This Might Help You Sell Your Teardown House Property

If you are struggling to sell a property because the house is old and in really rough shape, my re-focused redevelopment study might be the boost that you need to close the deal sooner and for a better price.

Below, I explain how a small amount of the right information helps realtors and owners more clearly position a difficult property by avoiding vague generalities and by speaking to the buyers most likely to value it. The article shows how to shift attention away from the burden of the old house and towards the credible, appealing redevelopment opportunity there that may help the property sell faster and for a stronger price.

Some detached houses are so hard to sell because they're in such a sad state. The owner and the realtor both know there's no point in taking interior photos, let alone staging the house for showings. One might hear a comment that the house "has good bones", but increasingly even that's a liability.

The owner might need to liquidate the property quickly because he/she needs the funds. Time may be of the essence, or maybe timing is the key. The realtor can't afford to spend years showing a property to prospects - coffee is for closers. The house needs to move, but it's one ugly duckling. The only ammunition available is the go-to cop-out "development potential", but we might as well be pulling the Eastwood "Do I feel lucky? Well do ya', punk?". Hardly an elegant selling scenario.

WHEN THE OLD HOUSE BECOMES THE PROPERTY

An old house in poor condition does more than make a property less attractive. It can take control of the buyer’s perception of the entire purchase.

The buyer sees a deteriorated roof, an obsolete electrical system, water damage, mould, potential asbestos, buried oil tanks, or simply decades of deferred maintenance to the house or even the land. Even when none of these problems has been confirmed, the condition of the house invites the buyer to imagine them as one big pile of problems.

The purchase begins to look like a straight uphill endeavour:

• arrange financing;

• buy the property;

• determine whether anything in the house can be salvaged;

• arrange more financing;

• investigate hazardous materials;

• disconnect services;

• obtain demolition permits;

• demolish and dispose of the house;

• and only then begin planning what the buyer actually wants.

The land becomes the reward at the end of a long and expensive obstacle course - and you still don't have a place to live in. This challenge reverses the way the property should be understood. The buyer should primarily see the promise of the land, while recognizing that some work will be required to realize it. Instead, the buyer begins to see the burden of the house, with the land reduced to a compensating benefit.

Once that burden is at the front of the buyer’s mind, the whole property begins to feel risky.

Some of the work may be reasonably predictable. Demolition is hardly an experimental technology. Nevertheless, buyers tend to combine every known cost, possible hazard, approval requirement, and unanswered question into one large, expensiv cloud of uncertainty.

The seller may know that the house has little remaining value and has priced the property accordingly. The buyer probably knows that intellectually yet does not necessarily experience the listing that way. The buyer sees an expensive purchase followed immediately by another expensive process, without yet having a clear picture of the result.

A listing cannot make the old house disappear. It can, however, change which part of the property occupies the buyer’s attention. The seller needs to move the buyer mentally beyond the existing house and toward the property’s next useful life.

“DEVELOPMENT POTENTIAL” DOES NOT SHOW THE BUYER WHAT THEY ARE BUYING

A normal residential property shows the buyer two things:

1. the land they will own; and

2. the house in which they could live.

The buyer can walk around the lot, enter the house, see the rooms, understand the basic layout, and imagine daily life there. Even when renovations are required, the physical product is visible.

A teardown property shows only half of that picture.

The buyer can see the land they will own, but the house they could eventually have is hidden. It exists only as an abstract possibility behind zoning regulations, construction costs, municipal approvals, and a worn-out building that is still occupying the site - a possibility supported only by the strength of the prospective buyer's imagination, boldness, and bravery. Or foolishness (but those ones rarely close, do they).

In that sense, the property is being presented incompletely. The seller is offering both land and future opportunity, but only the land is visible. The typical phrase used to fill the gap is “development potential.”

That tells the buyer almost nothing. Furthermore, it advertises to prospective buyers almost nothing. If you advertise almost nothing, then almost nobody comes, right?

It does not explain whether the property may reasonably support a new single-family house, a duplex, a multiplex or an infill house, a mansion, or some other configuration. It does not indicate approximately how much building area might fit. It does not identify restrictions that could limit the apparent potential. It does not help the buyer picture the size, arrangement, or usefulness of what could replace the existing house.

The phrase merely transfers the investigation to the buyer.

The buyer is expected to interpret zoning bylaws, recent housing legislation, setbacks, floor-area regulations, site coverage, parking requirements, access and infrastructure requirements, and other property-specific constraints. After doing that, the buyer still needs to translate those rules into some idea of an actual building.

