This webinar is meant as an introduction to how home renovations can help you sell your home for more. Making updates and improvements on your home can help you make a higher profit on your home, sell your home faster, and find the buyers you are looking for. We front the cost of renovating and updating your home with $0 down and no interest, making it easy to sell your home for more!
The key takeaways from this recording:
- What updates are cost-effective and create the most return on investment.
- Tips for increasing the value of your home and selling your home faster.
- Stories from clients they’ve worked with and how improving their home helped them increase their profit.
We are going to go over an overview of some of the properties that we had the opportunity to work with. This is a blog about increasing your resale value. A lot of people reach out to us about increasing the value of their homes even if they aren’t selling.
You are taking steps to better your future. We are going to go over some data of the properties we had the opportunity to work with. In the last 18 to 24 months we have sold 70-80 listings successfully. At least 85% of those listings required some type of work to the home. All of the homes needed help with the staging or the documentation prep. That is our expertise as real estate agents. At the same time as we get into.
So the key takeaways for this post are what updates are cost-effective and create the most return for investment. How we like to say it is if you are going to be spending a dollar and you are investing that dollar to improve your property. How can you stretch that dollar to multiply your money? Otherwise, it doesn’t make sense to invest your money. The other is tips for increasing your value. I don’t know if we can get any faster because of market conditions but you know the real estate market is cyclical. The real estate market won’t always be this hot. And when there are going to be fewer buyers out there and there is going to be more listings which is not the market we’ve seen with the last 9 or 10 years. If and when that ever happens home preparations make a big difference when there are days the market is longer in a completely contrasting market as the one we see now. In this market specifically, a well-prepared listing usually sells two or three times more for the dollar we invest in the preparation days. Lastly, we are going to share some of the stories of the clients that we have worked with and how that’s helped them achieve what they want in the next chapter of life after selling. We realize that most people we work with that are selling don’t sell homes often, and that’s why it makes sense to maximize the opportunity at times, it is a balance. A lot of the homeowners and landlords that we work with sometimes prioritize peace of mind and ease with the sales process. Which they may lean towards not doing any work at all and selling the property as-is. Which we give advice and weigh the pros and cons of each approach and ultimately the clients make that decision on which direction they want to take.
The most important part about this is planning for your future. Are you approaching the sale of your home as a tool for reaching your financial goals as we are in the real estate field? We have a lot of conversations with investors, and a lot of investors are in the fix and flip or rehab business. The whole point of what they do is to add value to the property that they acquire and a majority of the time the acquisition cost of the property is going to dictate the profit they will make. The profit they will make is based on the investment and a well-thought strategy as they execute and improve the home for resale. That will be the primary topic that we will be discussing for this blog.
So let’s look at some data points that we pulled from, Remodeling, which is a magazine online and also a national association of realtors website. In 2020 thirteen thousand dollars is the average amount that a household spends on updates before selling. This is up from 2019 which was nine thousand dollars. The average project our sellers go through tends to be between $20,000 to $40,000. There is a 60% increase in spending on home improvements from 2019 to 2020. To get a jumbo loan which $750,000 or more from the banks in our area you will need a 20% down payment. The rule of thumb that we use is that most buyers are required to have a 20% down payment for a single-family purchase because the loan amount is going to exceed $750,000.
Secondly, is the banks have been requiring more and more reserves. So after you give the down payment banks have then been requiring 12 months of reserves as a rule of thumb. This means oftentimes people purchasing single-family homes in our area, have a really good income to qualify for an 80 percent loan to value. They have likely saved a lot of money, pulled money from the family, liquidated some stocks and investments to be able to put down the down payment for the property they are going to call their you know indefinite forever home. So what that means is most consumers lack a couple of things. They lack number one: property management skills and the time to improve the property themselves. Secondly, they likely don’t have contractor or handyman relationships to get the job done in a timely fashion. Number three if they’re working multiple jobs they likely lack the time to be able to do it themselves. Number four due to the reserve requirement and the downpayment requirement they are lacking the necessary funds to do the property. Number five if they are leasing they don’t want to have to pay their lease and pay their mortgage both every month. So that’s why depending on the circumstances of the seller it makes sense to do work upfront if you can afford it. The money you invest will multiply in profit because of the inconvenience, the lack of experience, the lack of money, and the lack of relationships that most consumers have. There’s been a 33% increase in home functionality and livability by buyers after a kitchen remodel. Most of the properties in our area were built in the 1970s or earlier so obviously the building code has changed and the functionality that we deem as the norm has changed as well. There is a 4.8% average resale value increase after a kitchen remodel. The kitchen remodel is just one part of the house imagine what remodeling the rest of the house could do.
