In real estate, you sometimes have a house for sale where the house is actually of no value.  Such listings may technically have a house on the property and may even include some limited information on the house like number of bedrooms and bathrooms, but the value isn’t in the house and the land, it’s just in the land.

When you have a property with a house that is not habitable, the valuation process is focused on different aspects than a property with a liveable home.  You don’t need to think about how an extra bathroom in one property affects the value of a comparable with one fewer bathroom and so forth.  The focus becomes the characteristics of the lot and aspects that might be of limited impact in a typical listing become quite important.  In some cases, a positive attribute for a property with a good house might actually be a negative for a building lot.

Given that the value of a building lot is quite different than the value of the same lot with a viable house on it, we often work with clients who want to know what the lot itself is worth.  While each property has its own set of characteristics and attributes that impact the value, let’s review some of the factors that impact building lot value.

Zoned out.

We’ve written before about how a change in zoning can dramatically increase the value of a property, but the current zoning in likely to remain the same for most building lots in an urban area.  As such, it’s important to look at the zoning for a property to determine if your planned use is in fact permitted on the lot.

While the desired use is often an individual specific choice, the current zoning of a property can dramatically impact the value of the building lot.  Some sellers make assumptions that their property is worth the same as another building lot nearby without looking into the zoning.  Consider a property that is on the edge of a mixed use (commercial and residential) zoning area.  If they use a residential only zoned property nearby, they may be undervaluing the property, as the highest and best use might be a commercial building that could be built upon the lot.

If you’re interested in reading about how we look up zoning and interpret it, we wrote an article about that and you can find it here.

Sometimes being exceptional is bad.

The literal definition of exceptional is “unusual; not typical” but most people use it in the positive sense of “unusually good; outstanding”.

In real estate and real estate zoning, there are often exceptions to the zoning of a specific property.  They are often due to historical planning decisions and offer an interesting glimpse into how the municipality thought about what was desirable on that property in past years.

If you’re reviewing the zoning and there is an exception for the property, it can have a negative impact on the property if it limits what is permitted on that specific plot of land.  We’ve seen streets where three houses have exceptions due to environmental aspects that severely limit what can be done on the property.  You couldn’t tell a difference between those three properties and the dozens of others on the street, but anyone who bought one thinking they could do the same infill development as elsewhere on the street would be sadly mistaken.

Size matters.  Well, maximum floor space index and buildable site area matter.

Every property has restrictions on how big a home can be built on it.  These restrictions have a tremendous impact on the value of a building lot, as by dictating the size of the home, they dictate the possible sale price of any development on the lot.

On any street where you see a number of new build properties, it is likely that the builder built a home that was the maximum size that was permitted for that specific lot.  Older homes on the street are likely smaller, with more space between themselves and their neighbour, but a new build will be as close to the lot line as minimum setbacks allow, and they will be as big as possible.  Buyers often consider square footage as a proxy for value and an extra bedroom or washroom can have a big impact on the eventual sale price.

Just regular folk.

While there are some unique houses that use unusual angles and curves to create an attractive home, most houses tend to be based on squares and rectangles.  This tends to be the most efficient design to optimize useable space and it requires a lot that is regularly shaped.  A 25 x 100 foot lot offers a straight forward way to build a house with maximized layout and space.

We’ve shown properties where they were wedge-shaped, with a house that ended up resembling a wedge of cheese.  In practice, this resulted in strange layouts, such as a kitchen that starts out at 14 feet wide but drops to 7 feet by the time we reached the back door.

Unusual and irregular lot dimensions mean that much of what needs to be done is custom and buyers often need to adjust how they live (and the furniture they live with!) in the property.  While such unusual lots can be very interesting from a design perspective, they typically are less valuable than a standard, regular shaped building lot.

Opposites attract!  Or do they repel?

One of the curious aspects of a building lot is that sometimes what makes it less valuable is what makes a lot with a liveable home valuable.  The prime example of this is mature trees on a lot.  On a property where the house in place is remaining, the presence of a mature tree on the lot is very desirable.

In contrast, when someone is looking at a lot with the intent of tearing down the existing house, a mature tree can make building a larger home impossible.  It can be quite difficult to get permission to tear down a mature tree and depending on the location of the tree(s) on the lot, it can make it difficult to have a larger footprint that results in a higher sale price.

Less park, more parking.

A final aspect that can impact the value of a building lot is the parking situation.  A lot that already has the curb cutaway for parking has more value than a home where the builder would need to apply for permission for parking from the municipality.

Such permissions are never guaranteed to be granted and it can be an expensive and time consuming process to get neighbour agreement to remove street parking due to the addition of a driveway on the lot.  If a builder goes to the effort of getting legal parking on the lot, it definitely adds value to the property, but the seller must expect to get a bit less.

These are the main factors that influence the value of a property where the house on it is not worth keeping.  Building lots do exist in many parts of the GTA and it can be a rewarding and satisfying way to get the home you want, in the neighbourhood you love.  If you’re considering such an option, we’d love to help you move forward.