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Inside San Francisco's million-dollar fixer-upper homes
Inside San Francisco's million-dollar fixer-upper homes
Katie CanalesFeb 16, 2020, 20:28 IST
Fixer-uppers selling for at least $1 million in San Francisco regularly make headlines.
In a city where housing demand outweighs supply, the value of homes and land is sky-high, meaning even dilapidated single-family homes throughout the city are worth a pretty penny.
But the purchase of the property is only the first step in taking on a fixer-upper project - renovations typically mean shelling out millions more.
The glamour of flipping a "fixer-upper" has in part been fetishized by home-renovation TV shows on channels like HGTV. One of the most recent and high-profile ones that come to mind is of course Chip and Joanna Gaines' "Fixer Upper," where homeowners paid on average $173,221 for their fixer upfront in the Texas town of Waco before the famous couple gave it their signature touch.
In San Francisco, though, the concept of a piece in the city's tight housing market being a "fixer-upper" has a wholly different connotation.
The city's limited housing stock and subsequent housing shortage and crisis translate to even these dilapidated houses selling for north of $1 million. As demand outweighs supply, the value of land and the homes sitting atop it - whether they're intact or otherwise deteriorating - rises, which Coldwell Banker listing agent Jeremy Rushton told Business Insider is what's so stupefying about seeing a property in disrepair with such a high price tag.
"If prices doubled next week, all these homes would still look the same," Rushton said. "In the 90s, when they were a third of what they're worth now, they looked the same as they do now."
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That's why San Francisco fixer-uppers get so much attention, Sotheby's real-estate broker Herman Chan told Business Insider in an email. And on top of that, people love a good before-and-after project.
"[It's a] rags to riches story," Chan said. "It's so American."
Peruse any real-estate listing site, and you'll see a bunch of these fixer-uppers listed for sale in San Francisco. Some are bluntly categorized as a "fixer." Other spoiler alerts are a lack of interior photos in the listing or a disclaimer screaming "BUILD YOUR CUSTOM DREAM HOME" or "Bring your contractors and architects!" Listings don't usually attempt to sugarcoat it.
"Properties really speak for themselves no matter what they are," Rushton said. But historically, that doesn't sway buyers - these homes are almost always snatched up after not sitting idly on the market for long.
But buying the home is only the first step - then comes the millions more for renovations and the lengthy city approval process.
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Business Insider has reported on a portion of the city's "fixer-upper" homes in recent years, including a recent sale of one of the city's famed Painted Ladies purchased by a tech founder for $3.55 million (in cash, mind you.)
Here's how San Francisco's fixer-uppers have fared on the market, why new owners can't simply demolish their new fixer-upper even if they want to, what their listing agents had to say about them, and what some of them are like inside.
Rushton told Business Insider that he considers any given property a fixer-upper when it's in too rough of shape to justify investing in a paint job, new floors, or staging before it hits the market.
"Everybody has seen a rundown house, but to see a rundown house that's worth a million-plus, I think that's really what surprises people," Rushton said.
At press time, Zillow held four San Francisco listings tagged as fixer-uppers. Redfin had 14 real-estate listings categorized under "Fixer Upper in San Francisco." Nine of them are north of $1 million.
One is a century-old home on a 3,000-square-foot lot in the city's Richmond District and is a "Great FIXER opportunity." Only one photo is included in the listing: one of its dark brown exterior; no interior shots. The last sentence in the listing reads "Bring your contractors & buyers looking for a blank canvas." It's asking $1.65 million and is listed as a "Hot Home" on Redfin, with a note detailing that it is expecting to sell faster than 97% of other homes in the area.
Some are barely salvageable — it's possible to find real-estate listings blatantly quipping that it's dangerous to live in, like a listing in the city's Bayview Heights. It's an "Old Run Down Shack on Property Not Habitable. Contractor Special. Utilities believed to be at or on site. Build your custom dream home." The only photos are from the street, with said shack hidden beyond a rickety fence. Asking price is $500,000.
These homes are typically priced below-market-rate. So as startling as these prices may seem, the listings (before renovations) are actually somewhat of a bargain — the city's median home value is $1.4 million.
And, in many cases, as the age-old real-estate adage goes, prospective home buyers on the prowl aren't seeking the homes in these listings — they want the land.
"There is an allure to a fixer-upper in a desirable location," Rushton told Business Insider.
The asking price is often only part of the investment. Construction costs are sky-high here — the Bay Area is the most expensive place in the world to build, with the costs sitting at $417 per square foot to do so.
Costs aside, a renovation is also time-intensive. Crafting designs and pushing them through the city's snail-like approval process means potentially not moving into your new home for years after it's purchased.
That ultimately results in a higher home value for the owners once the renovations are all said and done. People can, and do, flip homes just for the properties to return to the market for a higher price.
