Scarcity of Prime Lots Making "Knock Downs" More Common

By Ron Whittington

For those who want to buy property and have a custom builder create their dream home, they might be hoping that empty lots for homebuilding are being discounted now as some developers sell off property where they had planned to build when real estate was sizzling hot.

While that is the case in some locations, realtors and builders are saying that we are experiencing a shrinking inventory of "attractive" lots to build on in some areas of Jacksonville – and in some cases it does make sense to homebuyers, and sometimes homeowners, to "knock down" or "raze" a home when buying in a new location.

Just like a home, prices for land lots are driven by supply and demand and where they are located, according to Prudential Network Realty’s Phil Pierce.

"Some land lots are going at less expensive prices, now, but it really depends on where they are," Pierce said. "Certainly, you can buy a larger tract of land in a rural area at a better price per acre than you can an ocean front lot. What you don’t see is much downward movement for land in the metro area."

While some developers and individual land owners, looking at home inventories double their number from last year, are dumping lots in South Florida, California and other states to increase their cash flow, those discounts typically happen in areas where land is a scarce commodity.

"There are only a select few lots in Marsh Landing, a nice, gated community, and buyers shouldn’t expect much discount in those lot prices," Pierce said. "Land on the oceanfront, in gated communities and located other unique residential areas are becoming more scarce. Buying lots in those locations nearly always makes sense, because they aren’t making any more of it."

Clare Berry, who has been a beaches broker since 1985, witnessed one of the first "knockdowns" in Ponte Vedra back in 1995. In that case, it was a 1960’s ranch style home.

"The new owner, who lived in Atlanta, first looked at remodeling, but decided that it would be cheaper to rebuild it," Berry said. "It became one of the first $1 million lots sold in Ponte Vedra. He bought the house and the lot for $995,000 and then tore down the house and built new."

More recently, a couple Berry worked with purchased a contemporary home along the water on a golf course for $1 million – and decided to tear it down to build a more traditional house.

"There is just so little property available in some of these sought-after neighborhoods anymore," said Berry, who is currently selling a one-acre lot for $499,000 in the Payasada subdivision located off State Highway 210 in Ponte Vedra. "In some cases, especially if you are buying or living in an area like Sawgrass, knock downs are becoming more prevalent."

Like Pierce, Berry says we should expect more razing in some of the older, well-established developments in Jacksonville in the future.

"In places like Deerwood, where the homes originally built there have structural limitations, older plumbing and electrical systems, or smaller square footages, we’re starting to see the process for the first time," she said.

The trend is already well under way in many cities. In Atlanta, for example, nearly all neighborhoods within the city’s perimeter highway are seeing ranch style homes from the 1960s, purchased for around $10,000 or less, fall to the wrecking ball to become two- and three-story homes worth $800,000 or more.

The changes are not universally welcomed in communities where roots run deep and neighborhood children grow up together, move away and sometimes return with their own families.

And last year, here in Atlantic Beach, city officials grappled with property owners about quality of life issues as so called "McMansions" began springing up on existing properties.

For home buyers, the cost of removing a home is about $15,000 to $20,000 on average, according to John Long, owner of custom builder J.A. Long, Inc.

"In some cases, especially brick homes or homes with historic value, you can actually have the home hauled away at no cost," Long said. "We had a case here where the owner had a brick house moved three miles down the road, placed on a foundation that raised it one story and it sits there today."

As a company that looks for lots where to build about 30 custom homes a year, Long also attests that quality lots are becoming harder to find.

Unless it is a custom builder like J.A. Long, Margi Pettit of Lifestyles Realtors in Atlantic Beach says she’s currently advising builders to leave the lots vacant and pre-sell their homes first – rather than building spec homes and waiting for the buyers to come.

"The cost of land has got to be right to put spec homes up," she said. "There’s so much inventory now."

She says the one exception may be single family homes in the $400,000 and under range.

"Those sales are pretty hot lately, but I wouldn’t advise building anything above that price range for the next three months or so," she said.

As for home buyers looking to build on a lot, don’t expect any deep discounts for the land – especially in the most popular neighborhoods in Jacksonville. However, if they see a piece of property with an older home, but it’s in a popular area where they really want to set up roots, Pierce says it may be ripe for a knock-down.

"Before you do, certainly ask architects provide renovation estimates versa razing a home and starting over," he said. "The buyer needs to look at the math, factoring in everything from the cost of renting a home during the renovation process and the potential resale value. Sometimes, you may find that you’ll likely spend an additional amount equal to the sales price to build a new house that will bring the property up to today’s standards."

Media Contact: Ron Whittington (904-563-0402)