# 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, especially if it’s located in a hot area.

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.

That’s because 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%; then 3) divide by 3 to determine the value of the land.

Assuming the current top of the block is now \$800k, developers could safely put up a well-conceived and built \$1M+ spec home that pushed 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.

That’s what the homeowner could roughly expect to get from builders.

Photo Finish

A thoughtful CMA (“Comparative Market Analysis”) by a good local Realtor can determine if the existing home is worth more than that, after budgeting for any needed fix-up or prep costs.

If it’s not — or, it’s too close to call?

The listing agent markets to both owner-occupants and builders, and lets the market sort it out . . .

**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”).