What about paint, how much value does that add? Now we can’t give you an exact percentage but we can give you some examples from the properties that we were able to work on. The amount that it cost us to invest upfront and also the gain of value based on the selling price gives us around 3.7% average increase after a full bathroom remodel and a 3.4% value increase after the installation of hardwood flooring. There is usually a 1 to 5 percent increase in dollar value offered by buyers to staged homes. If you combine those statistics together with a really well-positioned property in a hot market like this, and you have an agent on your side to do those strategic negotiations that is what makes a huge difference on the return.
Lastly, 82% of buyer agents said staging a home made it easier for a buyer to visualize the property as a future home. I can’t agree more with this one if you think about all the new construction homes that you have visited in your lifetime the one that you typically get to see is the model home with the fixtures and the full staging. I’ve said this many times, it is as much a financial decision for a consumer to purchase a home as it is an emotional decision. They should fall in love with the home that they could see themselves living in for years and years. With it being an emotional decision and because convenience is valued by buyers that may not have the reserves to do the improvements themselves they are going to leverage more of the bank’s money and more of their capability of financing the purchase at a much higher level. So that is why it’s important to make sure that as we prepare a property we think about what consumers are looking for.
So what brings value? The top three we share with consumers are flooring, natural and fixture lighting, and painting.
Flooring is important because consistency in floors is what covers more of the surface area for our eyes as we walk through our home, same with the paint. How can we make sure that it’s accentuated and the space looks bigger? It’s a combination of access to natural sunlight and consistent lighting throughout a property. So those are the typical three things that we make recommendations for. Of course remodeling, a bathroom and kitchen are four and five. Those are slightly more expensive of course because of more cosmetic changes plus the paint and flooring. Number six is functional features like the garage door, the roof, landscaping, and other fixtures in the property. We also sometimes will make recommendations on handles, switch plates, and things of that nature because what you will find in the past is that bronze and gold were really the choices back then but not so much now. Nowadays it leans much more towards black and stainless steel. So changing the door handles, the cabinet knobs and switch plates are just as important as changing the functional features. Back in the day when homes were built a lot of the switch plates were bone coloring. Now paint, trim, and even switchplates are white which is a much more neutral choice. More often than not we won’t be able to cater our property to a hundred percent of the population that is looking to purchase, however, we want to cater to the bigger majority. The majority want to make minor changes and have a clean slate with the home. The cleaner we can make the properties, consistently add those light fixtures, and paint will add value.
So let’s talk about what we would prioritize with these renovations. The first we need to prioritize is the goals. So oftentimes if we are talking about someone who is potentially selling or improving the property to get a higher profit, we want to understand what their preferred budget is. As I said earlier sometimes people prioritize ease, just to sell the property as-is and we can obviously help with that too. On our team, we have budgeting from the brokerage and ourselves, and our contractors are also very trusting of our relationship. We have fronted a lot of costs of renovation so the client can receive the benefits when we sell the property.