Most homeowners are not equipped to do this. Many realtors and builders can provide useful general comments, but they may not be comfortable interpreting every applicable regulation or showing how several requirements interact on a particular site. That's my job.

Even a sophisticated buyer may be reluctant to invest substantial time and professional fees before deciding whether to make an offer. That buyer may be comparing several properties, each carrying its own collection of unknowns. “Check with the City” may be technically prudent advice, but it does nothing to help sell the property.

A simpler, preliminary redevelopment report can fill the missing half of the picture. It can identify plausible building options, provide approximate development parameters, and explain the most important limitations without pretending that a complete design or permit review has already occurred.

The report does not need to reveal precisely what will be built or to assert firmly what can be built. It needs to help the buyer understand what kind of property this could become.

SELLING “AS IS” WITHOUT SELLING A MYSTERY

An “as is” condition serves a legitimate purpose. The seller may not know the complete condition of the house and should not make promises that cannot be supported. However, “as is” describes the seller’s responsibility for the existing building. It does not explain the value of the overall property.

When the house is nearing - or has slid right on by - the end of its useful life, an “as is” listing can unintentionally reinforce the least appealing interpretation:

Here is an expensive property containing an old building with unknown problems. Those problems will become yours. You're welcome.

That may be legally cautious, but it leaves the buyer alone to estimate the consequences.

Buyers do not usually price uncertainty gently. When a cost or restriction is unknown, they tend to assume a poor outcome and add a generous contingency. One possible problem becomes several possible problems, and each one acquires a healthy imaginary price tag.

This can result in:

• a lower offer;

• more extensive purchase conditions;

• repeated requests for information;

• prolonged negotiations;

• or no offer at all.

A property that feels difficult to understand also feels difficult to control. That loss of control is a large part of what buyers interpret as risk. The solution is not to guarantee that demolition will be inexpensive, that every development option will be approved, or that no concealed problem exists. The solution is to distinguish known information from unresolved questions.

For example, a report may identify that the existing building is likely to be removed, describe the general redevelopment options allowed under current zoning, and note the important site conditions that require further investigation. The buyer then has a framework within which to consider the remaining uncertainty. The unknowns have boundaries.

This is more useful than either extreme: making unsupported promises or declining to say anything meaningful. The legal caution of an “as is” sale can remain intact while the property is presented constructively. The seller can acknowledge that the existing house requires work or removal while also showing why the property may still be worth pursuing.

The old house is a condition of realizing the opportunity. It should not be allowed to define the opportunity.

CORRECTING THE WRONG ASSUMPTIONS ABOUT ZONING

Recent zoning changes have made residential redevelopment both more promising and more confusing. Some buyers still assume that an older single-family house can be replaced only by another single-family house. They may overlook opportunities for a duplex, multiplex, secondary dwelling, or other small-scale housing form.

Other buyers make the opposite mistake. They hear that four or six units are now permitted and assume that every residential lot can easily accommodate the maximum number.

Neither assumption is reliable.

Zoning permission is the beginning of the analysis, not the end. A property may be affected by:

• lot width and depth;

• required setbacks;

• maximum floor area;

• site coverage;

• building height;

• vehicle access;

• parking or loading requirements;

• mature trees;

• slope;

• easements;

• utility locations;

• servicing capacity;

• environmental restrictions;

• neighbourhood and context;

• or the practical shape of the building that can fit.

A bylaw may permit a certain number of dwelling units, but that does not mean those units will fit comfortably, function well, or make financial sense. Conversely, a modest-looking property may support more useful development than a buyer expects. The distinction between what is permitted and what is practical matters.

A large, theoretical floor area may produce an awkward building with poor layouts, insufficient outdoor space, difficult parking, or costly construction. A somewhat smaller configuration may provide more attractive homes and a more credible development proposition.

Realtors and sellers understandably rely on disclaimers when discussing these issues. Zoning is complicated, regulations change, and municipal approval cannot be guaranteed.

However, people are becoming tired of things such as Terms Of Use agreements and even price quotes followed immediately by disclaimers that appear to disavow the content entirely. Buyers regularly encounter language that effectively says a property has excellent potential, although nobody involved is prepared to explain or substantiate what that potential may be. The result is more likely to be confusion than confidence.

A disclaimer should establish the limits of the information, but it should not make the information useless.

The seller can maintain the necessary qualification while still providing a constructive professional opinion. A preliminary report can state which development options appear plausible based on the available property information and current regulations. It can also identify which conclusions require survey information, municipal confirmation, engineering, design, or further due diligence.

