Need to Know - Buying a Lot with a Tear Down

These days, the pandemic associated surge in demand has created a backlog of available, buildable lots so many people are looking at lots with existing structures on them. We'll walk you through what due diligence you'll need to do and how you can save money on demolition costs. In some cases the existing building can actually be an asset because of existing infrastructure, tax write-offs and more!

How to I know if this house is a good candidate to be demolished?

There's no hard and fast rule here but we highly recommend building a house that's on par with the neighborhood in terms of price, quality and features. If the cost of demolishing and re-building exceeds the average price of similar homes in the neighborhood then it's best to pass on the opportunity. Sometimes a tear-down lot is priced over this level because it's a large lot that needs to be legally split into multiple lots. But rezoning is a job best left to a professional land developer because it can take years.

Should I Hire a Demolition Professional?

In most jurisdictions, demolition contractors are licensed and regulated. Even though it's a fairly simple job, there is significant liability involved with dangerous building materials and environmental contaminates like asbestos, lead paint, mold and fuel oil. A professional demolition contractor will handle all of this as well as getting permits.

Can I reuse the foundation?

Technically yes, but in general we recommend against it for two reasons. The first is that it's a pretty minor cost savings since it will have to be inspected by a professional engineer, will need soil tests, etc. The second reason is that we don't believe that your new house plan should have to be constrained to partially or fully fit the existing foundation. In our experience it often ends up resulting in an inflexible design that wastes usable space. By starting from scratch you can maximize your house to the zoning law, the best views and the best use of interior space.

Can I Reuse Utilities?

One of the many benefits of buying a tear down lot is that often times the utility infrastructure is all ready in place. Before putting in an offer, it's important to get professionals out to determine the reusability of each service and quote tie-in costs or upgrade costs of applicable.

Electric: Most existing structures all ready have electric service but there's a good chance it may be undersized for the power needs of a new dwelling.

Sewer: If there is an existing sewer line that ties into a town sewer, have a plumber come out an inspect the line with a scope. There could be significant cost savings if the sewer lateral does not need to be replaced. If there is an existing septic system, it is unlikely to viable and will most likely need to be upgraded and replaced.

Water: If there is a town water line, check the pipe material, the meter box and the flow. If there is a well, have a professional well installer come out to validate it's functionality.

Perform a Zoning Compliance Review

Just because there is an existing building there, does not mean that you can build in the same way. Often older buildings are 'grandfathered' in because the zoning code changed or got more restrictive after they were originally built. Once you demolish a structure you will lose the 'grandfathered' status and may find that bulk regulations like lot setbacks or height restrictions make the lot unbuildable or undesirable. We have a post on zoning reviews.

Talk to Your Neighbors

Make sure to start the relationship with your new neighbors off the right way. Tell them what you're planning, what hours the contractors will be working and offer concessions if necessary. If their lot is downhill from yours offer to put up silt fencing to filter debris from runoff. If your neighbors houses are particularly close it might help to have your demolition contractor set up a water misting system for dust control during the main demolition phase.

Demolition vs Deconstruction:

Demolition is the act of quickly destroying a house and loading it into dumpsters to be hauled to a landfill. It's often the quickest option if you are in a rush to start building but can be wasteful and environmentally unfriendly.

Selective Deconstruction is the act of carefully pulling out usable components of an existing house to resell. There are many non-profit organizations that do this which is a huge benefit because you can write-off the value of the donated parts. It's much more environmentally friendly because things like plumbing fixtures, lighting fixtures, cabinetry, countertops, reclaimed hardwoods, windows, solid core doors, and appliances can often be refurbished and reused. Deconstruction is really only an option if there are salvageable things left in the house. If the house has been sitting vacant with water leaks and mold for decades it is unlikely to have anything of value.

Whole House Deconstruction is similar to selective deconstruction but goes even further to try to recycle up to 90% of the house. In some cases it may cost more than selective deconstruction depending on the market for recycled building materials (but is a greener option).

Example Cost Savings:

You buy a property with a house on it and get quotes from both a demolition company and a deconstruction company. The demolition company quotes you $20,000, while the deconstruction company quotes you $30,000 but tells you that the retail value of the donated parts is $50,000. At a 30% average tax rate, that $50,000 write-off is worth $15,000 to you, which means that the net cost of deconstruction is only $15,000. So in many cases deconstruction can be both more environmentally friendly cost-effective.

Coordinate Among Subcontractors

Demolition contractors often rent the same equipment (backhoes and bulldozers) as foundation contractors. See if you or the general contractor can rent the equipment for a sub-contractor credit in return and optimize the schedule to maximize the equipment rental savings.

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