March 3, 2010
Spoiler Alert: The 2010 "San Francisco Dream House" Is…
While the official unveiling isn’t until noon, and we were doing our best to wait, banner ads for the 2010 San Francisco Dream House Raffle have started running with pictures of the house so it’s game on and time to name that house as...815 Alvarado.
On the market for four months at $2,965,000 in the second half of 2009, the four bedroom home with three and one-half baths and a legal apartment down was withdrawn from the market in December without a sale.
As noted yesterday, the grand prize winner of the raffle will have the choice of this "$3 Million Dream House" or $1.5 million in cash versus last year's "$2.4 million Dream House" or $1.8 million in cash (which was chosen).
∙ Noe Valley Dreaming (And Raffle House Unveiled Tomorrow) [SocketSite]
∙ An Arts & Crafts 815 Alvarado By The Numbers In Noe [SocketSite]
∙ 2010 San Francisco Dream House Raffle [sfraffle.com]
∙ 815 Alvarado As Was In 1997 (Prior To Prevalent Digital Photography) [SocketSite]
∙ Can’t Sell? Raffle! 1240 5th Avenue: The "San Francisco Dream House" [SocketSite]
∙ 1240 5th Avenue: Raffle Winner Chooses Reality Over The Dream [SocketSite]
First Published: March 3, 2010 9:50 AM
Comments from "Plugged In" Readers
What's sad is that the real estate profession is such a cesspool of fraud and lies, that even a respectable organization will state that a home that hasn't sold for months at $2.7M is a $3M house, and no one raises an eyebrow.
Posted by: tipster at March 3, 2010 10:12 AM
A house is being raffled for charity, and you take that opportunity to slam the entire realtor profession?
Posted by: R at March 3, 2010 10:22 AM
Tipster - While I am not defending the real estate profession, I think most raffles or fund raisers list the highest possible retail value for a prize up for auction/raffle. In this case, I concur that it's almost certainly an inflated value. No argument that the winner should definitely contest the value before ponying up the tax money to Uncle Sam.
Icing on the cake is that this place is just two blocks from Firefly.
Posted by: huh? at March 3, 2010 10:23 AM
^^^ In that case, the highest possible price is probably closer 5 million.
After all, if you are reusing lunch bags, doing without heat, and don't own a car, being within walking distance to firefly should carry a very hefty premium, atleast theoretically.
Posted by: dub dub at March 3, 2010 10:31 AM
Subjective opinion: On the outside, anyway, this is one UGLY house. Take the money.
Posted by: Dave at March 3, 2010 10:47 AM
Is it the angle / lens of the picture, but those steps and the neighbors look like a crazy long set of steps?
I see no reason to bash the folks running the auction or the metrics. This falls way outside of the real of reality and it's clearly a gimmick / marketing tool. Here is what will happen in case anyone is interested. They will sell a lot of tickets, enough to get the house in the "lot"; someone will win, someone will take the money, and this house will sell a few months later for some amount greater than the cash value and less than the "MSRP" price advertized here.
In all honestly, maybe 3271 Baker should try this approach? I'm not kidding.
Posted by: eddy at March 3, 2010 11:01 AM
I guess black is the new black?
I do remember reading somewhere that black was a common color back in the day. Are these historical colors?
Posted by: SFHawkguy at March 3, 2010 11:18 AM
Why take the money? You don't think that you could net more than $1.5 million if you win and then sell this house? I'm confused.
Seems that in this case, the thing to do would be to take the house (as opposed to last year). Or, is money still the better deal?
When I win, could I take the house and sell it quickly for $2 million? Or, is that not possible?
Posted by: John at March 3, 2010 11:29 AM
Looks like last year's dream house just sold last November for $2,010,000.
Hmmm . . . was the guy better off with the cash last year?
Posted by: SFHawkguy at March 3, 2010 11:31 AM
Take the house. Hold it for two years. Then sell it.
Posted by: anonn at March 3, 2010 11:34 AM
I am trying to calculate the tax implications. Please correct me if I am wrong:
someone picks home instead of cash:
Since its worth $3 million, he/she has to pay $1.5 million in taxes. So, even if it gets sold for $2 million, he/she gains only $500K. I don't think he will get tax credit for lost $1 million. Does he?
If he takes cash:
Since its 1.5 million, he/she has to pay $750K.
I think cash looks like a good bet here, unless the home sells for more than $2.25 million. Of course you will be adding property tax, maintenance..etc..
Posted by: SFwatcher at March 3, 2010 11:46 AM
What they should do is take the house and immediately put it up for sale by owner (definitely don't wait 2 years) . Use the free realtor press to advertise that it's for sale and put it on Craigslist.
Posted by: SFHawkguy at March 3, 2010 11:50 AM
Or what the heck, they should ask $2,000,001
Posted by: SFHawkguy at March 3, 2010 11:56 AM
damn realtors...they better adjust their comps accordingly!
