I agree with the others that this feels like a strong sell case. In particular, I'm wondering if you can't get substantially more than your expected price given that you could have a second unit on the property. That is, if you know that others can too. Are there small non-building (e.g. permitting) steps you could take that might add a couple hundred thousand to the sticker price, for example? That could be your "job" in the sense of trading your time for money for the next 6 months related to this. You might even dwarf your spouses income for the year =).
We've looked into this extensively. The conclusion is that the buildable land's value cannot be unlocked in the open market and that the average buyer will not be willing to add hundreds of thousands for the buildable piece of land; we'd have to list it and see what offers came in. In order to add the value, we need architectural drawings, permits, to bring in sewer, etc. It would be 6 months minimum to do this and I'm expecting a baby around then. For many reasons, embarking on that is not the right move right now, but if we can hold onto the property I'd like to develop it myself when I have time. We also interviewed many developers who made offers on the place, and the best we could get was $800k, and he'd just tear down or gut the house we just remodeled.
Yep, that kind of stuff was what I had in mind. But yeah, if a baby is on the way / it isn't worth the hassle, then I think I'm fully on the side of just put it on the market and let the chips fall where they may. If you end up with a non-builder as your highest offer, I guess in the event they wanted something you didn't want to give up in a negotiation you could bring up this upside they might not be thinking of or something...
Re: teardown your recent remodeling -
If it's environment reasons:
For some perspective, I know someone in the commercial HVAC business whose company regularly redoes full HVAC replacement on 30+ floor commercial buildings that everyone knows will be coming down in < 2 years. He says he's seen full gutted renos happening alongside him too in those cases. And this is in California =(.
If it's emotional reasons:
Well, see Walt's answer. But also consider that you might prefer a teardown to visiting 2 years later only to see the new owners trashing the place etc. Let me tell you stories of homemade backyard above ground pools with pallets stacked up to act as a deck and zip-tied to the top of the chainlink fencing to make a higher fence... Kind of like putting your terminally ill dog down rather than see it suffer.