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Bring in the bulldozer
Get on Top of the Teardown Trend


When clients say they want to tear down and build from scratch, are you prepared to help them evaluate their options?

BY BARBARA BALLINGER

Since the teardown trend picked up steam in the late 1990s, entire blocks and neighborhoods have been bulldozed to make way for newer, bigger, and more luxurious homes. In desirable areas with older housing stock and scant open land, the movement continues at full force.

For people who are passionate about historic homes and adamant about preserving a neighborhood's original character, teardowns are a major threat. Many municipalities are fighting back with design restrictions, hefty demolition fees, and lengthy approval processes.

Yet, for buyers who know exactly the kind of home they want and where they want to live, teardowns can be an attractive option. When working with clients who are considering a teardown, you can help them evaluate the benefits and drawbacks of taking this course.

Reshaping Neighborhoods for Better or Worse

More than 300 communities in 33 states have witnessed widespread demolition, says Adrian Scott Fine, director of the Northeast Field Office of the National Trust for Historic Preservation and co-author of Protecting America's Historic Neighborhoods: Taming the Teardown Trend.

The affluent Chicago suburb of Kenilworth, Ill., is an example of how drastically teardowns can change a community's residential appearance. Nearly 50 homes have been torn down, half in the last three years, earning it a spot on the National Trust's 2006 list of America's 11 Most Endangered Historic Places.

Historic houses are not the only stock at risk, though their loss may cause the greatest dismay. Any house is vulnerable if it's on an attractive lot, is close to a downtown, and has a small or outdated footprint in other words, a house that's less valuable than the land on which it sits.

Teardown fever has led to the loss of architectural and socioeconomic diversity, preservationists say. The houses that replace teardowns are often considered too large for their lots, leaving little room for trees and backyards. They also block valued daylight from neighbors' homes.

As proof of just how widespread teardowns have become (and unpopular among old-house aficionados), the National Trust compiled a list of nicknames:
 
  • Northern New Jersey: "Bash-and-Builds" and "Bigfoots"
  • Denver: "Scrape-Offs" and "Pop-Tops"
  • Portland, Ore.: "Snout Houses" are new homes with protruding garages
  • Throughout the country teardowns also are called: "Trophy Homes," Starter Castles, Big Box Victorians," "Pink Palaces," "Taras on a Quarter-Acre," "McMansions," "Monster Homes," "Knockdowns," "Bulldozers," and "Scrapers."

When Does a Teardown Make Sense?

"A teardown should be a choice of last resort," says Robin Diessner, CRS®, broker-owner of Intero Real Estate Services in Phoenix. However, certain factors in a buyer's home search could make a teardown a viable option, she concedes.
 
  • When location is a must. If buyers want to be in a certain neighborhood where existing homes don't meet their needs or would be too expensive to remodel, a teardown may make sense, Diessner says. She knows first-hand how important this factor can be; she and her husband recently tore down their 1963 home, which had structural problems and poor energy efficiency. They were convinced to tear down and rebuild because of their irreplaceable view of downtown Phoenix, she says.
  • When it makes financial sense. Construction and architecture experts can perform a cost analysis of remodeling an existing home versus tearing it down. According to Fine and co-author Jim Lindberg, real estate practitioners and developers use the term, "Rule of Three," to gauge the economics: If you can sell a finished new home for about three times what you paid for the property, the conventional wisdom goes, a teardown will pay off, they say. The decision also should be pegged to the value of neighboring homes. For example, if the property and new home add up to $1.5 million, and it's near $2 million homes, then you've still got a "bonus" of $500,000, says Jerry O'Brien, sales associate at Coldwell Banker in Tenafly, N.J., who has torn down, built, and sold 13 homes with builders.
  • When the buyer is willing to work within local guidelines. Municipalities have become very strict about the size and style of new homes. Staying up to date with changing guidelines can be a full-time job. "Tenafly's codes change every year," O'Brien says. Tenafly currently limits new homes to 30 feet and goes to great lengths to prevent tree removals, he says. The buyer must present a plan that shows which trees will be removed and pay a $100 tree removal permit for every one to five trees. If the borough's director of public works thinks the trees should be replaced, the buyer must post a cash bond of $250 per tree, which is refunded after a new tree is planted. Tenafly also requires all curbs to be replaced, even if in good shape. Some suburbs also have enacted demolition taxes of $10,000 or more.
  • When there's not a tight timeline. Do your clients have sufficient patience? It can take years to design a house, gain the necessary approvals for tearing down a home and rebuilding, and complete construction.
  • When clients can handle the emotions involved. Make clients aware of the myriad building decisions they must make and the potential for stress. Building a new home from scratch may sound romantic, but it can be an emotional rollercoaster - especially when it's a teardown.

Doing (or Not Doing) Teardowns the Right Way

If clients decide to move forward with a teardown, they can take certain steps to ensure the home fits in well with the surrounding area and is accepted by neighbors.

It's smart for buyers to check the look and scale of neighboring houses before having their mind set on a particular size or style. They can work with a landscape architect to ensure that the landscaping will fit in and existing trees can be saved. To build a good relationship with neighbors who will have to put up with the construction, clients should meet with them early in the process and show them what the home will look like, Diessner says.

If clients decide against a teardown, they may want to reconsider looking for a home in the same neighborhood. "If at least one third of the houses are teardowns, I tell them that their house may not appreciate as rapidly (as the teardowns) or may become valued only for its land," says Doreen Rau, with Prudential Preferred Properties in Winnetka, Ill.

Sellers Need Teardown Knowledge, Too

When working with sellers in a neighborhood that's seeing a lot of teardowns, you can help them decide whether to invest in home improvements or market the home as a teardown candidate.

If the home has a lot of deferred maintenance or a dated floor plan and is located on an attractive lot, it may a buyer who wants to start from scratch. Instead of sprucing up the home for the general buying public, sellers could market the home "as is" to teardown buyers, including builders, who are tearing down homes as much as home owners.

"What you're doing in that case is listing the property for its lot value rather than for its structure," Diessner says.

Learn More

Teardown Resource Guide
This Web site, from the National Trust of Historic Preservation, provides information on the teardown trend, including a comprehensive glossary of terms that you'll need to know as you discuss teardowns with clients.



Reprinted from
REALTOR® Magazine Online 11/01/2006 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2006. All rights reserved.