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Making Sense of Home Teardowns to Re-Build a New Home

Written by Posted On Thursday, 30 March 2023 07:27
This lake front custom home was built on a lot that had a pre-existing home and was torn down to re-build. This lake front custom home was built on a lot that had a pre-existing home and was torn down to re-build. @Zbranek & Holt Custom Homes

The times are changing. As the demand for housing in preferred locations increases, the supply of developed lots for future homes is drying up. By design, cities grow from the inside out; once a town is established, residents want to live as close to the town center as possible. When observed from the air, one can see the circular growth of housing as it moves further from a city center to what we now refer to as the suburbs. Developers know that the farther from town they go, the cheaper the land will be; however, there is such a thing as too far. Eventually, the land location is no longer desirable to families due to traffic, available services, shopping, etc. Nevertheless, developers continue to buy cheaper land and continue to "sprawl" outward. As time goes by, cities and counties add regulations to future developments, which drives the cost of turning a piece of raw land into a residential homesite increasingly upwards. Soon, affordable housing is phased out.

Because new homesites are now often expensive, it sometimes makes sense to buy an existing home in a desirable location and demolish it so that the lot can be used again. This trend is occurring throughout the country and has given rise to sellers understanding that the land under their home is the actual value of their property. In our firm,Zbranek and Holt Custom Homes, 60% of the new homes we build now are on homesites that were repurposed by tearing down another home. This phenomenon is not just limited to the inner city; we build many waterfront homes and a higher percentage of those begin with a tear down. Simply put, the original owners got there first and wanted the same view and lifestyle that families today want.

Articles have been written about how the best lots are hiding under existing homes. When a new buyer only has an interest in the land below the home, it makes the transaction much easier for the seller. Specifically, they can take what they want from the home, there are no inspections, no adjusting old work to current codes, no updating or dealing with house showings. Also, a closing can often happen in a matter of days, versus weeks or months. From the buyer's perspective, in addition to getting a homesite in an ideal location, they know that water, electrical, sewer, and other needed services already exist on the property.

This repurposing of lots has opened the door to a new business that is booming in America: Residential Demolition Experts. These teams are educated in the removal of things like asbestos siding, lead pipes and paint, and other toxic materials no longer used or allowed in residential construction. From our experience, we can tell that business for them is booming since we routinely have to get on their schedule weeks ahead of our desired demolition date.

While there are many positive sides to repurposing land, not the least of which is preserving undeveloped land and green spaces, cities are just now understanding a significant downside. A new word is in the news lately around the country: gentrification. The simple definition of this long word is pricing existing residents out of their long-time homes. When older homes are demolished and newer ones built, it raises the property values of all of the properties in the area. When this continues long enough, families who have lived in their homes for decades find that they often cannot afford the new property taxes to keep their "legacy" homes. As one travels city by city, the new homes closer to town are now obvious. It seems to me that city managers can find a way to make this work for everyone. For example, if an elderly parent passes away, the family inherits the home; it makes sense that they will probably sell it if the home does not fit their current living situation. In this case, a new home can be built there and taxed accordingly. For the families who do not sell and wish to remain in their homes, a separate tax status should be created for them. Today, county appraisers simply take all of the sales over the past year and arrive at a "per square foot" property value for a given area. I think that if a traffic camera can locate a violator with a photograph of a license plate of a moving automobile and send the owner a fine, we should be able to create a taxing system that allows families to not be priced out of their homes through no fault of their own. But, that's just me.

As land costs continue to rise, governments continue to add costly development regulations to new subdivisions, and labor and material costs are an upwardly moving target, the slowdown of new developed homesites will continue to fall behind the growing demand. The answer is land re-use. This has been occurring in the commercial arena for many years as prime land values have soared. Only within the last ten years has it become more of a norm in the residential side of construction, and it is alive and well in all of the areas that we build in. As with most things in life, helping one side can hurt another side. Hopefully, the politicians and city managers around the country are working on this for everyone.

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Steve Zbranek

www.zhcustomhomes.com

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