$2.5 million shack for sale in San Francisco

SAN FRANCISCO (WPVI) -- San Francisco real estate is not cheap. Currently, the average price per square foot is around $1,200. But one listing in the Potrero Hill neighborhood caught our attention: a tear-down shack at $3,900 a square foot.

But there is a reason for the price tag besides the sweeping 360-degree views of the Bay Bridge, the East Bay and San Francisco.

The property at 863 Carolina Street is not much to look at from the street. Rickety stairs lead up to an equally dilapidated porch and overgrown backyard. There isn't even a wall on the backside of the property.

The current owners had been renting the property out until about a decade ago. That's when the home went into disrepair.

Neighbor Tracy Moon was shocked when she heard the price.

"I did not believe you! For 20 years, I've walked by here with my dogs and if you look at the way it is now, never in a million years would I ever thought you could turn this into something unless you start from scratch."

That is exactly why real estate Anne Laury's selling: the potential and ability to start all over.

"It's planned to have a two-car garage for a bedroom, four bathrooms, an amazing living space on the top floor with patios and incredible views."

The potential for the property is displayed for all to see in renderings, showing what the property can become with the proper planning. While the view could absolutely be considered "million dollar" on its own, many would argue the real value in the home is in the permits.

Geddes Ulinskas, prominent San Francisco architect is one of them.

"Teardown permits are extremely rare because the city does not like seeing housing disappear for fear of it not coming back. The concern is that there are temptations to buy multiple lots and combine them."

Ulinskas says sometimes the avoided headache of applying for permits is priceless.

"Two years of frustration out of the way, that carries a lot of weight and that's why you see a lot of homes being advertised being sold and approved."

As with all construction in San Francisco, there will be more permit requirements for whoever decides to build on the site. But the city tells ABC7 News having the demolition and building permits are already a huge accomplishment.

With just seven days on the market, there have been 22 disclosure packets given out to potential buyers.