Buy New or Tear Down?
June Fletcher, Wall Street Journal, March 30, 2012, link
Q. My kids are grown and I’m looking to relocate closer to downtown D.C. I want to a new house with a first-floor master suite. I have visited every new-home development in the area I’m interested in, but few offer first-floor masters. Out of desperation, I am now thinking of buying an older house, tearing it down, and building what I want. Does this make sense? What’s involved?
–McLean, Va.
A. Before you give up on new-home developments, wait a while, since your choices are likely to improve soon. The Urban Land Institute recently released a forecast that projects a huge bump-up in national housing starts over the next two years. Meanwhile, the National Association of Home Builders expects single-family housing starts in the Washington D.C. metro area to jump 24.7% in 2012 and 37.3% in 2013.
In the meantime, weigh the pros and cons of a teardown.
On the plus side, you can choose the design and neighborhood you like; you’ll be in a place with mature landscaping and established amenities; and you won’t have to choke on dust and dodge concrete trucks while your neighbors’ homes are constructed, as you would in an all-new community.
On the other hand, unless other homes have been replaced, you may wind up with the most expensive house in the neighborhood, which will limit its appreciation potential. If you want to build a bigger house than what’s there now, you could face zoning hurdles. You could also attract anger and even legal challenges from neighbors who don’t want a new home nearby because it will make theirs look obsolete.
If this doesn’t daunt you, the process is straightforward, and similar to building on a vacant lot. However, you will need to have the old home inspected for hazardous materials like asbestos (and make arrangements to have it removed safely if it does); get a permit from the building department and permission from the lender to tear it down; and notify fire and utility companies so utilities can be disconnected properly.
Your builder will guide you through this process, so take care in picking one. Infill building used to be the province of small builders, but during the recession many larger ones got into the game, too. As you compare them, don’t just look at the bottom line. Check out the quality of their finishes, appliances, HVAC systems, windows and doors. Ask how often you’ll be allowed to visit the home during construction, and what you’ll be charged if you change your mind about anything during the building process. Compare their warranties.
Get a list of at least five customer references, and if possible, visit them. Ask private builders for bank references; read the annual reports of public ones. Check out every candidate you’re considering with the Better Business Bureau, and also do Internet searches of the businesses’ names, along with the word “complaints.”
Remember, once you sign a contract with a builder, you are locked in—so before you begin fantasizing about your dream home, do your homework.
I approach my real estate practice with a commitment to provide superior service. I have a passion for my chosen career and look forward to being your tenacious advocate for all your real estate needs.