Our neighbors home was gutted and rebuilt - Question

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
mr_breen
Posts: 138
Joined: Sat Feb 14, 2015 10:53 pm

Our neighbors home was gutted and rebuilt - Question

Post by mr_breen »

Last year, the house (2200 sq ft - 2 story) next door to us was torn down to its frame and rebuilt. It had been owned by an older man who let it fall into neglect. When he became ill, his family sold his home to a developer for $400K. As stated earlier, the developer gutted it and rebuilt it as a modern home. After the tear down, all that was left was a frame. All the wiring, plumbing, HVAC, was redone. The yard was beautifully landscaped. Essentially, the home is brand new.

This developer was then able to sell the home for $800K. We live in a very old suburban neighborhood in the NE. Most of the homes are over 100 years old. I would say the average price is between $400K and $500K for homes of similar size as our neighbors.

I understand some of the reasons why our new neighbors would pay as much as they did. The public schools in our township are ranked in the top 5 of the state. Our neighborhood is within walking distance to our town's center, public transportation, and public schools. We have a vibrant downtown center just a few minutes walking distance and the town is very safe.

That said, most of our neighbors are shocked that the house sold for as much as it did. The new buyers own by far the most expensive house on the street given its size. They also seem standoffish - they've built walls on the left, right, and rear of their property. If you would drive down our street, their home sticks out - its looks like it belongs in a modern development - just seems out of place. They also have a much more elegantly landscaped lawn than everyone else.

So, my question is: will this have a significantly positive effect on the other home prices on our block? Could it actually have a negative effect? As I stated earlier, they added a wall on one side of their property. I now feel somewhat boxed in on my side. After the sale, Zillow's estimate for our home's sale price jumped up by $200K to an new estimated selling price of $700K. I have no idea if that is meaningful at all, however.

So, if anyone has been in a similar situation, I'd appreciate your thoughts. Thanks.
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by livesoft »

I think it will have a positive affect. Also, they may not have been able to get the same house for that money in an area of more expensive homes.

In my neighborhood of 20-year old homes, folks are doing extensive upgrading of the insides because to sell a home, no one wants to buy someone else's problems. With new floors, carpeting, bathrooms, kitchens, these homes sell for much more than the un-done home next door. Zillow means nothing.

Basically, you want a neighbor that takes care of their home and their landscaping. You are lucky in that regard. As for standoffish, I would not label them that way just yet just because of the walls. I would not mind if my neighbors put up walls to replace the wood fences that we all have. We still interact with each other despite the fences.
Wiki This signature message sponsored by sscritic: Learn to fish.
kolea
Posts: 1322
Joined: Fri Jul 11, 2014 5:30 pm
Location: Maui and Columbia River Gorge

Re: Our neighbors home was gutted and rebuilt - Question

Post by kolea »

We lived in a neighborhood in Seattle that has gone through something very similar. Average home values were pretty close and then a couple of houses were torn down and large, modern houses went in with values way above the average. When that happens, there is more value in the land than the homes on that land, and the process accelerates - more houses get torn down. As to the effect on your house's value - banks set value for loans based on comparables. If the new homes are very dissimilar to yours, it won't affect an appraisal of your house by as much as you would think, but overall the neighborhood is becoming "hotter" to live in, which is good for your home value.
Kolea (pron. ko-lay-uh). Golden plover.
rkhusky
Posts: 17766
Joined: Thu Aug 18, 2011 8:09 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by rkhusky »

Depends. The value of your house will probably go up, but so will your taxes. If you plan to live there for a long time, the latter may outweigh the former.
dolphinsaremammals
Posts: 2094
Joined: Tue Jul 22, 2014 4:18 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by dolphinsaremammals »

It's the beginning of the end of your neighborhood. One house after another will be sold, torn down, and a much more expensive house built and occupied by people who have no regard for the effect of what they do (the walls, upper windows looking down directly into neighbors' houses, houses built out as far as possible to the lot lines, discordant architecture, etc.) on their neighbors. Eventually your neighborhood will be overrun with those houses and people, and the old neighborhood feeling will be gone.

