Realtor, Loan officer, and Builder we will have a very narrowed focus on what you will receive. Once that property/lot comes on the market we will have the ability to move fast and write an offer same-day.


There are places like Edina where builders literally have inside connections with probate lawyers who feed them properties, and there are investors that door knock. Like I said though the majority of real estate is sold through the MLS. What I just described to you is what all buyers represented have over you right now. It may or may not surprise you that over 90% of buyers use a realtor to buy real estate.

All you need to do is plan and prepare more with a focused goal. Financing is still 95% of real estate buying. If we get that squared away you will be able to find a property fast.

[Kebinminn]

Check with the suburbs you're interested in. Many have torn down blighted homes and are selling the lot for redevelopment. The city website should have information on their economic redevelopment authority.

[StilltheSame]

Connect with a renovation company - they are often aware of what is going to go on the market.

[Hadenman]

Thank you all for the detailed responses- this is great information! Step one is clearly to find a great real estate agent.

I suspected that I would be unable to secure financing for a lot or teardown since there's no collateral on the loan, so I'm prepared for that. Having to work within city building codes makes sense, and I can see how it limits what can be built on the property... but why get a builder involved just as a search for property is getting underway?

[Captain21]

That is a pretty good question. Just to review it sounded like you wanted to go buy the lot yourself. From there you would find a builder to build a home on it for you. The reason why I would reccomend getting a builder involved early in the process is to just make sure what you want for a house is financially feasible. This is a huge undertaking if you are going to try and do it yourself, so to me the 3 important people to have on your team still are:

1) Loan officer
2) Builder
3) Realtor

The order of us 3 does not matter, but any good realtor can help you find a lender and builder that works for you.

Also, you must know that the majority of buyers don't look for tear-down lots. Instead, they browse the MLS for new construction opportunities and the price point they are at. In other words, let the builder/investor do all the upfront work for finding great lots and you purchase the final product. IF they try to charge you a lot premium know that it is negotiable.

From a financing standpoint this is just what most people have to do. It is so much easier to get 1 nice easy loan from the bank, but once again this is why a good lender needs to be on the team with experience. The builder won't do models obviously haha, and I doubt they will even begin construction on the new home until they have a buyer.

Let's simplify this and just use an example of Roseville. If you are using the MLS search you can easily filter out all possible new construction. There is one main builder I know of right now that is currently active in the market, and every one of the homes being completed are above $500,000. You should have a search set up for every city you are interested in where ONLY new construction shows up. Then you can start to see what builders are pricing these homes at in the neighborhoods.

It also gives you a pretty easy list of builders where we can start interviewing them right? The ones that are active in the neighborhood are the ones who will go find lots for us.

Now everything I am saying assumes you know very little about new construction. I have no idea if you already know exactly the house you want to build and how much it costs. All I am saying is that for the areas I think you are looking in this will be expensive. The north suburbs and 694 are my backyard.

So to me once again it starts out with sitting down and figuring out first what are your goals and financially what can you do. Once that happens a realtor reviews the market and helps come up with a game-plan. Between the lender and Realtor we figure this all out relatively quickly, and that determines how we approach the situation with a builder.

I hope this makes a little more sense! Let me know if I can be of any help and good luck