Tight market: Inventory is low for vacant urban lots

If you've found a lot in the city (what luck!), you'll need to think about everything from the value of what you're putting on it to the city's tap fees. Photo: Robert Llewellyn If you’ve found a lot in the city (what luck!), you’ll need to think about everything from the value of what you’re putting on it to the city’s tap fees. Photo: Robert Llewellyn

Scrolling lazily through the MLS, looking for a vacant city lot on which to build your dream home? You can scroll to your heart’s content, but you’re not too likely to nab your quarry. “They don’t come on the market very often at all, but when decent lots do come on the market, they’re gone within a day,” says Lindsay Milby, associate broker with Loring Woodriff.

Part of the reason: Builders and developers are always on the hunt for attractive city lots, and often approach property owners privately. Thus, sales happen without the properties ever officially going on the market. Same goes for larger lots that can be subdivided—the pros are on the case. Just outside city limits, Milby says, lots may linger a teensy bit longer, but still go quickly.

If you want to make a serious attempt at finding a lot to purchase (and if you have no relevant personal connections), Milby recommends just driving around the city with your eyes peeled. Spot something? Find the nearest address and use it to search public records to find out whether the “vacant lot” is indeed a separate property, or just an extra-large one attached to a house next door. “It’s not easy, and it takes time and a lot of effort,” she says.

(Occasionally, those large lots can be subdivided—if they have enough road frontage and the proper zoning.)

If you do locate something you like, know that the property owner has likely been approached by other parties in the past. “A lot of it is timing,” says Milby. “It’s all a matter of, are they willing to do it now?”

And, of course, it’s about making the right offer. Consider not only what number would be attractive to a potential seller, but the long-term implications of your investment. In the city, says Milby, the value of a property is usually about 30 percent in the land, 70 percent in structures. Using neighborhood comparables, you can roughly price an empty lot accordingly, keeping in mind the eventual resale value. “If the houses in the neighborhood around you are priced at $400,000, you can’t spend $200,000 on a lot, because you would be pricing yourself out of the neighborhood once you put the structure on that property,” says Milby.

What about buying an existing house in order to tear it down and rebuild? Prices are usually prohibitive, Milby says. “Sellers expect someone to come in and rehab them, rather than knock them down,” she says. Considering all the costs —buying a house, having it demolished, then building anew—the numbers rarely work.

Ready for some good news? “Once you find the lot, confirming that your project will work on it is not hard,” Milby says. It’s a good idea to connect with a builder or architect early in the process, so that you’ll have a clear idea of the footprint of your proposed building. Will you be able to fit a house and, say, a garage on a narrow lot? Or is the lot potentially too steep to build on? You can check your plans against setback and other requirements through the city’s Neighborhood Development Services.

There are a few other things to consider. Building a new house means paying a “tap fee” to hook up to city water and sewer service (which can be close to $10,000), and may also require you to put in a sidewalk. Finally, it’s a good idea to make sure you have an up-to-date survey, in order to protect yourself from nasty surprises like utility easements or encroachments from neighboring properties. This is another expense—roughly $500 to $1,000.

It may not be easy, but it sure is a nice dream to put a new house on an unbuilt city lot. And it is possible—after all, we’re not Manhattan (yet).

Posted In:     Abode,Magazines


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