Don’t tell Robby Skinner that the teardown market is slowing down. Every month, the Park Cities developer gets a lead on a house that “no one knows about.” And every time he arrives, “there are five other developers there. It’s crazy.”
Skinner says if he knew then what he knows now, he would have bought “every single property I possibly could” when he took over the family business in 2001. That’s when he began focusing on developing in the Park Cities. Teardowns, vacant lots, new homes—it doesn’t matter. Now he has to out-maneuver other developers evaluating property in the area. Mike Brawner, a broker with Xchange Properties, which runs Teardowns.com, represents one of the companies scouring the Park Cities to find just the right deal. Once a potential teardown property is identified, Xchange offers to represent the homeowners and sell to their network of builders.
“We spend a lot of time looking at properties and asking ourselves if they fit the teardown profile,” Brawner says. “And you can try to determine a formula as to what that is, but it’s just not always clear.”
In general terms, here’s what Brawner and custom-home developers are looking for when they drive by your home, if you live in the area from Highland Park up through Preston Hollow:
• Older homes, often ranch-style built from the 1940s to the 1960s.
• Houses 1,200 to 2,400 square feet.
• Deep lots that can accommodate new construction and leave space for a yard.
• Mature trees on the lot.
• The character of the block, i.e., the condition of the homes near the property, the setback requirements, etc.
• Other teardowns. “It takes a real gutsy builder to be the first one in an area,” Brawner says.
Once you get a feeling for whether a property is a teardown—meaning its primary value is in the lot—then you run the numbers and see if you (or the potential developers to whom you sell) can make a tidy profit. In general, you want to be able to sell a new home for three times the lot (or teardown) value. If new homes are going for $750,000 in the neighborhood, you won’t want to pay much more than $250,000 for the lot. (When you get into multimillion-dollar homes, you can get away with 2.5 times lot price.) Then you talk to real estate agents, look at what houses have gone for in the neighborhood, check how many days they’re sitting on market, and talk to potential buyers.
Even if all signs point to yes, there’s still an art to the teardown evaluation. Because until someone buys the house, it’s all just theory.
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| photography by Dave Shafer |
CASE STUDY NO. 1
The Little Forest Hills Bungalow
Address 8711 Eustis Avenue
Built 1938
Square feet 1,850
Appraised value $249,000
Argument to tear it down: The block on which it sits is rife with new construction. Nearly half the lots on this tiny street will see new or renovated homes complete by the end of the year. The home’s age suggests that, no matter how “cute” it is, you would never get that price for it with all the new construction surrounding it.
Argument to let it stand: This is where knowing your neighborhood comes into play. The new homes going up have been carefully considered to fit in with the “funky” Austin style of the block. People who consider buying here do so because the home is so unique. What seems a detriment in the rest of East Dallas on this block is a positive.
Decision: Sell it as is. A no-brainer. Lot values are only half this asking price right now, and the owner will get a fair price on his home because of its uniqueness in the Dallas market.
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| photography by Dave Shafer |
CASE STUDY NO. 2
The University Park Plantation
Address 3521 Wentwood
Built 1953
Square feet 2,925
Appraised value $1.25 million
Argument to tear it down: There are a lot of brand new homes in the neighborhood going for $2.8 million and up. The layout is “choppy,” with small rooms and no “flow for entertaining,” as real estate agents say. It has 8-foot, not 9- or 10-foot ceilings, as is now preferred. It has a deep lot that can hold new construction.
Argument to let it stand: It’s large, at nearly 3,000 square feet. It’s well-maintained on the outside. It has charm, as plantation-style homes are considered valuable by homeowners who cite “character” as something important to them. It’s two-story, with four bedrooms and three bathrooms.
Decision: Tear it down. The land is too valuable, and homes in this area are going for a premium price. Anyone spending that much for a home wants new amenities that would be cost-prohibitive to add.
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| photography by Dave Shafer |
CASE STUDY NO. 3
The North Dallas Mid-Century
Address 4728 Hallmark Drive
Built 1957
Square feet 2,544
Appraised value $360,000
Argument to tear it down: The home’s age and the fact that it sits on a deep lot that abuts Preston Hollow all suggest it’s a teardown candidate. But the real kicker is that the house next door was just purchased for nearly twice this home’s appraised value—and then scraped to make way for a new home.
Argument to let it stand: It has exceedingly good bones, as real estate agents like to say, in that it doesn’t show much wear and tear and has been wonderfully kept up. As well, the couple who owns it have updated several rooms, including the master bath and kitchen, with modern conveniences.
Decision: Keep it. The attractiveness of the location, the size of the home, and the care put into its renovations suggest the home’s worth on the open market could equal what they’ve put into it, if not more. Since they could get a fair price for the home, the value is not just in the dirt.
An analysis of the home found on the cover of this issue can be found at our online blog, FrontBurner.
