The “fixer” buyer pool no longer exclusively consists of contractors and small-scale developers. Instead, deep-pocketed buyers known in industry speak as “end users” are more likely to purchase a fixer and turn it into their dream home.
The most recent example I heard about was over at 226 20th Avenue in the Richmond. The two-story, 4BR/1.5BA home with 2150 square feet had been in the same family for more than 50 years and was ready for a facelift. But all the bedrooms were on the upper level and the garage offered good expansion potential—the perfect storm for the end user crowd.
The house was listed for $1,475,000 and the sellers received 21 offers. All but two were from buyers planning to owner occupy and renovate the property themselves, reported listing agent Kelly Quon at my company, Corcoran Global Living. There were 12 cash offers and most contracts had no contingencies. The sale closed last week for $2.3M, with five of those offers above $2M.
Contractors may be stepping back a bit due to high construction costs and limited investment funds. These conditions don’t motivate the contractor types to bid as aggressively as the end user. The latter type of buyer can decide how to renovate within his or her budget, and doesn’t have to worry about trying to make a resale profit. And that buyer also has the opportunity to design the home in a much more personal way.
End user renovators pop up most commonly in coveted, walkable neighborhoods. Prices for fixers in premiere neighborhoods average at least $2M-$2.5M (more if there are views). And newly renovated homes seem to be starting at around $5M these days. For an end user, it’s sometimes more appealing to spend that money to tailor a home to fit with their specific needs and tastes.
The end user journey is not without its pitfalls, and isn’t for the faint of heart. Many unexpected problems can arise, and you can easily find yourself exceeding your budget. In that spirit, I wanted to offer a few tips to help you stay on track:
Be realistic about renovation possibilities. If you’re planning to do a vertical or horizontal addition—or do anything that’s beyond the envelope of the existing structure—definitely consult with an architect and/or contractor on site before you write an offer. Your big ideas for a top-floor primary suite may not be something that the Planning Department will approve for one reason or another. And adding a garage is its own animal.
Have a general idea of renovation costs. Doing an interior renovation—for example, new kitchen, baths, moving a wall here and there, electrical/plumbing upgrades, adding a deck, adding a primary suite, and new flooring—can run several hundred thousand dollars. Vertical or horizontal extensions will cost more than that, and they often trigger seismic upgrades. And as I mentioned, labor and materials are an all-time high right now.
Understand the renovation timeline. If you’re working within the envelope, the permit process is a lot faster. But you still need to draw up plans with an architect and nail down very busy contractors. Estimate at least a year from purchase to completion if you have your peeps ready to go by the time you close escrow. For horizontal or vertical additions, the process will be longer due to neighborhood notifications and a more complex permit process. That timeline has implications for where you’ll live until your project gets the green light, as well as during construction.
Talk with more than one contractor. Costs vary widely, so it’s worth consulting with two or three contractors. Who you work with will come down to personal recommendations from friends, overall cost estimate, and availability. And don’t forget to check license details with the Contractors State License Board and the Better Business Bureau.
Decide whether you need a designer. Though it’s great when you can take a hands-on approach to a renovation, personally selecting all the materials and finishes yourself. But if you don’t envision having time to do everything on schedule, it’s best to hire an interior designer. There are some excellent ones in San Francisco, including my favorite, Catherine Kwong Design.
Give me a shout at eileen@insidesfre.com | 415.823.4656 if you’re in the market for a fixer to renovate. I can search for possibilities on and off market, and guide you through the purchase process.