Posted by: anon$random at March 3, 2010 11:58 AM
Better plan: Hire an "appraiser" longing for the days when they job was to "hit the number" given to them by the real estate agent and give them this number: $750K. Pay $375K in taxes.
Then sell it for $2M in two years.
Posted by: tipster at March 3, 2010 12:08 PM
If they sold the house for $2,100,000 two months after they received title then I don't see how the government can argue that the value of the prize was $3,000,000.
I don't know how that would all work out . . . Does the contest host organization issue a 1099 or something? Would one then have to challenge their valuation? Is there an actual sale at 3 million to the current owners if the prize winner chooses the home?
Posted by: SFHawkguy at March 3, 2010 12:17 PM
please see my thoughts on tax treatment on the prior thread.
good question SFwatcher. when the winner sells this house is his cost basis (for capital gains) the $150 cost of the lottery ticket or the $3M fair market value of the "gift" (on which the owner already paid gambling winnings income tax)?
the answer makes a huge difference.
Posted by: resp at March 3, 2010 12:28 PM
the problem with taking the house is paying the income and property taxes
Posted by: meep at March 3, 2010 12:58 PM
Cost basis would be the appraised value on the day it is won. It's income the day he wins it, not the day he sells it. The $150 would be deducted from the original income.
If sold in two years, the loss would not be deductible.
Posted by: tipster at March 3, 2010 1:06 PM
I'll keep my comments to the design of the house:
Terrible floor plan: you actually have to walk THRU the living room in front of the main furniture layout to get to any other part of the house. They sacrificed a classic center hall plan to make for this awkward thing called "den".
There is no real "dining room". There is a dining space, more like a breakfast room. So your nice formal dinner party is completely part of the kitchen. Nice. Cheap. A house at this price point demands a formal dining room, as well as a breakfast space.
Rear upstairs bedrooms are very small. Adequate but small.
This is a "fake Craftsman" house. The original was just a small cottage. The entire transformation is new..and rather heavy on the interior trim, in my opinion. Giant expanse of concrete paving at the garage entry. There was LOTS of room for more landscaping, more curb appeal to the right of the garage doors. It all matters when you're going for $3m.
Posted by: noearch at March 3, 2010 1:11 PM
cmon noearch quit nitpicking. it's a $150 house.
if you are right tipster then it is clear that owning this home will trigger a capital loss. not many people these days that have capital gains that need offsetting.
winner takes the cash.
Posted by: resp at March 3, 2010 1:23 PM
ok, but for $150 of my hard earned money, I don't wanna have to walk past the sofa on my way to the kitchen.
Posted by: noearch at March 3, 2010 1:26 PM
Despite my earlier comment of "Take the money," which was based on the fact that it's an ugly and poorly laid-out house, it might be a better deal to take the house, so long as you don't mind dealing with all of the hassles of maintaining and selling it.
Let's say the appraised value is actually $2.2 million, that seems possibly realistic and defensible if challenged. So if you win the house...the IRS will demand roughly $1.1 million, which none of us are likely to have. Selling the house is the only option, which depending on the market, could take a while. In the meantime, you've got upkeep and utilities (conservatively let's say $500 per month), property taxes (~$2500 per month) and insurance (I'm guessing $1000 per month.) Let's say it takes six months to sell and close, which is actually pretty quick. So there's carrying costs of $24,000. Closing costs and expenses could come to 10% of the sales price, or another $220,000. So you might net $856,000. If you sold the house for more than your basis (whatever the appraised value was when you won it) you'd then have to pay further taxes on the profit.
Or you can take the money, have virtually no hassle, pay half to the IRS and net roughly $750,000 immediately to go invest or buy/put down on the house you want.
This whole type of contest is a bit of a farce, since virtually nobody who might win the "dream home" could ever afford to pay the taxes and live in it, at least not without borrowing heavily against it. (Congratulations! You've won a dream home with a seven figure mortgage against it!)
What does the current owner get out of this deal, other than the exposure? If someone chooses the home when they win, how much does the owner get paid for it? It seems that the need to take the house off the market for at least a year would outweigh any benefit one would get from the marketing exposure. And I'm skeptical that the house got donated, in its entirety, to the charity.
Posted by: Dave at March 3, 2010 2:00 PM
Nice garage doors, almost makes up for the lack of landscaping. But those doors look like they'll need re-varnishing (urethane?) every 2 years.
The steps look a bit long in streetview too, and so do those next door. Maybe the lot slopes down to the street, such that they have to rise more than average to get to that floor?
Posted by: Delancey at March 3, 2010 2:03 PM
I think "take the cash" is always the consensus on these things, right?
Totally agree with Noearch - that den thing is just dumb. Don't mind the lack for FDR - obviously the kitchen is just for show anyway, since that giant island looks practically useless the way it is configured. The work surface is not close by the sink or cook top, and it doesn't have any leg room to use as a breakfast bar. So really, it's all just decoration.
Posted by: kthnxybe at March 3, 2010 2:18 PM
good points kthnxybe: You're right about the kitchen as well..I don't believe the house was designed by an architect..but rather the owner/contractor.
