Rules of the Game
The flyers started showing up again about a year ago. The builder is eager to buy our house and can offer us a very competitive price because real estate agents wouldn’t be involved. He already has a buyer who wants to remodel the home.
Uh-huh. What he really wants to do is tear it down. Or at least take it down to its foundation, to avoid building to a more stringent new-home code, and start over. You can look up and down the street to see how this game works. We’re waking up to the sounds of air guns and delivery trucks again in our close-in Washington D.C. suburb. The teardown market is back in full swing after a two-year respite brought on by the downturn.
The dynamics are a little different this time around. Builders of all sizes, not just small custom builders, are involved. Some of the region’s largest builders, though typically not the national production builders, are bidding on infill lots and winning. Everyone is doing their homework, searching for smaller, less expensive homes in a well-heeled neighborhood, sometimes using county records, other times using their eyeballs. They want to find outcast homes, preferably before real estate agents get to them, in neighborhoods where home values are high and growing.
Our 2,800-square-foot house is a candidate, despite the considerable work we’ve done to it through the years. Though it may not be an ideal candidate. According to recent assessments, it’s worth about half of what the 4,000 and 5,000 square foot behemoths up and down the block are selling for.
The unwritten rule of this game is pay about a third of the value of the finished home you would sell on the lot. That’s making it increasingly difficult to stay below the magic $2 million mark, where buyers would just as soon buy a custom home.
When we moved into our Bethesda neighborhood 20 years ago, with some of the best schools in the state, our home was of average size and value. But things took off during the housing boom when a vibrant teardown market was born, similar to the ones in close-in neighborhoods in Dallas, Los Angeles, Chicago, Raleigh, New York, Houston, among other places. All of them, according to news reports, have rebounded in the last two years.
What’s different this time around is that the action is driven more by builders than wealthy homeowners, who during the previous cycle would buy a big lot with a small home and find a builder to tear it down and build a new one. The small builder in our neighborhood who specialized in this business wound up getting caught with some over-valued property when the end came and went out of business.
The builders this time around are in some cases buying lots close to major roads that homeowners probably wouldn’t have touched the last time around. But it’s the only way to hit the magic one-third rule. They also have to contend with McMansion regulations that restrict the size of the homes they can build.
Some builders even sell from an occasional model. I visited one that was open Sunday to see what might happen to my house. The emphasis was definitely on square footage for the dollar, rather than showcasing elegance or finesse. The builder was showing a wide-open first floor plan, a massive back porch that traversed the entire backside of the house, and a large walk-out basement with a bedroom.
The salesperson assured me that the wide-open floor plan impressed buyers, presumably family buyers who wanted to be together in one big space. It clearly wasn’t aimed at an empty nester like myself. Besides the powder, there was only one other enclosed space, an office, on the first floor. The bathroom wasn’t big enough to accommodate a shower if you wanted to convert the office to a first-floor master.
The teardowns in Bethesda are easy to spot, since they tend to have a similar appearance. I call it the mid-Atlantic style, though its roots are probably in Victorian. It’s characterized by a large a front porch, some
stone, a strong gable element, and lap siding, often painted light blue or green. Apparently it’s the safest bet.
The example shown above was built on the site of this one story Colonial rancher.
My wife and I would consider selling our house for something smaller, especially if we could find something in a nice neighborhood. But most of the new homes in the neighborhoods where we’d like to live are too big, which is another story. I guess it’s still early in the housing cycle. Our home is going to be worth more if we hold onto it for a while. ?
Boyce Thompson is the former Editorial Director of Builder Magazine, and the author of The New New Home.
The flyers started showing up again about a year ago. The builder is eager to buy our house and can offer us a very competitive price because real estate agents wouldn’t be involved. He already has a buyer who wants to remodel the home.
Uh-huh. What he really wants to do is tear it down. Or at least take it down to its foundation, to avoid building to a more stringent new-home code, and start over. You can look up and down the street to see how this game works. We’re waking up to the sounds of air guns and delivery trucks again in our close-in Washington D.C. suburb. The teardown market is back in full swing after a two-year respite brought on by the downturn.
The dynamics are a little different this time around. Builders of all sizes, not just small custom builders, are involved. Some of the region’s largest builders, though typically not the national production builders, are bidding on infill lots and winning. Everyone is doing their homework, searching for smaller, less expensive homes in a well-heeled neighborhood, sometimes using county records, other times using their eyeballs. They want to find outcast homes, preferably before real estate agents get to them, in neighborhoods where home values are high and growing.
Our 2,800-square-foot house is a candidate, despite the considerable work we’ve done to it through the years. Though it may not be an ideal candidate. According to recent assessments, it’s worth about half of what the 4,000 and 5,000 square foot behemoths up and down the block are selling for.
The unwritten rule of this game is pay about a third of the value of the finished home you would sell on the lot. That’s making it increasingly difficult to stay below the magic $2 million mark, where buyers would just as soon buy a custom home.
When we moved into our Bethesda neighborhood 20 years ago, with some of the best schools in the state, our home was of average size and value. But things took off during the housing boom when a vibrant teardown market was born, similar to the ones in close-in neighborhoods in Dallas, Los Angeles, Chicago, Raleigh, New York, Houston, among other places. All of them, according to news reports, have rebounded in the last two years.
What’s different this time around is that the action is driven more by builders than wealthy homeowners, who during the previous cycle would buy a big lot with a small home and find a builder to tear it down and build a new one. The small builder in our neighborhood who specialized in this business wound up getting caught with some over-valued property when the end came and went out of business.
The builders this time around are in some cases buying lots close to major roads that homeowners probably wouldn’t have touched the last time around. But it’s the only way to hit the magic one-third rule. They also have to contend with McMansion regulations that restrict the size of the homes they can build.
Some builders even sell from an occasional model. I visited one that was open Sunday to see what might happen to my house. The emphasis was definitely on square footage for the dollar, rather than showcasing elegance or finesse. The builder was showing a wide-open first floor plan, a massive back porch that traversed the entire backside of the house, and a large walk-out basement with a bedroom.
The salesperson assured me that the wide-open floor plan impressed buyers, presumably family buyers who wanted to be together in one big space. It clearly wasn’t aimed at an empty nester like myself. Besides the powder, there was only one other enclosed space, an office, on the first floor. The bathroom wasn’t big enough to accommodate a shower if you wanted to convert the office to a first-floor master.
The teardowns in Bethesda are easy to spot, since they tend to have a similar appearance. I call it the mid-Atlantic style, though its roots are probably in Victorian. It’s characterized by a large a front porch, some
stone, a strong gable element, and lap siding, often painted light blue or green. Apparently it’s the safest bet.
The example shown above was built on the site of this one story Colonial rancher.
My wife and I would consider selling our house for something smaller, especially if we could find something in a nice neighborhood. But most of the new homes in the neighborhoods where we’d like to live are too big, which is another story. I guess it’s still early in the housing cycle. Our home is going to be worth more if we hold onto it for a while. ?
Boyce Thompson is the former Editorial Director of Builder Magazine, and the author of The New New Home.
