Couple paid $90,000 for an entire street in San Francisco's richest neighborhood thanks to a $994 tax bill error — the neighbors were fuming

Real estate investor Michael Cheng and his wife, Tina Lam, didn’t realize what they were getting into when they invested their money in an auction sale. All they wanted was to live their “American Dream.” By a twist of fate, they found themselves to be the owners of the entire street of the richest and most exclusive neighborhood of San Francisco for just a little more than $90,000. The trouble is, the multimillion-dollar homeowners who live in the neighborhood were upset and enraged by the auction sale because, after all, it was held due to an unpaid tax error, according to a 2017 report by ABC7 News Bay Area.

Richest neighborhood of San Francisco

Presidio Terrace is an ultra-exclusive, oval-shaped, cul-de-sac neighborhood in San Francisco, boasting 36 palatial multi-million-dollar homes, encircling a private landscaped island. Bordered by plaster facades, ornate wrought iron fences, ivy-draped walls, stone gate entrances, towering porticoes, grand porches, and intricate woodwork, the 20th-century architecture of this neighborhood smells of the elite. It is run by homeowners who have lived there since at least 1905, including famous residents including Senator Dianne Feinstein and House Democratic leader Nancy Pelosi.

Trouble blew up 

The problem is that the ultra-rich residents who live in the neighborhood are not very pleased with this sale. Having their street owned by people who called themselves “middle-class” and whose interests might not align with theirs was not a happy thing. Cheng felt their attitude towards them wasn’t too neighborly. “I thought they would reach out to us and invite us in as new neighbors,” he said, as per South China Morning Post. “This has certainly blown up a lot more than we expected.” 

The story started in April 2015 when the couple came across the listing. The auction stemmed from an error that may seem a bit hilarious on the surface, but provoked havoc among the residents. What happened was that the homeowners' association for Presidio Terrace failed to pay a $14-a-year property tax, something that all private street owners of San Francisco must do, according to the San Francisco Chronicle. The unpaid property tax prompted the association to put the property on sale at $994. The couple eventually snagged the street with a $90,100 bid in the auction.

Bills sent to the wrong address

The story didn’t end there. As it turned out, the city’s Office of the Treasurer and Tax Collector mailed its forms to a deceased bookkeeper who once worked for the association. For 17 years, the bills went to the wrong address, and no one knew what was happening. It wasn’t until Cheng and Lam did a title search that the bookkeeper's story emerged. The entire story was playing in the shadows, and the couple just got lucky in the end. As a result, the residents of the street weren't too happy with it. Matt Dorsey, the HOA spokesperson, told ABC News that the city should have tried harder to find the correct address. 

Information asymmetry

The entire confusion was caused by what researchers call "information asymmetry," according to a report published in BCP Business & Management. While sometimes, the seller takes advantage of the buyer's ignorance of the item's value, many times, the buyer exploits the seller's ignorance of their item's value and purchases it at a price less than its market value.

On November 28, 2017, the San Francisco Board of Supervisors appealed to reverse the sale. The association also sued the couple and the city, intending to block the couple from selling the street to anyone. "We are going to stand by the city because they did everything correctly and we did everything correctly, according to the law," Cheng said, per China Daily.

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