March 7, 2013
Flipping (Not Fixing) Over In Eureka Valley
Listed for $750,000 last June in need of some TLC but "not a fixer," the 1,142 square foot single-family home at 3917 18th Street sold for $900,000 last July.
Since power-washed and remodeled at an estimated cost of $91,000 per the permits (new fixtures, appliances, cabinets and furnace), the three bedroom home has just returned to the market as a "remodeled brown shingled Italianate home proudly situated in the Castro" for $1,095,000 and touting a "magnificent gourmet kitchen:"
∙ Listing: 3917 18th Street (3/2) 1,142 sqft - $1,095,000 [via Redfin]
First Published: March 7, 2013 1:00 PM
Comments from "Plugged In" Readers
Quick question: why does the cost according to permits and the real cost always obviously differ so greatly? What is the advantage? Just taxes? And if so, why don't the planning dept crack down on this practice? Seems like it should be obvious and easy to remedy.
Posted by: nobody at March 7, 2013 1:06 PM
It's called greed.
Gourmet kitchen my foot.
Posted by: Mark at March 7, 2013 1:36 PM
^^^ Savings on permit fees which are proportional to the build cost.
The city could crack down on this though it would require an audit of the contractors involved and that would require some serious CPA effort. There are probably ways to conceal the real cost as well.
Ultimately the true value (or close to it) comes through in the sales price and that's when the city really rakes in ongoing tax revenue.
Posted by: The Milkshake of Despair at March 7, 2013 1:38 PM
Where's the 'after' picture showing the new gourmet kitchen?
Oh wait, that is the 'after' picture?
Posted by: R at March 7, 2013 1:53 PM
The kitchen is fine for a gourmet cook. It seems to have the key features in place to make a good workspace.
But as for quality of finishes it looks cheap. That two piece "one size fits all" hood duct enclosure looks terrible.
I'm puzzled about the "power washed" comment. Are the shake shingles the same as before, just cleaned up? I didn't know you could do that.
Posted by: The Milkshake of Despair at March 7, 2013 1:59 PM
While the kitchen is not perfect, and the home is on the smaller side, it does have the requisite 3BD/2BTH. For that location I have to think it's going to sell really quickly.
Posted by: Willow at March 7, 2013 2:27 PM
Plus, if it sells quickly, it will be a short term capital gain, taxed at a higher rate, right?
Posted by: Marten at March 7, 2013 2:55 PM
I believe it's tax year, not 365 days, that determines the capital gains rate, but I could be wrong.
Posted by: lyqwyd at March 7, 2013 3:02 PM
($66K) Closing @ 6%
($91K) permits as stated
38K of "fat bank," 4.2% pre-tax.
Love or hate the kitchen, my view is that this is a better buy today at $1.095 than it was a year ago at 900K.
Is this an intentional underpricing/bidding war bait/lazy listing? I don't know the 'hood...
Posted by: soccermom at March 7, 2013 3:13 PM
Also editor, help me understand the flipping versus fixing distinction you are trying to make? It looks like the current owners have done some work to improve the state of the home. In the end does it really matter to what extent? They took all the risk to buy this place and will be rewarded according to the current market demand.
Anyway, I'm with you soccermom, this home is going to attract lots of interest.
Posted by: Willow at March 7, 2013 3:54 PM
I think this is a semi-flip in the sense that there's some improvement to make it more fitting to a certain market segment, but most importantly the seller assumes the market has significantly gone up since his purchase (it has).
If I had to guess: 1.2M or 1.25M. There's not much for sale out there in the 94114. 15 or 20% overbids were common even this winter.
Posted by: lol at March 7, 2013 4:16 PM
standard tax rates for short-term capital gains apply for holdings of less than 365 days, not based on calendar year. This will be profitable, but with a 35% tax hit.
Posted by: anon at March 7, 2013 4:24 PM
They power washed, sanded, and stained the shake shingles with an oil based stain. I've seen this done a couple of times and it works well.
DBI doesn't let you assign grossly low improvement prices any more. Instead they have a book that says a kitchen remodel costs x... My experience is that the DBI costs are lower than a high end kitchen remodel.
The specific location isn't the greatest, but the hood is fantastic. 18th is kinda dirty from, tons of traffic and is on a bus route.
Posted by: mateo at March 7, 2013 5:08 PM
Better to be lucky than good - regardless of what you think of the kitchen, they timed the market quite well. There is backlog of SFH buyers looking in this area, and hardly anything available. The flippers will do well on this despite the property's flaws (smallish lot, busy street).
Posted by: Faceword at March 7, 2013 5:54 PM
mateo is correct about permit cost. The Department of Building Inspection has a schedule of fixed fees or $/sq. ft for various construction items. The schedule will say "New kitchen = $8,000", "Detached garage = x$/sq.ft.", "Concrete retaining wall = x$/lin. ft." etc. You get the idea. I wouldn't say that some owners/developers/contractors don't declare all work, but in no way does $ paid for actual construction = $ on permit applications. That isn't the way it works, and just because someone has a different value on their permit documents than what they actually paid for the construction work, doesn't necessarily mean that person is cheating the system. Many are actually just going by the DBI schedule of assigned values.
Posted by: apropos at March 7, 2013 9:22 PM
I didn't know they could be power washed, but it seems they can. See video:
Posted by: jlasf at March 8, 2013 12:05 PM
That kitchen is far from "magnificent." The Viking stove they put in is the cheapest model they make (I know this because being a commoner this is the model I'm hoping to save my pennies for). There are practically no cabinets. Where's my microwave hood? Now I have to figure out where on what little counter space I have I'm going to put that. Where am I going to put all my gourmet-making tools and small appliances? My oversized pots and pans would never fit in that miniscule sink either. Lame.
They should have extended the cabinetry to the wall and moved the door to the location where the window is now. A French door would have been nice and would let light in.
I am impressed with the results of the power washing, though. That looks really nice.
Posted by: Lori at March 8, 2013 1:49 PM
Music in the video is cool...you can kinda space out to it nicely.
Posted by: 49yo hipster at March 8, 2013 11:51 PM
Lori - I hear you on the Viking range, but asking for a microwave hood? They perform terribly, moving little air for lots of noise. "Magnificent gourmet kitchen(s)" have actual functional hoods and separate microwave ovens.
Posted by: Jeremy at March 9, 2013 11:53 PM
@Jeremy -- I'm not as worried about the performance of a microwave hood, I know they are definitely not the epitome of performance. It's really more about having to sacrifice what little counter space there is for a microwave that doesn't currently exist in that remodeled kitchen.
Posted by: Lori at March 11, 2013 11:53 AM
3917 18th street appears to be contingent.
Posted by: lol at March 26, 2013 12:01 PM
The sale of 3917 18th Street closed escrow on Friday with a reported contract price of $1,160,000.
Posted by: SocketSite at April 22, 2013 11:56 AM