Deconstruction Serves Both Buyers and Sellers of Real Estate

June 1, 2021

With the entire country in a bit of a real estate frenzy, houses that are for sale often vanish soon after escrow closes, only to be replaced something entirely new. Here’s a way that both buyers and sellers in such transformations could benefit.

The real estate agent is often the first person to recognize that a listed home is a candidate for replacement. Of course, the agent’s hunch can’t be confirmed until a buyer is secured. But assuming the agent is correct and the house is coming down, all three parties (seller, buyer and agent) could benefit by taking a few simple steps.

First, the purchase agreement would need to be written to allow the seller to deconstruct his or her own home, leaving the underlying real estate ready to receive whatever replacement the buyer intends to build.

Second, the seller, working with a TRP manager or other skilled reuse professional, would need to obtain a survey of the property detailing, in writing and photos, all the materials to be salvaged for reuse, including framing lumber. The survey results would be sent to several IRS-qualified appraisers who would, at no cost to the seller, calculate estimates of the donation value the seller would receive upon deconstruction and donation of the materials. From these estimates, the seller would ultimately choose one appraiser to work with. The seller would also obtain a bid from a certified deconstruction contractor to carefully remove all the materials indicated in the survey and deliver them to a qualified nonprofit organization, such as TRP.

Third, once such project details are agreed upon, the chosen appraiser would visit the site to inspect the materials, and the nonprofit would create descriptive inventories of all of the materials.

Fourth, upon delivery of the salvaged materials, final inventories would be created based on what was actually received by the nonprofit. These final inventories would be sent to the appraiser, who would complete an appraisal report and deliver it to the donor, along with all required IRS forms.

Fifth, escrow would close, the buyer would take possession of a clean lot, and the seller would receive a substantial tax deduction.

As you can see, the process is straightforward and delivers the following benefits:
• The seller obtains a great price for the house and a substantial tax benefit.
• The buyer receives a build-ready lot, without having to pay for demolition.
• The real estate agent earns kudos from the client, and has mastered a new sales tool.

Note: Deconstruction typically costs more than demolition. If the seller did not have funds available for this type of transaction, the buyer could sweeten the deal by offering to fund a portion of the purchase price through escrow, and before closing, to pay for the difference.

By the way, this process works for remodeling projects as well.