How To Sell a San Francisco Fixer
530 Day Street Before
There are strategies for selling every type of property, and San Francisco fixer uppers are no different. Fixers (fixer upper, fixer, flip, tear down, distressed property, cash deal) come with their own set of issues, obstacles, and special considerations. Often it has been years even decades since the property was maintained in any fashion whatsoever, and it may be unclear where to even begin updating the property before putting the home up for sale in order to receive the highest return. Sometimes fixer properties have been issued Notices of Abatement or even “Red Tagged” by the city meaning they are unsafe for habitation. In some instances the neighbors are so fed up with the dilapidated appearance of the home that they have begun calling the city to investigate.
That was the case with our listing at 530 Day Street in Noe Valley pictured above. There were abatements filed against the property, the neighbors were upset, and on the face of things it seemed like the home was unsalable. When selling a San Francisco fixer it is important to see the big picture realizing issues such as abatements must be cleared in order for title to transfer and escrow to close once a buyer is in contract. Our clients at 530 Day Street really needed someone to step in and deal with the city, which we were thankfully able to do.
Do you have a probate, a trust, or a fixer upper you are considering selling? We will put together a free analysis of the property’s value and show you the best way to market the home. Call or email us! – 415-244-5846
A good example of how complicated things can get when selling a San Francisco fixer upper is the house we sold at 1507 Noe Street in Noe Valley. This property sat without any upkeep for so long that it had begun to slide down hill off its foundation. The seller hired a contractor to replace the foundation. The contractor removed the foundation and put the whole house on box cribbing. When my business partner Mike Ackerman and I got the call to list the property, 1507 Noe Street was balancing on blocks of wood without a foundation on a hillside. The interior was packed with storage and things from wall to wall with a dozen cats to boot. Our client really needed someone to come take the reins and help her make the best return she could in order to move to a comfortable place in the East Bay.
1507 Noe Street Before
The question when selling any fixer is what to do to the property before bringing it on the market. Sometimes perhaps the better question is what NOT to do. A house like 1507 Noe Street really needed to be demolished and rebuilt as something completely new, which was something our client could not afford to do. The most likely buyer for the property was going to be a developer of some sort. At the same time if only investors and developers showed up to purchase the home they were going to understand the costs of improvement very clearly calculating a return after redevelopment of about 30%. These buyers will not offer very much for a fixer in a truly poor state particularly when there is no competition. It was important for us to make the correct changes to the property in order to make the best return for our client!
Three types of buyers interested in San Francisco fixer upper homes:
Owner Occupied Property
This is a buyer who has seen what their money will/won’t buy in San Francisco and have started to look for properties in poor condition other typical buyers just won’t put up with. The issue with Owner Occupiers is that they can accept a certain amount of deferred maintenance but will typically have limited funds left over after the purchase in order to improve the space. This means a house like 1507 Noe Street without a foundation is just too much of a fixer for them. The key for attracting this kind of buyer is cleaning up a property to the point where they can see a value in making smaller scale improvements such as a bathroom, kitchen, and some less complicated layout upgrades. In San Francisco, and particularly in Noe Valley, houses that need small scale improvements are not true fixers, really I would call them Cosmetic Fixers, and the majority of buyers in a coveted neighborhood will be interested in making an offer on a cosmetic fixer. Few buyers are unwilling to update a bathroom or kitchen, there is little discount for properties in need of this kind of “cosmetic” upgrade.
Property Developer Intending To Occupy
Developers, architects, and contractors have to live somewhere too. From time to time they will be looking for a fixer property they will intend to occupy after putting their skills to work creating the house of their dreams. For the right property they are willing to pay a premium and compete against any buyer that may come along. They are also very savvy having dealt with the many issues and roadblocks that come with fixing up property in San Francisco. They can quantify accurately the costs of improvements, which is extremely helpful when preparing to out-compete other potential buyers. They can deal with the big questions and have good answers for the “unknowns”, which most normal buyers just aren’t equipped to do. Not to mention the overhead and holding costs that come with waiting for plans to be approved and permits to be issued by the city which can take months (years!).
Property Developer As Investment
Investor developer buyers are interested in fixer homes purely from a business perspective. They do not intend to work for free and have to keep a certain amount of value aside as profit, often 30% or more. Essentially they need to believe they can put time and money into the project and in the end sell it with an expectation of making a sizable profit above all their costs including holding costs, improvement costs, and the opportunity cost of their time. Investor developers are very savvy, understand how to deal with the San Francisco city bureaucracy, and have real and tested design-build skills. They often have an excellent idea of what their end consumer will want in terms of finishes and details, these guys know the market. The one thing the investor developer cannot do is compete with an owner occupier. The investor developer won’t live in the home, won’t wait for appreciation to increase the value of their investment, and they have calculated in a sizable percentage of profit, a buffer an owner occupier does not expect. Property developers hate seeing regular buyers interested in fixer uppers because for them it means spending more money to compete. The more “hair” on the deal the better, which can include the need to tear down the property, new foundation, or the mother of all property issues, tenant issues.
Investor Developers provide an excellent service by improving homes that a typical home buyer just can’t deal with. By doing this neighborhoods are improved turning eye soars into dream homes.
310 Duncan Street Fixer Upper
310 Duncan Before Photos
310 Duncan After Photos
My business partner Mike Ackerman and I recently sold this fixer property in Noe Valley at 310 Duncan Street between Church and Sanchez. This property had many levels of issues but also opportunities. First off the city’s records stated it was unclear if 310 Duncan Street was a multi-unit or single family home. For many Owner Occupiers this is a problem. Most likely they have had limited experience dealing with the department of Building and will be completely in the dark about what use the city will ultimately allow. On the other hand developers may actually LIKE that the use is “Unknown” because it will give them some flexibility when later deciding how to develop the property.
In the case of 310 Duncan, even though it did not have a kitchen, which can make lending difficult, and the rest of the property including the rear decking was in a dilapidated state, it was decided to completely clean out the property, redo the hardwood floors, and paint the interior and exterior. The strategy was to improve the curb appeal enough to attract all three of the San Francisco fixer upper buyers and create the sense that 310 Duncan was closer to a Cosmetic Fixer than a true demolish (not that the city would have ever allowed 310 Duncan Street to be actually demolished) and rebuild fixer upper. By doing this the pressure was on for all the buyers as suddenly there were many ways for buyers to look at the property, and make the numbers work.
In the end we listed 310 Duncan for $998,000 and after receiving 21 offers the property sold for $1,675,000!
We love working out the complicated situations. Call us with your probate, trust, fixer upper scenario, and we can give you some great ideas for accessing the best return possible! – 415-244-5846
Oh did I mention the two fixer churches we sold in Mission Dolores?
601 Dolores Street
The City of San Francisco had filed a suit against the church requiring the property to be retrofitted, which the congregation could not afford. They reached out to Mike and I in order to prepare the property for market. After a lot of hauling and careful compiling of the paperwork we marketed 601 Dolores finding a buyer who purchased the property with the intent to use it as a single family home! 18,000 square feet of living space, not bad. After a few years he sold the property to the Children’s Day School which is how it is being used today.
651 Dolores Street
For years the congregation of the Second Church of Christ Scientist had been trying to redevelop 651 Dolores Street to include residential space that could help them finance the continuation of their ownership. In the end it proved to be too difficult, and the congregation called Mike and I to help them sell.
Want to know more about how to sell a San Francisco Fixer Upper? Give us a call and we will do a free walk through of your property giving you an accurate assessment of the value and marketing plan for how best to achieve the highest price for your property. We have lots of experience working with trusts and probates as well! – 415-244-5846