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You Find the Lot of Your Dreams, but There’s a House on it: Do You Remodel or Tear it Down?

If you’re at the stage of planning your custom dream home, where you’re actively searching for the ideal building lot, it’s not uncommon to find a house already sitting on it. Someone else discovered it before you did. Your heart sinks because it’s absolutely perfect. If the property isn’t listed for sale, most seekers will keep on looking for second best. Moving on is certainly an option. However, there are two other exciting angles to consider.

If your focus is on living on the right piece of property, in the perfect location, with ideal views, and a neighbourhood that checks all the boxes, you may be up for the challenge. You will want to contact an experienced and very creative Realtor® to research the home and its owners, discover their situation and their ‘hot button’, and propose a sale that may help the current owners move on to a lifestyle and location that helps them achieve another dream. For example, the owners may be empty nesters and downsizing could be a good option for them. They may like to live closer to their children. A skilled and creative agent can be invaluable in securing your perfect property while arranging the sale and purchase of another home that is more attractive to the current occupants.

If the deal can be made, the first option to consider could be an extensive remodel. If the existing house has ‘good bones’, there’s a chance it can be reconstructed into your dream home. Alternately, the house will be a teardown, AKA a knockdown, and that needs to be factored into the negotiations.

Should you buy a vacant lot or a teardown property?

In older developed communities there is often little vacant land available on which to build a new home. In Canada’s limited housing market, teardowns are becoming an increasingly popular option for prospective buyers. So much so, that many Realtors® are openly targeting that market with catchphrases like “Attention Builders!”. If you’re a first-time home buyer, picking up a teardown in your desired neighbourhood could be the best way to buy the land at an affordable price.

You’ll want to consult with your designer/builder from the very start because there are many factors to consider. Can your dream home plans be built on the lot you’re considering, or can the floor plan be adapted to work? When discussing the viability of your project with municipality officials, your designer or architect will likely be asked to submit official plans.

If you’re building a passive house or net zero building, is it possible for your house to face south on this property? How close are your neighbours, or will they be, if you build a larger house? Is it a heritage house that can’t be demolished, or your new build will not fit the character of the neighbourhood, so a permit cannot be issued? Are there other zoning challenges? In some cases, grandfathering rules have permitted an old house to stand even though zoning restrictions have since changed, and the current regulations will affect any new construction.

The one great advantage when buying a teardown property is you don’t have to give any consideration to the layout, kitchen cabinets, those broken tiles in the bathrooms, the undersized bedrooms or the structural condition of the house; it’s all coming down. In fact, the worse the house looks, the easier it may be to get a price reduction.

A teardown is going to be a very big and complex project, so it’s important to evaluate your threshold for frustration and dealing with potential zoning and permit delays when you’re making your decision on the property. Two years is not an unusual timeframe for the teardown and rebuild process. Buying a fully-serviced lot is a lot simpler, and permits are a lot easier to secure. So the question is, how much do you want your dream home built on this lot?

Will it be a remodel or full demolition?

From an investment standpoint, the new home you build should generally be worth at least two to three times what you paid for the teardown property. If the financing is available, starting fresh is most likely ideal. But the total cost can sometimes be overwhelming, and it may be necessary to consider remodelling to afford to have your home situated on that lot.

Another consideration is where your family will live during the extended teardown and rebuild period. With a large-scale remodel, it should be possible to live in one portion of the house, while other areas are being reconstructed.

Selecting the perfect lot for your teardown rebuild

A teardown rebuild is often the only way to have the house you want, built on the land you want, at a price that will fit into your budget. Remember that the purchase price of the property, demolition fees and costs to build your dream home all contribute to its total cost. The proximity of the property to schools, shopping, dining, parks and recreation, and transportation routes may be key considerations. Or the property may offer a spectacular view, with a treed lot overlooking the city or valley below.

Buying an old rundown property on a beautiful street typically represents an incredible investment opportunity. Buying the house to knock it down may provide you with your dream home for years to come – perhaps while your children are growing up – and then deliver a solid return later when you sell it.

Choosing your teardown/rebuild contractor

When choosing a teardown and rebuild contractor, you want a reliable, trusted builder with a lot of experience in dealing with local municipal zoning and bylaws, the allowable footprint and building code, and design/architecture. Your builder must be able to see your vision and help you construct the house of your dreams, but also make sure all the permits and inspections are handled, trades are scheduled and materials arrive at the right time. A teardown/rebuild has more ‘moving parts’ than a conventional build, so you need a builder who can make your dream come together.

A designer/builder can usually respond more quickly than a separate designer or architect and builder when the ideal property is located. You’re usually able to direct all your questions and requests to just one person. If you’re actively looking for the perfect lot, you may also want to have your whole team in place, including the real estate agent, the mortgage lender and a real estate attorney.

If a deal can be made, a lot of things will have to be checked before you pull the trigger on the property. Your team can work together to make sure the home and land meets all the requirements, so your new home can indeed be built on the lot.

An experienced builder will have plenty of experience in dealing with neighbours, having developed a sensitivity for handling situations before they become problems, and can advise you on the best way to work with them. It’s more than just the noise, tradespeople parked on the road, dust and mess. New upscale homes placed in an older neighbourhood will often begin to change its character, and that can lead to resentment. It’s important that your new home doesn’t overshadow the other properties on the block. Your designer/builder can help the exterior of your new home fit in with those already on the street.

Some other considerations when tearing down a house

There’s more to removing an old house than knocking it down with an excavator and hauling it away in big dumpsters. There’s usually a permitting and inspection process that ensures that any hazardous materials, like aluminum wire, lead paint, lead solder joining copper pipes and asbestos insulation are disposed of properly, and environmental regulations are followed. If the old home used a septic system, it may have to be removed or replaced, involving local environmental permits and inspections.

When discussing financing, you’ll want to discuss your plans carefully with your lender. Buying an existing home with a mortgage is commonplace, and if you qualify, it should be easy enough to get pre-approved before approaching the prospective seller. A traditional mortgage requires the home be kept in good condition, as security against the loan. Buying an existing home with the intent of immediately tearing it down, and then building another is far more complicated. The mortgage you need involves the purchase of the old house, demolition, and then building the new home.

The takeaway

In mature neighbourhoods in developed cities and towns, vacant land can be hard to find, and the perfect lot for your dream home is probably already occupied. It may be possible to remodel the existing house to fit your vision, but tearing down the old house to build fresh has become a very popular strategy. It’s important to work with a good designer/builder or architect and builder, a creative Realtor® and a flexible lender to put a plan like this together, but if you do your homework and come prepared, you can have the custom home you want, on the prefect lot.

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