Daniel Bortz is a freelance writer who specializes in writing about personal finance but also covers real estate, home improvement, travel, careers, small business, and even weddings. His work has been published by AARP The Magazine, Consumer Reports, Entrepreneur, Fast Company, Fortune, and the National Association of REALTORS®’ HouseLogic website, among others. He’s also a licensed real estate agent. Connect with him via LinkedIn, Twitter, or email.
Presale Renovations Take Off
For equity-rich sellers who need more than a fluff before they put their home on the market, companies are now offering renovation management and funding.
January - February
A couple in Cambridge, Mass., were looking to sell a two-bedroom condo. The property had been rented out to three college students and needed work if the sellers were going to get top dollar for it, says Carol Kelly, a Compass real estate agent based in Cambridge.
“[The couple] didn’t want to reach into their own pocket to pay for the renovations,” Kelly says. “They didn’t want the stress of investing their own money into the property.”
So Kelly recommended Compass Concierge, a service the brokerage rolled out in 2018 to pay for presale renovations. Sellers pay back the money using the proceeds of their sale. Compass put $17,000 worth of improvements into the Cambridge condo, installing new flooring, painting the kitchen cabinets, and power-washing the house. It paid off: The condo, which was listed at $589,000, sold for $640,000, enabling the sellers to repay Compass and eke out bigger gains from their investment.
New Value-added Service
Real estate professionals have long promoted the merits of staging a property before taking photos or scheduling showings. Many have even made staging part of their value proposition. But until recently, when sellers wanted or needed to make more than decorative enhancements, all most agents could offer were referrals to reliable contractors. Sellers had to dip into their own pocket to cover the costs. Now, companies are offering a new value-added service: a way to save sellers the upfront cost, and the headache, of renovating their home before they put it on the market. In essence, these services enable sellers who’ve built equity in their home to fix and flip their own house rather than accepting the lower return that often comes from working with an iBuyer or house flipper.
In addition to Compass, Realogy announced last fall that its Coldwell Banker brand was piloting a presale renovation program called RealVitalize in Columbus, Ohio; Denver; and Orlando and Tampa, Fla. Around the same time, Keller Williams announced its own pilot in California, Georgia, and Texas through the Keller Offers Concierge Program.
Then there’s Curbio, an independent presale renovation company that launched in 2017. Its services are available to sellers only through a real estate agent. The company, based outside of Washington, D.C., in Potomac, Md., was a member of NAR’s Reach Technology Accelerator class in 2019.
Unlike other presale renovation programs, which farm out home improvements to third-party contractors, Curbio performs all renovation projects—from selecting building materials and hiring subcontractors to overseeing installation and ensuring the quality of the work with a one-year warranty.
“We’re a licensed general contractor in every state that we operate in, so we handle everything throughout the entire remodeling process,” says Rikki Rogers, Curbio’s vice president of marketing. “We want to create a turnkey experience for home sellers, where they don’t have to worry about managing their remodeling projects or paying for them up front.” The company doesn’t charge home sellers interest on the money they borrow. Instead, Curbio gets deals on labor and materials in order to earn a profit margin on a client’s home renovations.
Redfin Concierge, which started in November 2017, has a different business model. The brokerage charges home sellers a 1% listing commission and offers a presale renovation service for a 2% commission fee that covers design and project management. The fee also covers staging and home cleaning but, unlike with Curbio and Compass Concierge, home sellers who use Redfin Concierge are responsible for funding their own renovations.
“Our designer will do a walk-through and generate a list of improvements we recommend. Sellers decide what renovations they want to make, and then our concierge oversees the construction,” says Mia Simon, director of real estate operations at Redfin.
Like Compass Concierge, the Redfin program is aimed at sellers who are looking to make small facelifts, “not those needing major remodeling projects,” Simon says. “Our goal is to make the house shine by doing little things like painting rooms with neutral colors, patching holes in walls, replacing dated light fixtures, or painting bathroom tiles.”
“We want to create a turnkey experience for home sellers, where they don’t have to worry about managing their remodeling projects or paying for them up front.”—Rikki Rogers, vice president of marketing, Curbio
Kelly is one of Compass Concierge’s early adopters. Since early 2019, nearly every listing she’s had has used the service. “To me, it’s a game changer” in real estate, says Kelly, who has been an agent for 33 years. “To ask sellers to reach into their pocket and put thousands of dollars into their house before they put it on the market is a big ask. The beauty of this service is that the seller has no upfront costs.”
