Normally, you can buy a buildable lot for less than a lot with any type of existing construction.
I have done this a bunch of times, my realestate trick was buying up large properties with single dwelings and sub dividing them, then building, and building, and building...
SO, first, look around for property, I understand that in some areas it just doesn't exist.
Next if you are intent on buying this property, consider what you want in the end.
So if you want 1700 sq feet 3 bed 1 1/2 bath and whats there is a 1000 sq foot 1 bed 1 bath, consider a remodel rather than a rebuild, if the foundation is solid, {I am going to guess this is municipal water and sewer, not well and septic, by the lot you described}.
In most cases this is much easier...
I bought a house in 2010, it was built in 1950 and looked like it was built in 1550, kitchen cabinets with no doors, rooms with no floors, etc... I paid 63K for it because the sellers inherited it and needed to sell it to buy a house I was selling...
So I didn't touch this thing for almost 2 years, it got even WORSE in that time, lol.. I couldn't get an insurance co to insure it, I had to put it under my construction insurance {in the case someone trespassed and got hurt}. Then I had a bt of free time, so I started thinking about what I was going to do with it. The foundation was solid, the house was a good size 2000+sq, but the layout was terrible {most houses of that error, lots of small rooms, built ins, small closets, not enough baths, etc}
I ended up meeting the city inspector on site and picking his brain, he made it clear that rebuilding on that lot would be tough because of code changes, thats all I needed to hear, I went home, that night drew up a plan, filled out the permits and submitted them the next day, full remodel, I gutted it, sistered 2x6 construction to the existing x4 walls, new roof {trusts and all}, vinyl sided it, new doors and windows, new out side stairs, landscaping, ran natural gas, full irrigation for the lawn, all in about a month. Then we had to move onto another project.
If you looked at the house it looked brand new, until you walked inside and noticed it was an uninsulated shell with construction stairs and not 1 interior wall!!! I even put curtains up, lol...
Anyway, I find a buyer for the house, some called to see if it was forsale, {they couldnt see inside to see the mess it was}, so I met with them, and they loved the area and had family a few doors down, and wanted the house..
I let them in and they were heart broken, lol, I explained that they could pick any floor design they wanted, I removed free spanned and headered EVERY weight bearing wall so it was literally wide open {has 9ft ceilings both floors to start}, I even took out the stairs...
They asked what it would cost to finish and I replied, it would be much easier if I knew what they wanted to spend, they gave me their preapproval number, how many beds, sizes, baths, kitchen, office, dining room, etc and I drew them a house that night..
They loved the design, we worked with the bank a bit, a month later they were picking wall and floor finishes!!!!
NOW, the moral of the story is, I was into that house, property and all for around $180K, it was worth over $300 when I was done, if I demo'd and rebuilt, I would have spent $275K and it would have ended up smaller, because the demo costs, permits, new foundation, etc etc etc would have drowned the project...
So look at whats there, unless its a stone foundation, with 15 years of water damage to the sticks, everything else can be saved. Even if its too small, you get the right contractor and you will be amazed, I turned a 1400 sq foot raised ranch with attached garage into a 3200 sq foot ranch and saved the original shallow raised ranch foundation, used it as a short ceiling mechanical room/storage area, poured a slab on the opposite side {the side with no garage} used the garage as a slab for that side, lowered the floor in the raised area so you walked in the front door and didnt go up or down the center of the house had nice high ceilings, the 2 wings had normal height, 1 side was a master suite, the other was 3 bedrooms. Even the inspectors in that town could not believe it, turned a $140K raised ranch into a $490K mini palace, lol...