Tear down my house and rebuild -financing?
I was going to move, but am now considering tearing down my house and rebuilding. Area is very solid, and has been hit by the economy, but not badly. Location is outstanding.
A few facts:
> The street I live on has small and very basic homes built in 1950. Homes all around this street are priced from 350K to 800K. They are all larger, some built in the 60's and 70's, others are new.
> Two homes on my street were torn down and after rebuild, sold for about $600K in the past 4 months.
> Desirable area due to location and top school district.
> Over half the homes are owned by builders or real estate companies. Purchase price for the teardown homes is usually around $150K, new builds sell for around $600K. They are still building, so at least in their minds, the market is ok here.
> Nearby subdivisions are also teardowns/rebuilds, and these new homes are selling at an acceptable pace, ie, on the market less than 3 months. (which is good in this economy, I think.)
So how does one go about this? I owe about 70% of the current value. I intend to build a smaller home, 1200 - 1300 sf as opposed to the 2500 - 3500sf homes being built. (not even sure if the city would allow that.)
Is there a type of contract where you sell your home to the builder, then when they build it you buy it back at a pre-agreed price, or do you do a "tearing down my house/rebuilding it" loan?
Sorry, but I am clueless about how this works!