Courtney Smith, a Compass agent in Los Angeles, also thinks presale renovation services are a no-brainer. “We have long been proponents of thoughtful, considered presale renovations. In fact, before Compass Concierge even existed, our team was offering no-interest loans to help [qualifying clients] improve the market value of their homes, transition to their new living situation without financial strain, or overcome obstacles that might otherwise make their home difficult to sell,” Smith says.
Smith’s rationale is in line with why Compass entered the presale renovation business. “We built the program to empower agents to better serve their clients by minimizing the seller’s short-term financial burden while maximizing the odds of a quicker sale and [a higher] sale price,” says Michael Coscetta, chief sales and strategy officer at Compass and head of Compass Concierge. Since Compass Concierge started, the company has funded more than 5,000 presale renovation projects, and “we are seeing clear signs in our data that these homes do sell faster and for a higher price than other peer properties,” Coscetta says.
Not Every Seller Is a Fit
Curbio’s focus is on sellers who are looking to make larger-scale home renovations, Rogers says. The company’s minimum project is $15,000. “A lot of our projects are in the six-figure range,” says Rogers.
Because it’s making larger investments, Curbio is selective, Rogers says. “We don’t say yes to every project. If a seller comes to us and has $30,000 of available equity but our experts determine that the seller would need to make $50,000 worth of home renovations to add enough value to the home, we would turn that client down. We do a very detailed and data-driven analysis up front to assess whether a home seller is a good fit for us.”
Another difference: Whereas Redfin and Compass market their concierge services directly to home sellers, Curbio’s business marketing is squarely aimed at real estate agents.
Since Curbio isn’t paid until the home sells, sellers who use the company must agree to reduce their home’s list price by 2% every 30 days until the property is sold. “If the house doesn’t sell, or the seller decides not to move, all they have to do is pay for the renovations. There are no penalties or extra fees,” says Rogers.
“We built the program to empower agents to better serve their clients by minimizing the seller’s short-term financial burden while maximizing the odds of a quicker sale and [a higher] sale price.”—Michael Coscetta, chief sales and strategy officer, Compass; head, Compass Concierge
Presale renovation services aren’t right for everyone, says Amanda Rose, a Berkshire Hathaway agent in Atlanta who has worked with Curbio. “I think it works really well for sellers who can vacate their house while the renovations are being made or for a rental property owner who does not occupy the home. But living in a house during major home improvements breeds frustration,” Rose says.
“Renovations are a lot easier to do when the house is vacant,” agrees Brendon DeSimone, a New York real estate broker and author of Next Generation Real Estate, who hasn’t worked with a presale renovation provider. That being said, “you only have one chance to make a first impression, and if you can have someone else pay for renovations up front, I think it’s often a smart strategy.”
Dan Galloway, a Redfin agent in Washington, D.C., has used Redfin Concierge with a number of his clients. “This is a great product for people who are selling remotely or are really busy and don’t have the time to prepare their homes in the way that it needs to in order to show well,” he says. “We recommend it for properties that are in pretty good shape but need some cosmetic facelifts to compete with other houses in their listing price range.”
Sellers whose homes need more than a facelift but who don’t have the benefit of a Curbio analysis should proceed with caution. “Combining the cost [of a renovation] into the sale makes it a lot less stressful and much more convenient for a home seller,” says Jim Molinelli, a design-build remodeler and the author of Remodel! Without Going Bonkers or Broke, “but it masks the fact sellers will lose money on most remodels.”
It’s true that most remodeling projects don’t recoup their full cost, according to the National Association of REALTORS®’ Remodeling Impact Report. Real estate agents surveyed for the report looked at the average cost of various projects and estimated what they’d recoup at resale. So, for example, a full kitchen remodel costs, on average, $68,000, and home sellers could be expected to recover only about $40,000, or 59% of their investment. The bottom line: Some sellers will be better off adjusting their price down to compensate for dated features.
Nonetheless, presale renovation services are gaining momentum. Curbio, which currently operates in 11 markets—including Chicago, Miami, and Atlanta—plans to expand to at least 40 metropolitan areas by the end of 2020, and Compass Concierge is offered in all of the brokerage’s housing markets, which span more than 100 cities. Coldwell Banker, Redfin, and Keller Williams all say they also expect to expand their programs.
“Until now, for home sellers who had substantial equity in their home but didn’t have a lot of cash, it was nearly impossible to make renovations to their house before they sold it,” Rose says. “That’s changed.”