It is an incongruous sight for boaters on Seattle’s Lake Washington. Tucked among the waterfront mansions on affluent Mercer Island sits the circa-1906 steamship Manzanita, jutting out of a hillside as if she’s run aground.

The now-landlocked steel ship came ashore at Mercer Island about 70 years ago, when a resident purchased the Manzanita’s stern, hauled it up on to dry land and started using it as a house.

Now the boat-turned-house—with three-bedrooms and spanning about 1,400 square feet on roughly a quarter of an acre—is being sold for the first time in 14 years, asking $1.995 million.

The master bedroom.

John L. Scott Real Estate/Luxury Portfolio International

The upper level of the home has clerestory windows, a fireplace and walls paneled in 100-year-old mahogany.

John L. Scott Real Estate/Luxury Portfolio International

"It’s just so unusual," said listing agent Lori Holden Scott of John L. Scott/Luxury Portfolio International. While the Seattle area has a thriving community of houseboats, she said she has never seen a ship converted into a house on land.

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Since 2006, the lakefront property has served as a summer home for Ben and Lillian Tao, who spent a decade and roughly $200,000 renovating and restoring the historic structure. "I really, really liked the idea of owning a part of U.S. history," said Ms. Tao, 59. Now that they are relocating to Hawaii, "I want someone to enjoy the boat as much as we did."

"Of course we have no control over what the next owner is going to do," said Mr. Tao, a 61-year-old lawyer. "But we prefer someone who will appreciate all the work we did."

The Manzanita, originally 190 feet long, was built around 1906 as a lighthouse tender, designed to transport fuel, food and other supplies to far-flung lighthouses, according to the book "Mercer Island" by Priscilla Ledbetter Padgett. In 1949, after the boat had been retired, Mercer Island resident Betty Ekrem purchased the stern—about one-fifth of the ship—and had it transported by barge to her property on Lake Washington. With the help of her father, a contractor, she added a cement foundation and turned it into a lakefront guesthouse, according to her son Roy Ellingsen, 65. "Even in our kid brains, we knew this was a pretty cool place to grow up," he said.

The Taos restored as many of the ship’s original details as possible.

John L. Scott Real Estate/Luxury Portfolio International

When the Taos bought the Manzanita in 2006, it was in "dire need" of repair, Mr. Tao said. At the time they already owned a home on Mercer Island and weren’t in the market for a house. But when Mrs. Tao saw the Manzanita while house-hunting with a friend, she immediately wanted it.

Her husband—usually the more pragmatic spouse—needed a bit more convincing. "It was leaking," he said. "I could tell a thousand things needed to be done." But he relented after the couple took their two children to see the house, and "the kids fell in love."

The Tao family at the house with Roy Ellingsen.

Tao Family

The family paid $1.1 million for the waterfront property, which includes a shared dock and a diving board. The family used it for day trips and weeklong vacations.

Meanwhile, Ms. Tao spent about 10 years painstakingly renovating the home, restoring original details such as wood paneling and yellow-brass fixtures. "Whatever I could preserve, I did," she said.

The upper level of the home, which once contained the captain’s quarters, remains largely as it was when the Manzanita was afloat, with clerestory windows, a fireplace and walls paneled in 100-year-old mahogany. Ms. Tao said she removed Sheetrock added by a previous owner, while keeping the boat’s original doors and light switches. She replaced carpeting with heated wood floors, and used engineered mahogany to resemble the original wood.

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The ship has three staterooms, or bedrooms. One still has its original, built-in wooden bunk, Ms. Tao said, and she built a similar-looking bunk in the opposite stateroom to match.

The Taos renovated the home’s one full and two half-bathrooms. In keeping with the nautical theme, the master bath has a copper soaking tub, copper-embossed sink and a vanity fashioned from a wooden barrel.

The lower level has fewer original details, but Ms. Tao renovated it to look as boat-like as possible. She outfitted the kitchen with custom cabinetry, bronze hardware and a cherry-red, cast-iron AGA range. While searching for a copper backsplash, she was told by one vendor that he was too busy to take the job. That changed when "I sent him pictures of the boat house," she said. "He immediately called me and said he would do it."

Throughout the interior, the Taos displayed framed historic photos and newspaper clippings about the Manzanita. Ms. Tao said she would likely leave most of them for the next owner.

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Home prices on Mercer Island, an affluent suburb linked by bridge to Seattle and Bellevue, range from $1 million to $18 million, Ms. Scott said. Older homes are rare since the island wasn’t connected to the mainland by bridge until the 1920s. Real-estate sales have been strong for years due to tech-industry growth, she said, and the market is even more competitive now that the pandemic has slashed the number of available homes for sale. Mercer Island homes routinely sell within days of hitting the market, often over the asking price with multiple bids, Ms. Scott said.

In such a fast-moving market, it is possible that the Manzanita will be torn down and a new, larger house built in its place, she said. "It’s quirky—no doubt about it," Ms. Scott said. Plus, the home’s hillside location requires descending 48 steps from the parking lot.

But some potential buyers have expressed interest in keeping the Manzanita intact, and Ms. Scott hopes that will happen: "It’s just one of those funky things that deserves to live on."

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