Whenever you’re looking to buy a house, you have a list of criteria you would like. You could be looking for a ready-to-move-in situation, or you could be on the lookout for a fixer-upper that you can sell later at a better price. Fixer-uppers are typically homes in disarray that are popular as they can typically be bought at a lower price. If you’re looking for one in the Bay Area, rest assured you stand good chances of finding one.
While homes for sale across the country are harder to find in 2021, the San Francisco housing market is going against the current. Sure, San Francisco might claim some of the highest prices for homes in the country, but there is an even larger inventory of homes on the market than in 2020, up by 25% year-over-year in May 2021. This means you might be able to find a house that needs rehabbing if you know where to look. Here are some guidelines to help you find the ideal fixer-upper in San Francisco:
1. Make location a priority for your next fixer-upper
If you’re looking to take on a fixer-upper project, location is key. Buy one in a desirable neighborhood where the market is hot. Look for a neighborhood with good schools. Once you can scratch that off your list, make sure your fixer-upper isn’t situated close to a busy intersection, as most buyers seek out a quiet area for their future home.
2. How to find a fixer-upper
When hunting a fixer-upper, there are quite routes you can take to find leads in less than a desirable state. Here are some options to help you achieve this goal:
- Drive around
You could be working with a real estate agent to find your next fixer-upper, but you can also be proactive and drive through neighborhoods of your choice to see a home that might appear to be in disarray – from an overgrown lawn to boarded-up windows – these are some of the classic signs of a fixer-upper. Write down the address so that you can easily find it and put in an offer if you decide to buy it. Look for fixer-uppers in any of these San Francisco neighborhoods: Fisherman’s Wharf, Telegraph Hill, The Mission, Haight-Ashbury, North Beach or The Castro just to name a few.
- Browse the Multiples Listing Service (MLS)
Another way you can find a home in poor shape is through the Multiple Listing Service (MLS), which is the database for all properties that are listed in the US market. It’s typically reserved for real estate agents, but you can ask your realtor to look for you. “Short Sale” or “Real Estate Owned” are labels that usually accompany fixer-uppers listings on MLS. Properties that have been on the market for more than 90 days are also likely to be within the target group, as owners might not have been able to sell their potentially distressed property earlier. - Attend foreclosure auctions
You can buy a house in disarray if you attend a foreclosure auction. This type of event offers many discounted homes, but be sure to expect bidding wars. Your local newspaper or county courthouse is likely to list these events so you can add them to your schedule in advance. Auction websites such as Auction.com offer an online alternative to the in-person type of event. You can place your bid online by searching for your target location. - Consult local tax records
You can also go through local tax records to find properties that might have delinquent taxes as they might suggest financial difficulties on the owners’ part. This isn’t a surefire sign that you’ll discover a fixer upper, but it can be an indicator of potential poor home maintenance. You can find more information about delinquent property taxes on the San Francisco’s Treasurer & Tax Collector’s website.
3. Hunt for an ideal configuration and layout
A home’s configuration should also weigh heavily in your choice of a fixer-upper, as your goal is to attract buyers. Think a three-bedroom, or a two-bedroom if you can find a fixer-upper built this way. Your golden rule should be: make sure the home you’re planning on fixing meets the average bedroom number of the neighborhood so that you can get a competitive price when you put it on the market. Check out for more information here.
The floor plan should also be practical so as to avoid extra work such as making structural changes. A layout with dispersed bedrooms on two floors will also not attract buyers. Additionally, two entrances for the kitchen is usually a bonus point for the home.