So, kiss your neighborhood and house goodbye. On the positive side, you will probably be able to sell your house for a tidy sum of money to one of the barbarians.
Boglegrappler
Posts: 1489
Joined: Wed Aug 01, 2012 9:24 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by Boglegrappler »

There's always someone who wants to be in charge, with knotted knickers that he isn't.
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by stan1 »

dolphinsaremammals wrote:It's the beginning of the end of your neighborhood. One house after another will be sold, torn down, and a much more expensive house built and occupied by people who have no regard for the effect of what they do (the walls, upper windows looking down directly into neighbors' houses, houses built out as far as possible to the lot lines, discordant architecture, etc.) on their neighbors. Eventually your neighborhood will be overrun with those houses and people, and the old neighborhood feeling will be gone.

So, kiss your neighborhood and house goodbye. On the positive side, you will probably be able to sell your house for a tidy sum of money to one of the barbarians.
Yep, that's what happens when the land becomes more valuable than the house itself. Historic designations (houses and neighborhoods) and strict zoning laws about setbacks, windows, vehicle parking, and design standards can help a little, if you live in a city where those are possible. If your city is controlled by real estate development interests rather than preservationists there's not much you can do.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
Topic Author
mr_breen
Posts: 138
Joined: Sat Feb 14, 2015 10:53 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by mr_breen »

Boglegrappler wrote:There's always someone who wants to be in charge, with knotted knickers that he isn't.
Well, I'm not sure if you are referring to me or not. But, in any event, I'm just trying to figure out what is going to happen to our neighborhood - that's all really.
LeeMKE
Posts: 2233
Joined: Mon Oct 14, 2013 9:40 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by LeeMKE »

I agree with Stan1.

Your home may not appreciate much if at all, because what has happened here is that the land is worth more than the land with an old structure on it. If this happens another few times, you should value your home for tear down value. That is, the value of the lot, minus the cost to remove the structure.

For the time being, enjoy your location and home. I wouldn't rush to upgrade your home nor get too excited. This may be an anomaly caused by the disrepair of the torn down house. If it happens another couple of times to homes in less dire condition, see paragraph above. If not, it may spur a mini-boom of improvements around the neighborhood and that will float your value higher.
The mightiest Oak is just a nut who stayed the course.
Lafder
Posts: 4127
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Our neighbors home was gutted and rebuilt - Question

Post by Lafder »

In general a higher valued home in the neighborhood raises your property value.

Good fences make good neighbors :)

Our longtime neighbors did the same thing except tore down to the foundation. They were going to do an extensive remodel and it turned out to be easier for the builder to build all from scratch instead of dealing with tying in to the old. In their case they did build bigger but not outrageous for the neighborhood. Their home was one of the more modest homes to begin with.

Their new window placement sucked though. Their new bathroom window was directly across from my front door line of site. So I am the one who put up a solid fence :)

I would make a point of being friendly and nice. They are the newcomers.

Best wishes,
lafder
Valuethinker
Posts: 49038
Joined: Fri May 11, 2007 11:07 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by Valuethinker »

dolphinsaremammals wrote:It's the beginning of the end of your neighborhood. One house after another will be sold, torn down, and a much more expensive house built and occupied by people who have no regard for the effect of what they do (the walls, upper windows looking down directly into neighbors' houses, houses built out as far as possible to the lot lines, discordant architecture, etc.) on their neighbors. Eventually your neighborhood will be overrun with those houses and people, and the old neighborhood feeling will be gone.

So, kiss your neighborhood and house goodbye. On the positive side, you will probably be able to sell your house for a tidy sum of money to one of the barbarians.
Where I know of 'Teardown' neighborhoods this is precisely what happens. Monster homes which look like beached whales (or ships) because they are so large for the lots. Tasteless architecture: could be in Palm Springs or anywhere. And a loss of the community feeling: the incomes have higher incomes, dual career professionals usually, keep them and their kids to themselves (I've lost track of the number of Filipina nannies in the old 'hood). Big Mercedes and BMW SUVs etc.

The OP's developer 'repaired' the old home because then you don't need planning permits to build a new house, most likely.

