To Sell the House or the Dirt its On?
When a seller reaches out to us to sell their home, there’s no question that the best path forward is to focus on marketing the home to achieve the highest possible yield for the client. There’s a ”law” of real estate that all real estate tends toward its highest and best use. Find the highest and best use and you’ll find the best price.
A Northern Virginia owner recently approached us with a house that could sell for $1,000,000 today. If I knock it down and build another one, it may sell for substantially more. How can we determine if there is an opportunity greater than selling the existing home for $1,000,000?
Although this is not a perfect science and, as with any business venture, there is risk, much can be done empirically to understand the possibilities for a property. Here are some questions to answer to uncover the property’s potential:
What is the property’s current market value, as it is today?
What is the vacant lot worth today without the house?
What is the size of the lot and are there challenges to the lot - steep slopes, access issues, etc.
What is the upper $$ limit of the market for a new home in the subdivision or surrounding area? How much does the developer and the current homeowner want to push that $$ limit? Are there examples of success for this type of project in close proximity to the current home?
How much square footage would you have to build, and what finishes and features need to be included to reach the upper $$ limit of the market?
How much will it cost to build the new home? Are there impact fees for schools, infrastructure, etc.?
How long would it take to permit the new home and, perhaps most importantly, to construct it
How are drinking water, sewer, and storm water managed currently? Are changes in store? What’s the cost and timeline of this change?
Who is the developer, and what is their experience to take on this project? Do they have local engineers and great relationships with suppliers?
WHO is your buyer, and when will you find them? Pre-construction or after the new home is built.
The answers to these initial questions are pivotal to making the right next move for our clients.