Posted by: noearch at March 3, 2010 2:21 PM
"A house is being raffled for charity, and you take that opportunity to slam the entire realtor profession?"
When I win this raffle, and choose the money, I will be sure to say the reason I did so was because the house was worth less than the post-tax cash disbursement I'll receive. A more politically correct way to slam the realtor 'profession'. Now, is that better?
Posted by: TallGuy at March 3, 2010 2:52 PM
You're not Tipster. But the limb you went out on to say "when" you win the raffle IS pretty much equivalent to the realtor slam reach that he made. That much is obvious.
Posted by: anonn at March 3, 2010 2:58 PM
Oh to be sandwiched between anonn and tipster, how tantalizing. I suppose I should just redeem myself here by buying all 40,000 available tix and calling it a day. Unfortunately I don't quite have $6M. Anyone want to go in on this with me? I don't like cats, but you can have the master bedroom.
Posted by: TallGuy at March 3, 2010 3:05 PM
Your comments are very helpful and much appreciated.
I can't believe you and your guests would have to walk through your living room every time they enter and leave. I assume the den is the first thing to go, you'd knock down the wall between the entry and the den, and so now you just have all this wasted space on a ginormous hallway.
The dining room will no doubt become a family room and you'd have to divide the living room into a small dining area just above the fireplace, but then you'd have to walk down steps to get to it? Perfect for those Sesame Street numbers skits where the baker falls down the steps holding cakes at the end, but otherwise a pain in the ass.
Posted by: tipster at March 3, 2010 3:25 PM
Here's my understanding how the last home worked: The original owner built it and tried to sell it in 2008 when the market was crap. So they entered into an agreement with the yerba buena group and if the winner chose the home, they would get paid X. During the prize time, yerba buena paid carrying costs. The winner took the cash and the owner got the benefit of waiting till the market improved, though the first home looks like it sold in Nov for 2.01 vs the original list of 2.4, so waiting didn't help them much. But if I were the owner, and you think the market will improve, this buys you X months and then you can re-list.
I also gathered that marketing costs for this thing were around $1.5m for the last one, and they raised $5m in tickets, so they ended up clearing 3.5m - 1.8m (what they paid out) or around 1.7m, so not a bad idea for a charity to do this!
Posted by: anon at March 3, 2010 5:47 PM
Was this all built legally?
Posted by: anon at March 3, 2010 9:46 PM
If you read previous info when this remodel was on the market....
Designed by the local Noe Shop...Design Solutions on 24th St.
Owner designed and built...look at the web site. Good promo
for the business as a sponsor too....Golden opportunity to buy the
business and be walking distance to the house!
Posted by: John Smith at March 4, 2010 5:53 AM
Interesting to see "John Smith" try to recommend Design Solutions to noearch, considering that The Front Steps post that anon posted @ 9:46PM last night.
This house sounds like a disaster. Take the cash.
Posted by: JimBobJones at March 4, 2010 9:54 AM
Let me just say this. I have spoken to the owner of Design Solutions one time about some joint business. It was not a good conversation. Leave it at that. To my knowledge the owner is not a licensed architect.
The Front Steps posted a number of comments last year about the extensive permit problems and expirations. That should raise a red flag to anyone, as to the process taken to build this house in a proper way.
I would just say: Let the buyer (lottery winner) beware.
Posted by: noearch at March 4, 2010 11:29 AM
The San Francisco Nightmare House
Posted by: Salarywoman at March 4, 2010 8:38 PM
More fake-old crap for SF -- who does this fool? Faux Craftsman style has no place in a building built in the 21st century.
Posted by: citicritter at March 4, 2010 9:44 PM
Interesting comments here. I have a hard time believing that the YBCA would raffle off a house with so many legal/code issues, just due to the legal effort it requires to organize a raffle, declare a winner, deal with red tape, etc.... Anyway I checked out the house a few weeks ago and it's pretty sweet; especially the downstairs apartment. The upstairs has a posh "loft"/attic type feel, too. The pics def don't do it justice.
Posted by: joead at March 8, 2010 12:45 PM
I have a copy of the Yerba Buena's "Dream House "Raffle" brochure. The fine print reads, "Only 40,000 tickets will be sold." At 40k x $150 each = $6 million dollars, it's very possible that $3 million goes to Yerba Buena and $3 million gets pocketed by Joseph Pugliese. $3 million is the value of the house, right?
I know it is supposed to be charity, but it's also a clever way to sell a house.
Do people honestly think this guy is nice enough to give his house ALL to charity, especially when he's got a reputation?
I know I'm a bit critical here, but I don't feel good, especially knowing that NOT ALL PROCEEDS will benefit Yerba Buena.
Posted by: Anonymous2 at March 16, 2010 10:14 PM
The raffle is over (some time ago) and winners are listed at http://www.sfraffle.com/PrizeWinners.aspx
Posted by: The Milkshake of Despair at July 14, 2010 3:05 PM