The question is how long does one want to stick it. Probably the first teardown on the street is not the reason to sell, but if they are going to build one on the other side of you....
Valuethinker
Posts: 49038
Joined: Fri May 11, 2007 11:07 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by Valuethinker »

LeeMKE wrote:I agree with Stan1.

Your home may not appreciate much if at all, because what has happened here is that the land is worth more than the land with an old structure on it. If this happens another few times, you should value your home for tear down value. That is, the value of the lot, minus the cost to remove the structure.

For the time being, enjoy your location and home. I wouldn't rush to upgrade your home nor get too excited. This may be an anomaly caused by the disrepair of the torn down house. If it happens another couple of times to homes in less dire condition, see paragraph above. If not, it may spur a mini-boom of improvements around the neighborhood and that will float your value higher.
This is definitely about land price not house value.

It sounds like an attractive suburb, people want to live there, but they can afford bigger and better homes than the existing housing stock. Past a certain point it's cheaper and easier to knock down and rebuild than otherwise ( easier from a permits point of view to pretend that you are merely repairing).

Welcome to teardown land. I had thought the US housing crash would put paid to it but 'He's baaack....'
Boglegrappler
Posts: 1489
Joined: Wed Aug 01, 2012 9:24 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by Boglegrappler »

Well, I'm not sure if you are referring to me or not. But, in any event, I'm just trying to figure out what is going to happen to our neighborhood - that's all really.
Not at all.

Its not going to have a negative effect on the neighborhood. Its a validation that you live in a desirable area, and that people who earn more than the existing residents are willing to invest their housing dollars there. This is a very good long term sign. Neighborhoods seem to either keep pace or fall behind economic progress, and you don't want to be living in the ones that fall behind. People with economic wherewithal showing up means that your schools will have good taxpayer support, and young people with kids will move in to raise their families there.

The alternative can be seen any number of places, where things simply drift "south" and you wind up with a slow downgrade of the economic wherewithal of the neighborhood and community.

It might cause your assessment to rise, since, in a teardown, you have a specific market number put on the land alone. When that becomes a trend, it makes it more difficult for the local assessor to undervalue the areas being affected. But it only happens because the property is actually more valuable, and if you are in an older resident part of town, your assessor will probably do his best to suppress the valuations there in favor of the longer term residents (even though this is illegal and improper).

I agree with the recommendation to treat the new neighbors cordially. Years ago, when we bought our first house, we were 25+ years younger than almost everyone on our street. We got along well with everyone, but they viewed us as curiosities. And our immediate neighbor expressed surprise when we chose white for the color of our house when repainting (from grey), presumably because their house was white. :)
desiderium
Posts: 1264
Joined: Sat Jan 04, 2014 10:08 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by desiderium »

mr_breen wrote:
I understand some of the reasons why our new neighbors would pay as much as they did. The public schools in our township are ranked in the top 5 of the state. Our neighborhood is within walking distance to our town's center, public transportation, and public schools. We have a vibrant downtown center just a few minutes walking distance and the town is very safe.
This is why. The selling price reflects what people are willing to pay for living in your kind of town. The value is not exclusive to the new/fancy home, and more modest or older properties will undoubtedly appreciate.

I live in a place like this, where values have been driven up in a similar fashion. People have worried for years that the town will never be the same. Its the civilized nature and human scale of a small town that the newcomers are attracted to, and as they become part of the community they too will become defenders of the local culture. The character of the town may change less than you think. Help your neighbors get to know how things are seen and done in your community and they will want to fit in.
dolphinsaremammals
Posts: 2094
Joined: Tue Jul 22, 2014 4:18 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by dolphinsaremammals »

desiderium wrote:
I live in a place like this, where values have been driven up in a similar fashion. People have worried for years that the town will never be the same. Its the civilized nature and human scale of a small town that the newcomers are attracted to, and as they become part of the community they too will become defenders of the local culture. The character of the town may change less than you think. Help your neighbors get to know how things are seen and done in your community and they will want to fit in.
You are fortunate. My experience in two communities is the opposite.

