While buying a newly built home is exciting, you may also need to do something less fun: sell your existing home. Whether you live in a buyer’s market or a seller’s market, you’ll probably need to make some minor renovations to sell it for top dollar. Buyers today are more likely than ever to value a home that is in good condition and ready for a new owner.
“Only a very small segment of the population wants a project when they buy a home,” says Nancy Robinson, regional vice president for Coldwell Banker Residential Brokerage in Northern California. “An even smaller segment of the population has the vision to see how to do a project.”
Buyer expectations are part of the “HGTV effect,” which means that buyers anticipate a perfectly prepped home, says Robinson.
“Even in the hottest seller’s market, a home needs to be in the best condition and staged to attract buyers,” she says.
Making repairs and shelling out cash to pay for them are hassles many sellers wish they could avoid. In fact, 52 percent of homeowners say that making improvements and preparing a home for sale are the most stressful aspects of selling, according to the Zillow Group 2019 Consumer Housing Trends Report.
To reduce or eliminate that pain point, real estate brokerages and other companies have introduced services to supervise and finance presale renovations.
Sellers and Renovations
Renovating your home to sell it is completely different from renovating your home for yourself, says Rikki Rogers, vice president of marketing for Curbio, a tech company and general contractor who works with real estate agents and homeowners on presale renovations.
“We only work with homeowners who have a real estate agent because we rely on the help of agents to identify which renovations will make sense for each house in each market,” says Rogers. “We’re experts in what helps sell a house, not what a homeowner wants for themselves.”
Renovation Sells, a Chicago-based presale renovation company, works primarily with real estate agents and works directly with homeowners, too.
“Renovation Sells is a two-year old company but it’s the culmination of more than a decade of experience in construction, real estate investing and flipping houses,” says Michael Valente, Renovation Sells’ managing partner. “We take a multifaceted approach and give sellers advice about staging, decluttering and giving a house a facelift. Typically, we walk through a property with the sellers and their Realtor, who will give them advice about how to get a one-to-one payback for the renovation. Ideally, we want a one-to-one-and-a-half or higher return on investment for home improvements.”
Here are two ways experienced real estate agents help sellers. First, they make recommendations that will improve the owners’ chance of selling quickly and for a desirable price. Second, they connect sellers with reliable contractors to perform the work. A natural progression for some companies is to make a more formal commitment to help sellers get the work done before listing their home.
“Our agents knew that sellers who would benefit the most from our concierge service are people who don’t have the time or the resources to do the work themselves to get their home ready for the market,” says Dan Galloway, a broker with Redfin brokerage in Washington, D.C. who manages the D.C. Redfin Concierge program.
Most of these presale renovation companies won’t tackle major structural work. Instead, their focus is primarily on cosmetic updates such as refinishing floors, replacing carpet, painting walls and upgrading parts of a kitchen and bathrooms.
In addition to providing a supervisor for the market preparations and reliable contractors, many concierge programs pay for the repairs and home improvements for the sellers. Typically, the sellers reimburse the brokerage or renovation company with proceeds at settlement, essentially providing an interest-free loan to the homeowners.
“Some sellers are cash-strapped and need these funds in order to prep their house,” says Stanton Schnepp, senior managing director of sales for Compass real estate brokerage in Washington, D.C. “In other cases, the sellers have plenty of money but they just don’t want to spend their cash. They would rather pay for it out of the profit from their home sale.”
However, financing home improvements with a real estate brokerage means that if your house doesn’t sell, you decide to delist or switch agents, you must reimburse the brokerage for the cost of repairs rather than wait for settlement.
The amount you can finance depends on a variety of factors. “Compass Concierge bases the amount they’ll cover for clients on the list price of the property, the amount of equity the homeowners have and estimates of commissions, closing costs and possible price reductions,” says Schnepp. “It also varies by market conditions.”
Presale Renovation Options
Not every company operates in every market. However, there are variations in the level of services offered and the financial arrangements for presale preparation.
Among the Companies Offering Presale Support Are:
Coldwell Banker RealVitalize
Coldwell Banker partners with Home Advisor to provide renovation services in about 90 percent of their markets, says Robinson. “A lot of our agents in the San Francisco market were putting together plans with their sellers and some were even fronting the money,” says Robinson. “Partnering with Home Advisor as the general contractor and using their vetted resources takes the liability off our agents.”
RealVitalize doesn’t have a minimum requirement for the amount of work done. It bases the maximum on the list price and the scope of work established by the agent’s recommendation. The service can be used to make repairs requested by a buyer after a home inspection. Sellers must use contractors recommended by Home Advisor. Coldwell Banker pays all the bills and is reimbursed at settlement. If the house doesn’t sell during the contract period, the homeowner must pay the bill when the contract expires.
Compass offers both a “classic” and a “capital” version of their presale services in all their markets.
“Some sellers want to use their own contractors, so we partnered with Notable, an independent lender, to provide a no-interest, no-fee loan to qualified sellers for our capital version,” says Schnepp. “Our classic concierge service includes a no-interest loan for a particular amount, with our Compass concierge paying the vendors until the client reimburses Compass at settlement.”
Compass Concierge includes services beyond renovation, such as paying for a staycation while the house is being prepped or to board an animal while their house is on the market, says Schnepp.
Curbio provides “one-stop shopping” in about 16 markets, says Rogers.
“The owners sign a contract for the scope of work, and we manage the project, order all the materials and hire all the subcontractors,” she says.
Curbio, which receives payment for everything at settlement, requires that project expenses meet a minimum threshold of $15,000. While there’s no maximum limit, the amount sellers can spend depends on their home value, its equity and the market.
“We focus on spending an appropriate amount on things that will help the house sell, like landscaping, deferred maintenance and upgrading kitchens and bathrooms,” says Rogers. “Some of our projects have cost more than $200,000.”
Sellers must sign a contract that commits them to the scope of work and the cost; the first requirement is to put their house on the market within one week after the work is completed – and keep it listed until it sells, says Rogers. Another mandate: sellers must agree to reduce their listing price by two percent every 30 days if the house hasn’t sold.
Redfin Concierge services, currently available in California, Seattle and Washington, D.C., will likely be introduced in all Redfin markets over the next few years, says Galloway.
“Sellers pay an extra one percent fee on top of the 1.5 percent standard commission Redfin charges,” says Galloway. “Our concierge service includes staging and deep cleaning to prepare a home for sale and management of all logistics for presale preparations, including finding and scheduling contractors.”
Common projects, says Galloway, include light handyman services and small repairs such as changing a light fixture or staining a deck. Sellers pay for contractors’ costs but Redfin Concierge manages the project and secures bids from preferred providers.
“We have preferred pricing from some of our contractors, since we give them consistent work,” says Galloway.
Renovation Sells, currently only in the Chicago market, recommends a scope of work for each home in consultation with the seller’s real estate agent.
“Most of our clients pay us directly, although we occasionally work with Compass Concierge,” says Valente. “Some of our customers take out an unsecured loan with Guaranteed Rate, which offers loans up to $40,000 that are not tied to the sale of the house.”
The average project by Renovation Sells costs $22,000 and takes three to four weeks, says Valente.
Of course, many sellers also opt to prepare their home for sale themselves, either by deep cleaning and painting on their own or hiring their own contractors. No matter how you handle the process, prepping your home before it goes on the market is essential for a quicker sale and one that earns you the best payout.