Is my house a teardown? Here's why it may be an easy yes or no answer

Defining a home as a teardown has little to do with the age of the home

The answer to whether your home is a teardown may not be black and white or predetermined. In other cases, it may be an easy yes or no. There are many factors that determine this. You should not be personally offended to know you live in a teardown, as it has no reflection on you.

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Defining a home as a teardown has little to do with the age of the home or how dated the home improvements might be.

The phrase "teardown" might be quite unfamiliar in most places of our country and throughout the world, and far more common in prime residential areas of metropolitan cities with a shortage of land and a high density of wealthy and upper-middle-class people with specific needs.

Elite groups and wealthy people sometimes wish for a home near the water; a spectacular view; or a property unique for its size, privacy and potential. They usually opt to design their dream castle from scratch.

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Most of us who live on, say, the Westside of Los Angeles in a 50-year-old, 7,000-square-foot home are curious about what someone who will buy our home will decide to do.

The real answer is in the location and the trend in the location. Who will pay more for your home today? An owner-user who will fix it modestly and live there? A flipper who will do a major remodel? A developer? Sometimes the only way to be sure is to test the market.

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If your location supports a newly built home that could sell for twice what your home is worth and there is evidence of many new homes having sold for over twice what you perceive your home to be worth, your home is likely a teardown.

Again, it has to do with the potential and the extreme value there could be for your lot size and location.

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A perfectly maintained 3,800-square-foot home on an 18,000-square-foot lot in Brentwood Park, for example, might be worth $6 million. Based on its size, a new home could be built on that lot and sold for $15 million. Simple math shows that this home is probably a teardown.

A similar example is a home in Mar Vista, Los Angeles, of 1,200 square feet on a 7,000-square-foot lot.

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The potential here might be a new home worth $3.2 million. If the current home would only sell for $1.2 million, it is quite easy to conclude there would be demand for a developer to make a reasonable profit.

On the other hand, if an owner-user decides to pay $1.6 million, the developer would probably step back realizing there is no profit to be made at this acquisition price. The home was not necessarily a teardown because its value to an owner-user exceeded its value to a developer.

Bottom line: Before making a determination to sell directly to a developer, call a knowledgeable real estate adviser.

Ron Wynn has been among the top 100 agents in America for over 10 years, as noted on REAL Trends/Wall Street Journal. Ron has represented over 2,200 sales totaling over $1.5 billion in sales volume in his 30-plus-year career as a real estate broker in California.