Appreciate the advice everyone. The houses are in good condition and well sized, about 1500 and 1800sf, so not really tear-downs.
The main problem with them is they are set back about 25 feet from the sidewalk and about 12 feet from the permitted building line, creating a lot of “wasted space.”
Right now, despite the fact that everyone does it, the front of a property is not allowed to be devoted entirely to parking. The city might allow a variance to permit this if it meant two 100+ year old beach cottages could be preserved, letting the wasted space in front go to parking.
The 1.7m “low estimate” of the houses value is based on their cash flow of about ~$7000/mo as long term rentals (20x annual rent) or alternatively their conservative market value if they were sold separately.