One of the most notable private-home teardowns in local history was the demolition of a 12-year-old, 6,100-square-foot house at 112 N. Washington Drive on St. Armands Key. HERALD-TRIBUNE ARCHIVE / 2013 / HAROLD BUBIL
SARASOTA - Longtime residents love nearly everything about Sarasota except its penchant for tearing down old houses.
If the houses are on the waterfront, they’re an even bigger target for the bulldozer. The older they are, the harder they are to sell — and the more likely they will be demolished.
“What we are seeing nowadays in waterfront is appreciating land and depreciating house,” said top-selling agent Roger Pettingell of Coldwell Banker Previews. “When it gets to the point that the land so outvalues the house, then the house is a teardown.”
For those who don’t like this trend, the trail of tears extends from the Acacias — the 1913 Southern colonial home of Bertha Palmer’s aunt that was torn down in 1983 and replaced a decade later by Sarasota Bay Club — to the New Edzell Castle that was built in 1911 on then-tiny Bird Key and torn down in 1959 to make way for the Yacht Club on the suddenly big Bird Key. In Lido Shores, Phil Hiss' trailblazing midcentury modern home on New Pass was demolished in the early 2000s and replaced by three mansions. The list goes on and on.
Those were historic landmarks, but teardowns don’t have to be, and they don’t always look like teardowns, either.
A 12-year-old, $4.25 million St. Armands house was razed by Tampa Bay Lightning owner Jeff Vinik in 2013 to make way for what will be the largest house on the key. As Sarasota’s stature and wealth grows and land values climb, the Vinik redevelopment, not the first of its kind, likely won’t be the last.
Waterfront houses of a certain age have proven to be a tough sell — even if they are updated and in good condition. For starters, the pool of buyers is exceedingly shallow, and they are just as likely to buy in Naples, Palm Beach or Miami as in the Sarasota area if they can’t find property here that is just right.
“When people are making that dream-house investment in a luxury piece of property on a prime lot,” said Pettingell, “they want all the boxes checked. They want to make sure it is just what they want.”
“They just don’t care” about resale, said Kim Ogilvie, who, with her husband, Michael, have sold several true mansions in the area during their careers with Michael Saunders & Co.
“They want what they want.”
It's the land, not house
Appearance and even historic pedigree have little to do with it.
Too nice to tear down? Realtor Roger Pettingell, who does not have the listing on this property, says this 25-year-old house might be considered expendable to a high-end buyer who recognizes the property's "scarcity value." STAFF PHOTO / HAROLD BUBIL
Overlooking Roberts Bay, an elegant, updated house in excellent condition, priced at $6.4 million, has 6,600 square feet and superb views of mangrove islands and the Sarasota skyline in the distance. But it also has been on the market for nearly a year. The challenge is that the house and the land are about equal in value, and the trend is upward for the land and downward for the 25-year-old house.
Pettingell argues that it is a mistaken assumption to think the house is too nice to demolish. Such an “A-plus” location has opportunity value, he said.
“That scarcity premium is going to get it sold. It has nothing to do with the house; it is just the scarcity of the land.”
On Bay Shore Road near the Museum District, a nearly 10,000-square-foot mansion has been on and off the market since 2010, priced at nearly $10 million. The house was an instant landmark with its Moorish architecture. But a remodeling by a subsequent owner toned down the exterior, and the inside has been updated and refined. It’s lovely — but it was built in 1992.
It’s a “view” property; the water there is too shallow for boating.
As high-end homes age, the property's value becomes more about the view and less about the house. STAFF PHOTO / HAROLD BUBIL
Nearby, Kim Githler and Charles Githler sold their bayfront mansion this year, for $9 million, after two years on the market — not a terribly long time for a house its size and price. But it was only 10 years old.
It should be noted that several classic 1920s Spanish-style houses in the Indian Beach-Sapphire Shores neighborhood are being restored and updated, rather than torn down, as the architecture is still prized and difficult to duplicate. On Siesta Key, at least two midcentury moderns have been preserved as guest houses while new mansions were built on the site. One of them was moved a few feet to the front of the lot to make way for the new house.
Back at Lido Shores, on the north end of Lido Key, most of the houses on the New Pass side of Westway Drive have been replaced with mansions in the past 12 years. Those on the other side of the street, lacking water views, are being remodeled or left to decline further, awaiting renovation or replacement.
At 1300 Westway, the famous “Umbrella House,” designed in 1953 by Paul Rudolph, almost certainly would have been torn down years ago if it were on the water instead of on a “garden” lot, especially if, like the Hiss residence, it had been built in the middle of two or three lots.
A classic case is in Cherokee Park, where a 1964 bayfront house of 8,734 square feet, not counting the boathouse, is about to be torn down by owners who just paid $4.5 million for the 1-acre site in May. The house came on the market at $7.5 million in October 2014 before selling for land value (plus the grandfathered boat house), a reduction of 40 percent from original list price. The seller paid $6.6 million in early 2007.
Highest and best use
While the number of for-sale affordable houses ($50,000 to $300,000) within 20 miles of downtown Sarasota outnumber $1 million-plus listings by about 6 to 1 (5,060 to 780), according to Realtor.com, the high end of the market is a source of endless fascination for real estate voyeurs, and illustrates the mathematics that decides whether Josh Wynne, Steve Ellis, Bruce Saba or Michael Walker, all contractors, end up putting their signs in the yards, or whether the task might fall to John King or other remodelers.
