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Teardowns have become big business

Three years ago, Christine and John Bowes learned that a property they had long had their eye on _ a 100-year-old cottage on a 3-acre lot _ would soon come up for sale. The couple knew that the house was too small for their needs.

They also felt that it was too close to the main road. Worse, a 1960s renovation had stripped the place of most of its charm, but it wasn't the house they were after; it was the land.

"We'd admired the view for years," Christine says, so, after buying the property, the Boweses demolished the little cottage and built a 12-room Georgian Colonial in its place, joining an increasing number of home owners who are forgoing major renovation for something far more radical, the teardown.

Once a rarity, the teardown _ the demolition of a house in order to put up a new one _ has become a growth industry. Patrick Cunningham of C&C Partners, a design-build firm in Los Angeles, has seen teardowns literally take over his business.

"In 1990, they were about 20 percent of our work; now it's more like 98 percent," Cunningham says.

The reasons for the boom are simple. Rising wealth and low interest rates have fueled enormous demand for empty land in metropolitan areas, along coastlines and in other prime, heavily developed areas, but the scarcity of those kinds of properties has made their prices skyrocket, aiming the spotlight on parcels like the one the Boweses bought.

"You have relatively modest homes sitting on very valuable land," says Scott Halliday, president of a home-building company in Ocean City, N.J.

It's that combination _ basic house and attractive lot _ that people are increasingly eyeing and buying, fully intending to whack the structure and start over. Teardowns can also make sense for homeowners who are happy with their location but utterly dissatisfied with their house. To be sure, a teardown may seem drastic and wasteful, but it can nonetheless be an economical way to get the kind of house you want in the place you want it.

"Many people who come to us for teardowns are paying less for the house and the land than they'd pay for an undeveloped parcel," says New Canaan, Conn., builder and developer Caroline Wheeler.

Besides the potential front-end savings, a teardown makes sense when extensive remodeling _ even when it's coupled with a large addition _ simply isn't feasible.

Many superb lots are occupied by 1950s, '60s, or '70s ranch-style or split-level houses that have little appeal to people looking for larger, more traditional designs. In addition to their aesthetic shortcomings, postwar houses often have small kitchens and bathrooms, low ceilings and inadequate wiring.

"It's cheaper to start from scratch than to bring many houses up to today's standards," Wheeler says.

What is more, financing a teardown isn't all that difficult or exotic. As with any new construction, a lender will use blueprints to appraise the house-to-be and lend an amount based on that value.

If you are tearing down a house that you own, the bank will use some of the loan proceeds to pay off the existing mortgage and disburse the remainder over the course of the demolition and construction.

Yet, while financing may be relatively simple, teardowns can be anything but, starting with finding a suitable property. Ideally, you want a great piece of land with a wreck of a house so that you won't end up paying a good amount for a dwelling that has no future.

In particular, avoid a place that has been freshly remodeled, since it likely will come on the market at a premium price. Before you buy, have an architect and a builder _ preferably with teardown experience _ assess not only opportunities but also potential problems of building on the site.

"Putting up a larger house on a relatively small lot can pose significant design and construction challenges," Cunningham says.

Professionals who have worked on teardown projects can tell how much new construction will fit on the property, how to take advantage of views and which trees and other landscaping can be saved.

"It's hard for owners to visualize what the new house will look like," Wheeler says. "The existing one gets in the way."

Your builder should also find out about zoning requirements and, in areas that are less developed, the likelihood that someone will put up a house on an adjoining lot, information a contractor can get from town hall or from other builders.

"You want to make sure you'll have that view for a lot longer than just a year or two," Cunningham says.

Your architect/builder team should also confirm that a teardown will be more economical than a major renovation. When comparing cost projections, the teardown numbers should include a realistic amount for demolition.

Taking down a one-story ranch, for example, might cost between $5,000 and $10,000, but a two-story Colonial with, say, a concrete terrace and a detached garage could run from $10,000 to $20,000.

If remodeling still seems likely to be cheaper than demolition, give careful thought to the compromises that a renovation could require. Would you end up with the same low ceilings? Can the old walls accept windows big enough to brighten dark rooms? Will there ever be enough storage?

The more you want from a renovation, the more likely it is that a new house will be better able to provide it. Also bear in mind that a new house can maintain a higher resale value than one that has been extensively remodeled, especially when paired with that most desirable of real estate features _ location, location, location.

1999 Time Publishing Ventures Inc.

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