Should the price of land be higher than an empty lot if there’s a tear-down structure on it or should it be lower?
I think it depends on the location. We live in a lake community. Folks around here pay top dollar for tear downs…essentially they are purchasing the land.
We have a relative in a summer resort town. They lived in a year round neighborhood of great homes. When people bought for $900,000 or so…or more…it was 50/50 whether they would renovate or tear down and build.
Sometimes tear down houses on lots are more expensive because they are in very desirable locations.
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Agree that it is location dependent. In my area, a lot with a house on it can be tricky to tear down because of the historic restrictions so an empty lot may be more desirable (and therefore more expensive) but it also depends on the condition of the house. Someone’s tear down may be someone else’s rehab.
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Same location. Two lots are next to each other.
The effect of the house on the value to you depends on whether you would tear down the house (negative value) or keep it (positive value).
But other potential buyers may have different preferences on tearing down or keeping the house.
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There are many considerations. Is it a tear down for you, or a tear down for all buyers? Has there been any development on the lot besides just the building that will be torn down such as connected utilities or sewer hookup, grandfathered zoning, driveway/road, … ? How expensive is it to tear down the particular existing structure, and are their complications such as asbestos/hazardous material?
You might look at similar sales in that area to get an estimation.
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Depends on the buyer. Two possibilities, but not all possibilities.
A developer/builder would generally be better off not having to spend funds on the demolition of the house, which may include potentialy toxic materials.
A buyer may want to live in the existing home, or rent it out, while the new house is being designed and a building permit is obtained.
If the property is an “eyesore,” then the new owner may want to keep the house on the property, while the approval process is ongoing, potentially giving the buyer leverage with the city/town.
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Good point about infrastructure things. Most empty lots don’t have the sewage, utilities, gas lines in place. These add costs! Also, the existing house lot could have other features that are pluses…maybe a nicely landscaped yard that could be preserved when the old house gets torn down…or renovated.
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Around here, if zoning requiements changed, you may grandfathered in to the older, less restrictive codes if you are able to use part of the old dwelling. That could make a big difference in what you can build.
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My thought was along the line of @Googie31 – if permits are hard to come by, a property that already has the regulatory sign-off for a certain footprint, septic, access, etc could be more valuable than a lot which would require applying for (and maybe not getting , at least as asked) all the same.
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My son’s next door neighbor passed away. Her daughter put the house up for sale, it was a tear-down. 80 people saw the house the first weekend and had 47 bids. The house/land finally sold for $430K above listing to a contractor, at slightly below $2M for a small .25 acre lot. The contractor applied for side yards set-back variance to put a large house on it and the hearing is tomorrow night.
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Set backs are HUGE in my area.
Buying a falling down wreck but preserving the chimney and the front door allows you to grandfather in the old setbacks which were much more generous than the current code allows. So buying the land with the wreck on top of it tends to be much more valuable than an empty lot which won’t allow for the McMansion of your dreams! Empty lots usually mean building to scale which usually means something more scaled back than many folks have in mind for new construction.
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Wow, where is this? California or a waterfront lot?
North Shore, Long Island. Close to water, but no views.
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Yes, the old house’s attached garage in the back has the old setback code and now they want the whole house to be grandfathered in. My son and his wife and the neighbor on the other side of the house are going to the hearing tomorrow night.
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I had somebody purchase the small 3 bedroom house next door to me. It was by no means a tear down, it was completely livable, although older. The new owner told me they were “building an extension.” They wen to the town and got approval to build their enormous house but were supposed to keep the basement (I assumed to meet various codes and restrictions). Well, they claimed after they demolished the rest of the house that the basement had structural issues and just tore it down also. The brand new building (since nothing was left of the old one), was set up higher then the old one, and the property now sloped down. Suddenly I had runoff water from their property onto mine (had never been an issue with the older building).
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I buy and develop land. To me, it’s basic arithmetic. I’m currently negotiating on a vacant parcel that previously had a building on it. I look at the cost of a comparable vacant lot and add in the cost to clear unwanted trees, install water and sewer and pay the fees, and add the cost savings from previously having electric service.
In this case, the added value is about $30,000, so I’m willing to pay a $30,000 premium. If the prior structure was still there, I’d subtract demolition costs so, in the end, the value would be roughly equivalent.
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Likely because we both live in NJ? 
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My sister lives in an old neighborhood. Some of the houses are tear downs but usually the people keep at least 2 walls to get the benefits of the prior zoning. The house across the street was almost all torn down but the city wouldn’t let them change the front door to the other street (it’s a weird triangle lot with a pool and tennis court on the pointy part, and the house front door looks at my sister’s and the back had a huge garage put in so my sister was glad they didn’t let them flip it so she’d have to look at their garage).
The house through her back yard was torn down and they put in a HUGE house. The prior owner was the parents of friends and the grandchildren were friends with my nephew so they had a cut through the fence so the the kids could play back and forth. Now the new house doesn’t even have a back yard, as the house is almost to the fence. It’s ridiculous. I’m sure they paid over a million for the house FOUR years ago and they are just finishing the $4M house now.
The house next door to hers was bought by a flipper and is just now remodeled and for sale, but it isn’t going well as they didn’t enlarge the garage and the one there is pretty small. It is technically a 2 car garage (one door) but very narrow so they can’t be two big SUV cars. My sister also has a garage like this but she parks her car right in the middle and her husband has to park outside. Of course it also has bikes and scooters and lacrosse equipment and all the other things garages collect over 30 years, plus the trash bins.
It’s a beautiful old neighborhood and I think most of the houses, mostly brick, were originally put up in the 1920’s. My sister did re-do the kitchen about 20 years ago and just recently re-wallpapered the kitchen and dining room, but she hasn’t done much else. Still has single pane windows!
Typically, the structure will have some value on an appraisal unless it is completely falling down. But as @sherpa says the selling price is dependent on who is buying the property and their plans for it. You may think it is a teardown, but someone that needs an inexpensive home may be willing to fix it up and live in it.
The zoning is also a consideration, if the current requirements are too stringent and it is possible/desirable to keep the necessary walls/chimney to be grandfathered.
Curious what the price difference is between the lot with the structure and the empty lot.
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