Also, i disagree with Boglegrappler's theory that the alternative to being overrun with McMansions is decay. There are plenty of beautiful historic or bungalow communities, for example, as well as middle class and blue collar communities, where people restore and maintain their properties.
Last edited by dolphinsaremammals on Sun Mar 01, 2015 11:36 am, edited 1 time in total.
kolea
Posts: 1322
Joined: Fri Jul 11, 2014 5:30 pm
Location: Maui and Columbia River Gorge

Re: Our neighbors home was gutted and rebuilt - Question

Post by kolea »

It became such a problem in Seattle that they put a limit on the size of a new house. As I recall, a house cannot be larger than 25% above the average size in the neighborhood. Sizes will still creep upward but the pace has been slowed down.
Kolea (pron. ko-lay-uh). Golden plover.
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by stan1 »

TwoByFour wrote:It became such a problem in Seattle that they put a limit on the size of a new house. As I recall, a house cannot be larger than 25% above the average size in the neighborhood. Sizes will still creep upward but the pace has been slowed down.
Yep, that's subject to local politics of the township and its legal authorities. If the township has a local council that wants to preserve the small town way of life its possible to rally residents who live there now and get these types of limitations if the council has the authority to restrict development. If the elected representatives are sympathetic to real estate interests then first the community would have to vote them out and replace with people who want to keep the town like it is. If the township doesn't have the legal authority to set development standards then it will be very hard.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
Valuethinker
Posts: 49038
Joined: Fri May 11, 2007 11:07 am

Re: Our neighbors home was gutted and rebuilt - Question

Post by Valuethinker »

dolphinsaremammals wrote:
desiderium wrote:
I live in a place like this, where values have been driven up in a similar fashion. People have worried for years that the town will never be the same. Its the civilized nature and human scale of a small town that the newcomers are attracted to, and as they become part of the community they too will become defenders of the local culture. The character of the town may change less than you think. Help your neighbors get to know how things are seen and done in your community and they will want to fit in.
You are fortunate. My experience in two communities is the opposite.

Also, i disagree with Boglegrappler's theory that the alternative to being overrun with McMansions is decay. There are plenty of beautiful historic or bungalow communities, for example, as well as middle class and blue collar communities, where people restore and maintain their properties.
The sad thing is that we are often talking about houses with considerable historic value, fine features etc. Which could be extended and remodelled but don't need to be knocked down.

However the economics make it easier just to knock them down and start again. The result are pretty identikit boxes.

It's funny. 2 streets over from my parents there are endless teardowns. Their street? The lots are narrower and although someone has just got permission for a 3rd floor, and most of the houses have been extended, I can't think of any total teardown.

The 'hood has the right transport connections to downtown, good schools, parks and other amenities. The location is just very valuable.

I always think of dentistry when I see a 'hood that's been teardowned. They look like a kid whose adult teeth are coming in.

Gawd save us from all that white stucco and gyprock though.
ShiftF5
Posts: 751
Joined: Wed Jan 11, 2012 7:59 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by ShiftF5 »

From a strictly financial point I've got to believe this will be positive, though as several others have detailed, your neighborhood may be in for some drastic changes.

Good luck.
Topic Author
mr_breen
Posts: 138
Joined: Sat Feb 14, 2015 10:53 pm

Re: Our neighbors home was gutted and rebuilt - Question

Post by mr_breen »

Valuethinker wrote: Where I know of 'Teardown' neighborhoods this is precisely what happens. Monster homes which look like beached whales (or ships) because they are so large for the lots. Tasteless architecture: could be in Palm Springs or anywhere. And a loss of the community feeling: the incomes have higher incomes, dual career professionals usually, keep them and their kids to themselves (I've lost track of the number of Filipina nannies in the old 'hood). Big Mercedes and BMW SUVs etc.
That's interesting. It's almost exactly the situation with our new neighbors. Both are lawyers, but they have Lexus SUV's instead of BMW's and the wife is always traveling around the world for her law firm.

This might be an anomaly because the particular home torn down was really in bad shape. The good thing is that the footprint did not change at all, since the frame was kept. If this keeps happening though, it'll make home improvement decisions difficult for me. Is it worth it to spend the money to update our kitchen if the likely buyers will want to tear the home down? A lot to consider...
Post Reply