- The Washington Times - Thursday, September 8, 2005

When does a house outlive its usefulness and would be better torn down than repaired? This question is creating controversy across the country, where a shortage in the housing pool has forced this type of infill development.

A teardown is a property that is purchased with a house. The house is then demolished, followed by the construction of a newer, bigger — and, it is hoped — better home. For the new homeowner, the teardown provides the feel of an established neighborhood in a new-home property.

Teardowns become more popular in a tight market where land and homes are scarce. Because the buyer is purchasing a property at its peak value, it’s not an inexpensive venture, either.

The buyer usually has purchased a perfectly good house at market price, and now the cost of demolition and building a completely new home must be absorbed. A very expensive teardown was purchased earlier this year in Westport, Conn., at the price of $14.6 million. The WestportNow news Web site keeps track of the teardowns in Westport’s aging housing pool. (Take a peek at www.westportnow.com and click on “Teardowns.”)

The teardown phenomenon has even launched a submarket in the real estate industry in which companies establish themselves as go-betweens for builders seeking rebuildable lots and buyers who want a teardown property.

So, when should you consider tearing down instead of rehabbing? That was the question I received from a homeowner who had moved into a property that sounded like it needed to be torn down. His list of defects included:

• Sagging roof from three layers of shingles.

• Flooding crawl space.

• Electrical safety hazards throughout.

The owner is estimating it will cost about $90,000 to fix up this house on which he already owes $150,000. The house is worth $260,000. Meanwhile, he has priced a modular bi-level home for $125,000 — but that doesn’t include plumbing, electrical and sewer hookup.

Thus, he can either put in an additional $90,000 or place a new house on the lot and owe more than what the property is worth today, hoping for growth in the equity over the next few years. As you can see from his situation, a teardown could be a solution or bigger problem. It also can come down to a plainly financial decision.

One of the most controversial issues that faces local jurisdictions is urban renewal and how a community’s historic character will change with the influx of infill development. Some local governments have established infill surveys or analyses sheets that look at each proposed project to determine its viability and, ultimately, its approval.

If you’re looking to carry out a teardown, your local jurisdiction may have criteria that must be met, such as that in the city of Davis, Calif. The municipality’s infill guidelines ask questions, such as does the project:

mContribute to the development of complete and integrated neighborhoods?

• Contribute to a mix of uses in the neighborhood?

• Contribute to the variety of housing types, densities, prices and rents, etc.?

mEnhance and not erode the existing neighborhood character? (This is a big factor.)

mCreate a compatible use with the adjacent community?

(By the way, the city’s Web site has a really cool page that documents with Flash animation the growth of the city during the last 90-plus years at www.city.davis.ca.us/gis/growth/.)

As communities move forward with land limitations for development, the concept of infill redevelopment will become more prominent. Citizens/homeowners will need to be more aware of the ins and outs, as well as pluses and minuses of this type development as it creeps into our neighborhoods and changes the way and look of how we live.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions of comments at his Web log (https://commonsenserealestate.blogspot.com).

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