Don Saba, a longtime local real estate appraiser who specializes in the upper end of the market, says, “Statistically, based on my extraction of land-to-value ratios over the past 25 years, when the site is 85 percent or more of the overall market value, and the improvements are nearing their economic life, then the highest and best use is to raze the existing improvements and construct a new home.”
Value, though, is “subjective and debatable, depending on whose point of view,” said Sarasota Realtor Albert Wooster.
Appraisers and real estate agents try to take the subjective out of the pricing equation by looking at what has sold. But for many waterfront homes, finding comparable properties is difficult. The houses tend to be one of a kind and very expensive. Saba sometimes looks to Naples or Palm Beach for similar homes when valuing mansions.
When they do sell, it is not uncommon to see deep discounts for grand waterfront homes in today’s market. Forty percent is common. The Githler mansion came on the market in February 2013 at $14.9 million; its $9 million selling price was a reduction just shy of 40 percent, even though the 10-year-old house showed like new, with the best of everything in its 11,000 square feet.
When asked if 20-year-old mansions are harder to sell, and why, Pettingell answered, “It depends on the 20-year-old mansion. People always would rather have brand new. If you go to the top of the pyramid, it is: ‘A’ location, brand-new house. It is very rare to find, and usually the most expensive.
“After that, you have to find somebody who really wants that location. What we need them to do is value the lot as an appreciating asset, and then instead of just figuring out the cost of the structure that is there, which is not what they want, we need to add that scarcity value in there, to get the price that makes sense. We need to value scarcity.
“You have this 20-year-old house, and presumably it has built-in obsolescence, because it is not the current look that we as a community have decided we love, which is modern. Or maybe the approach steps are higher, where now we have figured out how to build up the lot so you don’t have grand steps. It is a small market anyway, and now you have to find someone who is willing to make a compromise on the structure. That is not an unfindable buyer; there are just fewer of them.”
In defense of the existing mansion, the alternative — building a new one — carries with it the increasing cost to build, and the long process — often a year for planning and up to two years of construction.
“Not everyone has the stomach or the two years to do that,” Pettingell said. “You have to take into consideration that it is going to take a long time to make that happen.”
Perspective also plays into the pricing equation. Longtime residents don’t see the value in the land, and newcomers — potential buyers — don’t see the value in the houses.
The bottom line for sellers, Realtors agree, is that they have to discount their prices, in some cases steeply.
“Buyers are smart,” said Ogilvie, “and they are searching the nation for the right purchase. They could buy in Naples, Santa Monica, Palm Beach. They’ve been shopping — and we’re jaded. We don’t see how great it is to live here like they do.”
Coming soon: The teardown trend transforms long-established mainland neighborhoods.
Flood zones, preservation and love
Real estate professionals say several factors are considered when valuing, and possibly demolishing, high-end waterfront houses:
• Flood zones: A house with its first living floor at ground level (“on grade") does not conform to flood elevation rules. “That could make a house a teardown if someone valued that land so much,” said Roger Pettingell of Coldwell Banker Previews. While older buyers prefer not having to climb stairs to enter the house, “There are more luxury home buyers that want to see a house built to current standards. You buy a house on a canal that sits on grade, and you very likely can have a high flood or homeowner insurance premium that you are afraid will get higher and higher.” Said Re/Max Alliance Group agent Wanda Kerr: “The new flood insurance regulations have now added a financial burden of ever-increasing insurance premiums to older homes that do not meet the current elevation standards. One more reason a tear down now may be appropriate.”
“FEMA and the National Flood Insurance Program will drive more properties into the teardown category as the cost of flood insurance rises to the ‘actuarially sound’ rate, whatever that is,” said John Van Zandt, a Realtor with Island Real Estate. “On Anna Maria Island, I’m already seeing elevated homes more highly valued than similar-sized ones on the ground.”
• The “love” premium: Even sellers who admit that their houses are teardowns “love the house and want (their agents) to find somebody who loves the house, too.” Pettingell said. “That is really tough for pricing, because we know that the real value is just the land. So we are going to ask somebody to overpay for a structure they don’t want. They are going to have to tear it down, and there are costs associated with that, too. But the seller doesn’t want to price it at just the land cost, because they see the value” of the house.
• Financing: While most high-end purchases are all-cash deals made without financing, some buyers do have mortgages. Pettingell said sellers are wise not to scrape their land with the hopes of making it easier to sell. “If you have a structure in an ‘A-plus’ location and you want to sell it, the last thing you want to do is tear that house down. If someone does want to get financing, they are going to want to get value out of that house” so that the appraisal supports the loan.
• Preservation vs. the “joy of new”: Why doesn’t an upscale buyer simply update the existing house? “They just don’t want to,” Pettingell said. “You get a listing and the sellers say, ‘I am looking for that buyer who wants to keep what I have and maybe redo the kitchen, and loves that feeling of a beach house from long ago.’ The reality is that it’s the few-and-far-between buyer who wants that. When someone buys a $3 million location, they want a $3 million house. They don’t want to feel they bought a $2.7 million piece of land and are in a $300,000 house.” Said appraiser Don Saba, “Effective age matters, and the amount of economic life left for the improvements (the house). However, if we are dealing with an historic home in a FEMA area, then the 50-percent rule does not apply, and, as a result, there is more incentive to make the improvements to the structure. The main issue is highest and best use based on economic incentive.”
