It might be almost free. In my town we have had people "donate" a house to the fire department. They have a controlled burn so they are better equipped when they face a real fire. The one catch I know of is the shingles may have to be taken off the roof. But in the end you have the whole house burned up.

You can ask your fire department if they have a similar program. Naturally, if the house is built into the houses on either side this is not likely to be an option.

There are also some people who specialize in tearing down old houses or barns. They often pay you or work almost free for taking the materials. If you go this route make sure they are insured and can give you references.

You want to talk to your cities code enforecement department. They should be able to tell you about building restrictions and so on. You might also consider if they will not allow you to build a garage converting the house INTO a garage.

One person owning 2 deeds next to each other really just has one big lot. I am sure you could change your deed to show this is one lot. But need a lawyer to do it. You have to have the new deed recorded anyway, why not just add it onto your existing deed (if paid for)? BUT if you do, you may not be able to split it up again. So potentially, you could be stuck with one big lot. The same thing is true if you tear a house down. You might face new zoning laws that restrict future use or ban new building on that lot size.

Hence, ALWAYS talk to the city people who will fine you or will smile at you. Just ask ( again) the city about this.