Would-Be Home Seller to Realtor: “It’s NOT a Teardown?!? #%@&!!”
Pluses & Minuses (2 Apiece)
At least in my experience, for every long-time homeowner who’s (overly) invested in their home, psychologically-speaking, and can only see it through rose-colored glasses, there are another 3 (or 10!) hoping their home is a teardown.
Ditto for the listing agent waiting in the wings to sell it.
Their two-part logic?
One. The Seller doesn’t have to spend money fixing or updating anything,** never mind staging consultations, showings, or any other sales-related headaches; and
Two. There won’t be any inspection issues to wrangle over . . . because there won’t be an inspection.
Inspecting the Soil, Not the House
Of course, those two pluses can be at least partially offset by these two negatives:
One. While the home’s condition may not matter, the condition of the soil underneath it might (softer soil or land near wetlands can require pilings, which increase construction costs).
As a result, any sale might be contingent on the results of a soil test.
Two. Builders and developers pay wholesale, not retail.
The reason is that they need to bake in a profit for when they sell — something owner-occupants don’t have to worry about.
Crunching the Numbers
So, is it (a teardown)?
This 3-step formula is a good start: 1) determine the current top of the immediate block; 2) overshoot that price by 25% – 33%; and 3) divide by 3 to determine the value of the land.
So, if the current top of the block is now $800k, developers could safely put up a well-conceived and built +$1M spec home that punched all of modern Buyers’ buttons (open floor plan, high-end finishes, tall ceilings and lots of windows, wireless technology, etc.).
Dividing $1M by 3 = $333k.
So, that’s what the homeowner could roughly expect to get from builders.
A thoughtful CMA (“Comparative Market Analysis”) by a good Realtor can determine if the existing home is worth more than that (if it’s close, the listing agent markets to both future owner-occupants and builders).
**The local municipality may require the Buyer and Seller to hold a relatively nominal amount in escrow, until the Buyer’s new home plan is reviewed and approved.
P.S.: One of the nice things about teardowns for a listing agent, post-closing, is record keeping — as in, very minimal.
While the usual statute of limitations for agent liability on a deal is six years, once the existing structure is gone, I typically only retain documentation relating to soil tests, the Purchase Agreement, and closing worksheet (now called the “ALTA”).
See also, “True or False: To be a Teardown, a Property Must Be in Poor Physical Condition“; “East Edina Arbitrage — Housing Market Edition“; “How to Ruin a Perfectly Good Teardown (Huh?!?)”; “Buyer’s Agent: ‘Need a Lot/Teardown Up to $900k in East Edina’“; and “What’s Selling . . . East Edina.”
Plus these: “Is it a Teardown? How to Tell on MLS“; “Tear-Down Economics“; “Tear-Down Prototypes“; “Tear-Down Economics, Circa 2012”; and “You Know It’s a Tear-Down When . . .”
from RSSMix.com Mix ID 8230700 https://ift.tt/2lp7u0N
via IFTTT
Comments
Post a Comment