That is not a guarantee of approval. It is a reasoned starting point. The distinction is important because buyers are not necessarily seeking certainty at the listing stage. They are seeking enough credible information to decide whether the property is worth considering.

SUPPORTING THE ASKING PRICE WITHOUT SELLING FICTION

A seller may justify the asking price using recent sales, assessed land value, lot size, location, or generalized redevelopment potential. These are all relevant, but they may not explain why this particular property is worth the price being requested.

The logical progression is straightforward:

• First, an old or damaged house can obscure the value of the property.

• Second, the buyer discounts what is difficult to understand.

• Third, a credible explanation of the property’s future use can help the buyer evaluate its value more accurately.

A property-specific report creates a connection between the asking price and something more substantial than the phrase “builder’s opportunity.” It may show that the property could reasonably suit a new custom house, a duplex, a multiplex, or another form of redevelopment. It may identify approximate buildable area, broad configuration options, and relevant site constraints. This gives the buyer a basis for understanding what the land may provide in return for the purchase price and the trouble of dealing with the old house.

The report should not attempt to prove that the asking price is correct. Market value is still determined by what a buyer is prepared to pay. It can, however, prevent the property from being undervalued simply because its potential has been poorly explained.

There is also a temptation to emphasize the maximum theoretical outcome. A listing may advertise the greatest number of units or the largest possible floor area because the largest number appears to support the highest value. Communities in the Lower Mainland such as West or North Vancouver have many lots with topographical or geotechnical limitations on what can be developed.

That approach can backfire.

A buyer who later discovers that the maximum is impractical may conclude that the property was misrepresented. Even when the original statement was technically defensible, the loss of confidence can affect negotiations. A stronger presentation separates three kinds of information:

• facts that can be confirmed;

• preliminary professional interpretations;

• and matters that require further investigation.

The strongest claims are often not the biggest claims. They are the ones that remain credible after the buyer begins asking questions.

The seller does not need to promise a specific development outcome. The seller needs to demonstrate that the opportunity has been examined and that the asking price is connected to plausible uses of the property. The difference is between selling possibility and selling fantasy. One approach encourages further investigation, while the other risks shooting yourself in the foot.

I myself am rarely distracted by dated finishes, poor upkeep, or an unattractive existing house. More than two decades of experience bringing multifamily buildings to reality through a focus on the technical aspects of construction has given me a different perspective. I focus instead on the site, its constraints, and how the building interacts with the property, which allows me to assess what could realistically replace it and to explain that opportunity in clear terms.

The Solution

The owner and/or realtor needs to replace vague possibility with a clearer picture of what the property could become. My RED Report was developed to help buyers understand the redevelopment potential of a property before they commit to it. For a seller or realtor, I offer a more focused, pared-down version that identifies the most credible options, explains the main site constraints, and gives prospective buyers enough substance to see beyond the old house.

An important part of that process is identifying who the property is most likely to appeal to. A custom-home buyer, a multigenerational family, and a small-scale developer may all see very different value in the same site. Sellers should think about this in much the same way a business identifies its target market. A store advertising that it “sells things” is unlikely to attract much attention. A store selling expedition gear for Himalayan, Arctic, and Antarctic travel speaks directly to a defined group of customers.

“Development potential” has the same weakness as “we sell things.” It says almost nothing about the opportunity or the buyer it is meant to attract. A property presented instead as a rare opportunity for a luxury modern estate, a well-planned multigenerational home, or a carefully designed small multiplex begins to speak to a recognizable buyer. The goal is not to oversell the site, but to frame its most credible future in terms that the right buyer can immediately understand.

For properties that need more than a practical summary, an optional add-on can go further by exploring a few enticing ideas for what the site might become. This is the cherry on top: not a finished design, but enough architectural direction to help a buyer imagine the land as the setting for something desirable rather than as a lot burdened by a house that must first be removed.

Suffer No More

With the property’s redevelopment potential clearly explained, the realtor attracts the right buyers, answers their main questions early, and secures a strong sale before the listing has time to lose momentum.

Without a convincing picture of what the property could become, buyers remain focused on the burden of the old house, the listing grows stale, and each relisting returns at a lower price with less credibility than before.

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DISCLAIMER:

The information included in this article is to an extent generic and intended for educational and informational purposes only; it does not constitute legal or professional advice. Thorough efforts are made to ensure the accuracy of the article, but having read this article, you understand and agree that Daniel Clarke Architect Inc. disclaims any legal liability for actions that may arise from reliance on the information provided in this article. I am an architect in BC, but readers are recommended to consult with their own architect on their specific situations before making any decisions or exercising judgement based on information in the article.

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