True or False: To be a Teardown, a Property Must Be in Poor Physical Condition

Housing Market Misnomers

One of the biggest misconceptions in residential real estate is that, to be a teardown, a home must first be falling down.

Hardly.

All “teardown” means is that the home is less valuable than the land underneath it.

That can be the case for at least two reasons other than physical condition:

One. The home is undersized relative to its lot size.

Dozens (hundreds?) of perfectly habitable ’50’s ramblers in choice Edina neighborhoods have been torn down the last decade or so because they’re simply too small.

When a 3 BR, 2 Bath rambler with 1,500 square feet sits on a .30 acre (or bigger) lot in an area of +4,000 square foot homes, it’s destined to be a teardown regardless of its condition, because the neighborhood supports new construction over $1.5 million (note:  if you live on the coasts, add a zero).

Two. Functional obsolescence.

Of course, it’s also the case that lots of those ramblers — while in perfectly good condition — also had small Bedrooms (less than 100 square feet), no Master Bath (and perhaps only a small, dated Hall Bath), and a small garage (anything under three-car).

Not to mention a too-small Kitchen, less-than-open floor plan, and a dark, dingy basement with low ceilings.

Floor Plan is Forever

Even though none of those features are defects, per se, they don’t reflect modern housing preferences — and are almost impossible to remedy, at least cost-effectively, using the existing structure.

So, the next owner — or the builder who puts up a spec house for the next owner — simply starts over . . .

See also, “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 . . .” 



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