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The Margin: The housing market is so hot, a burnt-out Bay Area home just sold for $1 million in cash

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The housing market is supposed to be on fire right now, but this might be a little too literal.

After offers poured in for a burnt-out house in the San Francisco Bay Area, the home closed for $1 million in cash this week. Listing agent Melinda Byrne with Key Reality told MarketWatch that the listing actually received two cash offers for $1 million each.

Sure, many homebuyers are looking for a place that they can really put their stamp on and make their own. After all, a major appeal of homeownership is being able to do whatever you want with the property.

Well, this “bare bones opportunity to renovate/rebuild/restore” in Walnut Creek, Calif., is advertising just that. The four-bedroom, 2,395-square-foot house that was scorched in a two-alarm fire last fall has been listed at $850,000 — and it still drew plenty of bids despite the damage.

The 2,395-square-foot house was scorched in a two-alarm fire last fall.

Melinda Byrne

Byrne said that eight offers came in, in less than three days. “By the time I marked it ‘pending,’ I had five other people wanting to write offers — and I’m still getting people who would like to write on it to be in a backup position,” she said.

“Which kind of tells you what our market is like out here,” Byrne continued, adding that it had to be an all-cash offer because “there’s no lenders that are going to lend on it because of its condition.”

So how bad is it exactly? 

“Extensive damage from a fire has this house stripped to the studs on both floors,” warns the listing. “Bring your contractor, architect and designer: This is more than a fixer and the potential is limited only by imagination.”

Most of the interest in the house came from buyers who wanted to flip the property and resell it.

Melinda Byrne

But the listing also spins this “bare bones opportunity” as a rare chance to make dramatic changes.

“This one is ready to start fresh and build to suit your style preferences,” it reads. “Opportunities like this are rare to make dramatic changes to a home and floor plan. Great neighborhood, large lot and close to shopping and conveniences.”

Again, the house is charred from a two-alarm fire last September, which caused the roof to partially collapse, and engulfed the garage in flames. Firefighters determined that the blaze began in the garage, but did not say what might have caused it.

“Great neighborhood, large lot and close to shopping and conveniences,” the listing for the house reads.

Melinda Byrne

But a burnt-out house isn’t dissuading Bay Area buyers. 

Byrne said that while a few people were interested in buying the house for themselves to actually live in, a majority of the interest came from people who wanted to flip the house and resell it. And the house did indeed go to an investor who plans to flip it.

“As you know in California, there is a built in profit on this just because even if this person put a half million dollars into the house, he’s going to reap great, great rewards on it,” Byrne said.

And at least three people interested in purchasing the home after its remodeled have already started calling Byrne, she said.

While a fire-charred house going for $1 million might seem strange, it tracks with the crazy demand the housing market has seen recently.

Homebuyers are getting priced out left and right, while properties receive multiple bids and buyers waive appraisals and inspections. Median home values are up 11.6%, while inventory in the U.S. is down 30.3%, according to Zillow.

Read more: ‘We can’t compete with all cash’: The struggle is real to buy a home during COVID-19

Also: How do you compete with home buyers who can pay in all cash? Skip inspections and appraisals

The Bay Area is certainly no exception.

Homes nearby the scorched house go for anywhere from $1.2 million to $2.1 million, Byrne said. The average home value for houses in Walnut Creek is over $1.1 million — up 24.9% over the past year, according to Zillow.

Of course, the house has been mocked on local news, Byrne said, because people think it’s a burned-down house. Yet because it’s basically a skeleton, it’s better for a remodel, she said.

Because it’s basically a skeleton, the house is well-suited for a remodel, listing agent Melinda Byrne said.

Melinda Byrne

“Yes, it had a fire,” Byrne said. “But it is actually a better fixer than most, because you can see more, [and] the potential is much easier to deal with from a construction standpoint.”

And it’s not the only super-fixer-upper to become a hot property in this wild market. In June, a  $600,000 listing for a Colorado Springs “nightmare” house covered in obscene graffiti that smelled like “there’s a dead body in there” also started a bidding war. “Only in this real estate market could we possibly sell the house like this,” the listing agent told MarketWatch at the time.

Read more: The housing market is so crazy, this $600,000 ‘horror’ is drawing multiple cash offers

Byrne said she wished the market would slow down, but the only way that will happen is if there is more inventory.

“But I have a heart for buyers, too,” Byrne said, “and I just kind of look at it, and the competitive nature of this market is really hard on people … it’s hard.”

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