4. Always check the condition of the fixer-upper
You can expect a fixer-upper to need some repairs, whether it’s changing the wallpaper or adding a high ceiling. Make sure you know the types of challenges you are about to face, as some will be more daunting than others. First things first, the house should have a solid foundation – or what you’d call “good bones.” Some buyers enlist the help of contractors to help them establish the type of work needed to repair the house and to estimate costs. However, there are two major types of fixes you might need to undertake to increase the marketability of the fixer-upper:
Easy fixes
These are the kinds of repairs you can do to make the home eye-pleasing, and they include:
- Applying a fresh coat of paint
- Stripping old wallpaper
- Replacing windows and doors
- Update floors/carpet
- Replacing baseboards and adding trim
- Update or replace light fixtures
Bigger repairs
Bigger repairs are the types of fixes that might require structural or system-related work. Here are some examples:
- Fix the foundation
- Repair/replace roof or exterior
- Replace the HVAC, plumbing and electrical
- Complete upgrade of kitchen and bathrooms
- Do other upgrades such as adding an outdoor deck or patio
5. Decide if the project is worth investing in
If you found your ideal fixer-upper, get an estimate of the investment you might need to make in terms of severity of repairs, funds and time. If you’re doing the work yourself, count the price of the supplies too. Make sure to overestimate the cost of the makeover, as unforeseen spending is likely to occur. Another expense you should also include is the inspection also, as this is an essential step of buying a fixer-upper. Once you’ve counted all these expenses, check them against your budget to determine if it’s something you afford.
6. Proceed with an inspection
It’s important to have a professional do a common inspection to check for hidden issues that require repair or upgrades. While visible repairs are easy to notice, it’s better to have a home inspector look for water leaks and structural issues. Make sure your inspection also includes a check for mold, lead-based paint, septic tank and pest-related issues.
If any of these major issues are present, a home inspection contingency can help you mediate these repairs with the seller. If they are unwilling to perform them, you can back out of the deal.
7. Think about financing
If the inspection didn’t reveal any serious issues or the ones present are easily tackled by you, it’s time to consider how you’re going to pay for your new purchase. A traditional mortgage isn’t feasible in this case as lenders can’t approve a loan larger than the home’s value at the time of acquisition. Here are some loan options you can consider:
- FHA 203(k) loan
An FHA 203(k) loan is offered by the Federal Housing Association, and it’s a federal government-backed type of loan that covers the cost of the house as well as the repairs. This is why it’s important to know how much the repairs will cost. A 10-20% contingency is provided with this loan to help cushion unexpected expenses.
- HomeStyle loan
A HomeStyle loan is Fannie Mae is very similar to the FHA 203(k) one, with one difference: Loan limits on the HomeStyle amount to 50% of reconditioned value, while the FHA loan doesn’t have this threshold as long as the after-repair value is within the maximum FHA loan.
- VA renovation loan
A VA renovation is a type of loan made available for military staff and veterans. It’s a loan that comes with all the regular perks of a VA loan, which waives the down payment and reduced closing costs. You can also include the cost of repairs alongside the selling price.
8. Check if you need building permits
Once you got your loan approved and the sale went through, the true work begins. If you decide to make structural changes to the home that might include an addition, for example, you might need to consult the local municipal government office in order to learn more about getting a San Francisco building permit. It might be a costly process overall, but it’s a necessary step to make sure your project can be successfully carried out.
Adding space to a house is always a welcome change, as working from home has become a permanent option for many employees. Making room for that home office has been a challenge for most people, even if houses in San Francisco have gained over 500 square feet in the last decade.
9. Do as much as possible on your own
A lot of repairs require a professional hand, but if there are smaller tasks that you can do yourself, you should roll up your sleeves and do it. Stripping wallpaper and painting cabinets can be easily tackled by anyone. Take into account that it might be quite time-consuming, but a more cost-effective strategy to rehab your fixer-upper. Another caveat that might come into play is that if you’re using a renovation loan, DYI projects might be restricted.
If you decide to hire contractors for the job, try to get several bids, especially if you’re about to hire contractors that you’ve never worked with before.
10. Rent a self storage unit
Using self storage is useful in many instances, and rehabbing a home is no exception. A storage unit can help you keep construction materials and tools close to the site, especially if you’re doing major repairs to your fixer-upper and you need a place to keep everything. Most people rent a 10×10 unit, but for larger jobs such as this one, you might need a 10×15 or 10×20, depending on how much construction material you’re planning on storing. If you’re unsure which unit size you might need, you can always consult this storage unit size guide. When it comes to price, renting a self storage unit in San Francisco can start as low as $26/month and can get to about $580/month for the larger-sized units.
Did we help you find the perfect fixer-upper in San Francisco? Let us know in the comments section below.
