Summary: Tearing down a house and rebuilding the house or a new home may be the best option.
Carl - your book is great - THANKS!
We have a small older cinder block home and pole-built metal garage we need to have torn down before we can begin building. What information can you provide about this process? Chuck
Hi Chuck,
Thanks for the compliment.
Most of the following is from Chapter 9 in my book.
If you determine that the effort, cost, and "value added" in renovating a house just doesn't make sense or you just want a new house on a particular site and there is a house in the way, then tearing down the existing house and building a new one may be the option for you. This option usually requires a lot of cash or existing equity in the project.
The only legal way to tear down a house is to either own it free and clear or to pay off any existing mortgages.
One could get permission from the mortgage lender, but this only works if the loan balance is less than the value of the land, since once the house is torn down, the only thing of value left is the land!
Whatever improvements you put into the house as cash or equity over and above the value of the land is gone forever once it is torn down.
Here are some other things to think about.
▪ An appraisal will determine what the land alone (with the house torn down) will be worth prior to you getting involved too deeply. Get one!
▪ A construction loan can often pay off an existing mortgage (up to the value of the land). It takes an experienced mortgage loan officer to be able to structure an extreme makeover loan (and I speak from that kind of experience.)
▪ Other than surmounting the legal and financial obstacles of tearing down a house (assuming you don't feel it's just not right to tear down a house) you'll simply be building a new house.
▪ Start at the beginning of this book and proceed with your project. The only additional costs will be demolition and demolition permits, neither of which are cheap. Hauling and disposing of the demolition trash has gotten quite expensive too.
A NOTE OF CAUTION!! Don't tear down a house that is financed and has a mortgage on it without getting written permission from the mortgage lender or paying off the loan first! It's illegal! And, in most locales you will need a demolition permit! Investigate the permitting process early in your planning stage.
And here is another email on the same topic from Amy.
My house is way overdo for a major overhaul. I am looking to add a bathroom, family room, and changing the layout. Would it make more economic sense to demolish and rebuild or would doing a major renovation be better?"
Hi Amy,
Well, it all depends on what the cost of each avenue is and what the completed value of each will be, and what you really want and can afford.
Make up two estimates using my free spreadsheets, one for remodeling, and one for a new home (with the tear down costs included).
The new home will require you to select a house plan and, using the cost estimating software (also read my “getting started” page), determine an approximate cost to build new.
Amy, be sure to read the Note of Caution above. If you have any questions, let me know.
Carl Heldmann
