Its ceilings have collapsed, the floor has fallen through and the backyard is strewn with junk.

But in Surry Hills, where a 150-square-metre block is prime real estate, that was not enough to stop a buyer forking out $1.6 million on the derelict terrace.

The dilapidated property at 43 Waterloo Street – once home to a hoarder – sold on Tuesday morning after less than a week on the market.

The terrace had been abandoned for at least a decade and although no longer “filled to the ceiling” with rubbish – thanks to an extensive clean out – prospective buyers entered the former four-bedroom, two-bathroom home at their own risk.

“People had to sign a waiver to go in,” selling agent Darren Pearce of BresicWhitney Darlinghurst said. “We had about 10 people come through [on Saturday] but it was too big a job for most.

“[Some people] didn’t realise how bad it was going to be, and didn’t even want to go in once they got there.”

If they thought the property was neglected now, they should have seen it before about $70,000 was spent removing rubbish and hoarded household items from it and installing beams to support the ceiling and staircase.

Mr Pearce said he got sick the first time he inspected the property, which he described as the worst dilapidated house he had seen.

The house – which records show was owned by the deceased James William Walton and Alice Mary Koller – sat empty for years until neighbours began complaining about rubbish piling up and damage caused to neighbouring properties.

In 2015 The City of Sydney tried to track down a daughter, believed to have previously lived at the home, but had no luck finding the mystery owner.

It was only after seeing the home she grew up making headlines that another daughter of Mr Walton, Suszan Neighbour, came forward.

Mrs Neighbour’s sister Jean had moved back into the home after her father’s death, but left it for good after she was attacked by intruders.

Left abandoned the property allegedly became home to squatters and drug users and continued to further fall into disrepair. Jean was reportedly later tracked down to a nursing home.

Mr Pearce said builders who had inspected the property estimated they would spend anywhere from $500,000 to $1 million to rebuild on the block.

“I think the only thing to stay will be the facade, I think even the shared walls [with the neighbouring terraces] will need to be dealt with.”

Mr Pearce said the buyer was an investor who had experience flipping properties and could see the potential of the site.

While the work may be daunting – he’s far from the first to tackle such a derelict home.

This year a builder made a $264,000 windfall in just over a year on a fire-damaged terrace in neighbouring Little Riley Street.

After buying the property for $911,000 in 2016, he spent about $150,000 fixing it up, before returning the two-bedroom terrace to the market. While it failed to sell at auction, it was snapped up days later for $1,325,000.

In recent months buyers have seen similar potential in a fire-ravaged terrace in Redfern, which sold for $1.6 million, a rundown Lilyfield home covered in warning signs, which sold for $1.26 million, and another dilapidated Surry Hills terrace sold for $2,111,000.

While 43 Waterloo Street hit the market last week with a price guide of $1.5 million, this was quickly revised to $1.6 million.

The property was originally scheduled to go to auction on October 21.

By comparison the smaller neighbouring property at 41 Waterloo Street, which was also in a poor condition, sold for $1.36 million last year. A modern terrace at 45 Waterloo Street sold for $1.05 million in 2014.