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August 29, 2022

Bidding Wars Wane for Fixer Houses

Fixer House

San Francisco single-family home buyers are losing their appetites for “fixers” that need extensive work—or even just kitchen and bath updates. The main reasons? Rising interest rates and high construction costs are motivating buyers to watch their spending. No one wants to fork over—in some cases—millions of dollars for a project house, only to realize that they’re not up for renovation challenges.

Fixers have always been popular with “end users” who’d rather create their dream house vs. buy someone else’s remodel. Sellers have traditionally listed these types of properties with super low asking prices, only to see multiple offers and well above 20% over the list price.

The highest-profile example of the end user fixer purchase happened at 714 Steiner, the pink Painted Lady purchased in January 2020 for $3,550,000 ($800,000 over asking) by a tech executive who’d planned to lovingly restore the home. She’s since changed her mind about those plans, and listed the property this past May for the same price in the hopes of finding a buyer willing to take on the project.

But the tide is changing for this type of property, with several project houses selling for significantly under the list price this summer. Some had wonky floor plans, were teardowns or needed a general facelift. Here’s what I’m talking about:

2546 22nd Avenue
List Price: $1,599,000
Sale Price: $1,400,000
Sale Date: 8/9/22
Days on Market (DOM): 15

2546 22nd Avenue had good bones but was a bit dated and not staged. In short, it needed work and most buyers aren’t looking for a project. This home is located on a nice block near Stern Grove and the Taraval retail/transit corridor. So it will likely end up being a decent investment with a few updates. [Listing courtesy of ReMax Prestigious Properties]

822 South Van Ness
List Price: $4,880,000
Sale Price: $3,330,000
Sale Date: 8/5/22
DOM: 247

822 South Van Ness is one of those sprawling Mission mansions. Clocking in at almost 7,000 square feet, the building was previously a nursing home facility but could be a great opportunity to corral those 21 rooms inside into something more cohesive. We’ll see what the LLC that paid all cash for this property does next. [Listing courtesy Coldwell Banker Realty]

58 Graystone
Clarendon Heights
List Price: $3,995,000
Sale Price: $3,015,000
Sale Date: 7/8/22
DOM: 35

58 Graystone was a stately, 3600-square foot Tudor Revival with panoramic Bay and downtown views. The kitchen and bath finishes needed a facelift, but the home offered a good opportunity for some next-level renovations. I mean, who wouldn’t want a wine room with a secret prohibition room behind it? (This one was a bit of a heartbreaker for the sellers, as they accepted an offer at asking—-only to be strung along throughout the prime time Spring market by buyers who ultimately backed out. Yes, it can happen and there may not be another buyer on hand willing to pay anywhere near the previous contract price.) [Listing courtesy of Compass]

175 Valley
Noe Valley
List Price: $1,699,000
Sale Price: $1,670,000
Sale Date: 7/1/22
DOM: 7

The 175 Valley sellers grabbed a cash offer within a week for under asking on this fixer Victorian. For a home on this level in the neighborhood, this price seemed about right in the current market. But it’s down from a few years ago—and even from just two years ago when this similar Victorian fixer flew off the shelf for all cash at $2.1M. [Listing and above photo courtesy Intero Real Estate Services]

606 Mississippi
Potrero Hill
List Price: $1,500,000
Sale Price: $900,000
Sale Date: 8/12/22
DOM: 40

The twist with this one is that it sold on August 12th and just hit the market again on August 24th for $900,000. Anyway, this was a project house with lofty $1.5M value ambitions that hit a brick wall. Location is pretty good, on the border of Potrero and Dogpatch. I suspect the current/new owner lost his or her appetite for a construction project and is hoping to at least break even. [Listing courtesy of eXP Realty of California]

The takeaway for sellers? If a house needs a facelift, be realistic about value and be ready to make a deal when a qualified buyer presents a serious offer.

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