All of which is to say that the chance to acquire a fixer-upper and then carry out the needed renovations typically falls to San Francisco residents on the wealthier side, many of whom prospered or continue to prosper from the region's lucrative tech industry.
Rushton said fixer-uppers can be found across the city of San Francisco, though they're more common in the modest residential areas.
But mansions in the ritziest districts within city limits aren't impervious to falling into disrepair.
A seven-bedroom home in San Francisco's Sea Cliff, once owned by a now-imprisoned real-estate mogul and art scammer, is one of the area's only houses to be literally built into a sea cliff.
There are no photos of the home's interior in the listing. The floors need to be redone, and there is evidence of leaks.
"Bring your contractors and architects to re-imagine the iconic view home of your dreams," reads the listing.
Though it isn't dangerous to live in, it needs a lot of love. But the fixer could soon be another whose poor condition doesn't pose a problem for a buyer — it's currently "under contract" pending a sale.
"This property is for someone who has the money to begin with to buy the property and then either wants to do minimal work to it and kind of clean it up and keep the same floor plan or really completely gut it," the home's listing agent, Anne Herrera, told Business Insider in a 2019 interview.
Rushton said the most common explanation for why a home in the city has fallen into disrepair is their long-time tenants were elderly residents, who may not have the time, strength, or money to maintain it.
Other reasons could be a home falling to an heir who lacked the financial means to keep it up, or perhaps the home was caught up in legal family issues that prevented it from being maintained, Chan said.
"I've sold homes where they were vacant for decades and when people come in and they ask how long they'd been vacant, and then I answered the question, there's always this jaw-drop," Rushton said.
But in San Francisco's crowded real-estate market, the fixer-uppers are still actually considered some of the city's crown jewels.
"My experience has been that fixer-uppers in desirable locations always have a lot of interest and a lot of buzz around them," Rushton said.
Run-down homes even have an advantage over homes that may be cleaner but have an outdated remodel, or they fall somewhere in between a fixer-upper and a livable property.
"Nobody wants to pay a premium for somebody else's 2002 remodel," Rushton said. "They just don't."
Rushton said the sales history for many homes show higher data for fixer-uppers than for listings that are a couple of decades behind in fashionable design. It's an all-or-nothing type of situation for prospective buyers.
"People will pay a premium in San Francisco if a property is remodeled in a way that is trendy and agreeable to most people," Rushton said. "But if it's not that, then they would often rather have it as a fixer-upper."
But, he said, it's actually usually cheaper to buy an older remodel and simply update the finishes instead of the infrastructure, like the electrical and plumbing systems.
"It is more cost-effective to buy somebody else's kind of tired, remodeled [home,] but the market doesn't really see it that way," Rushton said.
Perhaps there's something about the prospect of starting over, from scratch, that is appealing to residents looking for a home. Though starting completely over is usually out of the question.
Getting a demolition permit is almost impossible, Rushton said — the city has stringent building regulations.
Even properties that have been extensively remodeled and look brand new still have the original build dates, since the city's building department requires them to keep a certain amount of the property intact. Rushton said he's never sold a home that's been demolished.
"I've seen places where that would be the economical thing to do," Rushton said. "If they were anywhere else, they would just be torn down. But that's just not a thing in this neck of the woods."
Most fixer-upper sales come with a good skeleton to work with, like this pink 480-square-foot home in the city's Visitacion Valley.
Photos showed a patchy roof and a grimy and outdated interior. The listing, like the others, marketed the property as an "incredible opportunity for developers, contractors, or the handy owner."
Most fixer-uppers in San Francisco ask at least $1 million, but sometimes there will be a stroke of luck — this one sold for $600,000 in December 2018, after just two months on the market.
Approved plans came with the sale, meaning the new owners didn't have to go through the city approval process — which can take a while — if they didn't want to.
And the home also only took up a third of the 2,500-square-foot lot, 75% of which had approval at the time to be built upon.
The home's listing agent, Linda Ngo, told Business Insider in a 2019 interview that she received "quite a few calls" from prospective buyers just within three days of the home landing on the market.
Chan said each individual property is typically marketed according to how much work it needs.
For "light fixers," HGTV show enthusiasts are going to be included in the target demographic. For "heavier fixers," interested parties would likely include veteran flippers, investors, and institutional buyers with deep pockets. And for fixers that were once "ultra-lux," the people interested will be those seeking legacy and prestige in historic or trophy properties, Chan said.
Once they've bought the place, most new owners of a fixer-upper will likely hire a contractor to do the remodel, according to Rushton.
That's certainly the case for Leah Culver, the new owner of none other than one of the city's seven iconic Painted Ladies.
Now, Culver is launching into a $3 million renovation process. But she luckily doesn't have to do too much of the work, since she's hired a local project manager to spearhead the project.
First comes hiring an architect, then settling on design plans, then submitting the plans to the city for approval. Construction may not actually start for another year.