Other things to consider are the other houses in the area and what is the norm in the neighborhood. It’s good to know what other consumers are looking for. We know in San Francisco a couple of blocks make a huge difference in preferences in the type of consumer that is looking to purchase. We study what people are looking for and who is purchasing so we can cater our property to the demographic that is going to be making the purchase. We prioritize a list of things that need to be done and we get line item quotations for each one. We typically rank them the most important to the least important in case there is a budget to keep in mind. The budget has been less of a concern with the understanding that the customer is in good faith selling, then we have no problem helping with upfront costs to accomplish the goal to sell for a higher price. If it is an occupied property the seller will give us an indication on how long it will take to organize their personal belongings and valuables. We then take over on the project management where we can dispose of items they no longer want and clearing out the house. We make sure we get quotations from contractors, landscapers, and all the vendors before we turn the keys over. Then the consumers let us know thumbs up or thumbs down with the property we are selling.
Now let’s dive into some specific examples of before and afters of what we have done to some properties. The first picture is one that we sold during the pandemic during the first lockdown. What you will see is the remodel cost of this four-bedroom, two-bath house that is on Evergreen in South San Francisco Sunshine Gardens. The renovation cost us $150,000 and the value we created was $225,000 at the time of the sale. If the property had been sold this year instead of last year it would have overall done better.
As you can see in the pictures we are giving you examples of what we did to this kitchen and what we did to the living room. This property was a trust sale. Unfortunately, someone had passed away and nothing was done to this well-maintained property over the 30-40 plus years the resident had lived there. As you can see we did a complete remodel of the kitchen. The kitchen was an overall smaller space, especially with that wall. All the fixtures, the cabinets, countertops, and the faucet were all old. We replaced the floor, appliances, countertops, cabinetry, the lighting, and we painted. In the living room, they had carpet and used wood paneling as an accent wall which was very popular to do in the past to create contrast. We ended up neutralizing everything. We recoded the hardwood floors that were under the carpet. We also opened up a wall because that is what consumers are looking for. Of course, with the remodel costs we really wanted a bigger multiple but due to where the market was at least we were still able to get a higher value.
Here in this next photo one of my partners, Hassam, was the listing agent on this property. This was one block away from Lowell High School in San Francisco on Meadowbrook. It was an occupied home to start and we had to coordinate and help the homeowner as they moved out of the home that they lived in for a very long time. They made some updates but overall what you’ll see is they kept the original flooring, they haven’t painted in years, there were wall sconces, the bathroom was never updated since being built in the 1940s. We did a lot of work and spent $64,000 in renovations. This property was also sold during covid. The value we created was an additional $230,000. I know some of you are wondering how we calculate the value created. We basically look at properties that were sold as-is during the same time and see what they sold for, and then compare to what we ended up selling for which obviously, the product was in a much more presentable and move-in-ready condition. That is the variance of how we came up with the value created. So as you can see in the living room; new flooring, new exterior, and interior paint, new recessed lighting to put off light throughout the property instead of the yellow hints, and we also lightened up the darker flooring. We ended up brightening the entire space with professional photography as well and staging and being professionally cleaned. It looked a lot better.
As you guys may already know during covid everyone had to do their searches online and there was no way of getting into a house unless you requested a specific time. So we had to make sure they fell in love with what they saw online so they would make that request to come take a look at it. So as you can see in the next picture is the bathroom which is the original next to the updated. Now, this property was a 3-1 in South San Francisco in El Campbell. You can see some before pictures where it was occupied. We partnered with a company called Homemaster that helped with the decluttering after all the personal belongings were moved out. We didn’t spend that much money on this one. We spent a little over $50,000 and the majority of that went into the bathroom. We knew there was only one bathroom and we knew that was very important to get fixed up. They had already updated the kitchen because of a previous leak that they had which insurance helped pay for. It was very cluttered when we inherited the property and there were many things we had to improve such as the back deck and walkway. The flooring that was already there was weathered and some of it was under the carpet, so we had to resurface it. So as you can see we transformed it and sold it this year. We got over twice of what we put into it.
This next home was represented by my partner Hassan. This was on North Crest it’s a newer construction property that was built in the 2000s, however, the styles and the materials used are very different than what consumers are looking for now. What you will see is a normal lived-in property that had wear and tear with older carpets that had many stains. We decided to take the carpet out because we didn’t think it could be completely cleaned and at the same time there is a higher value perceived for hardwood flooring. It doesn’t have to be hardwood floors though, we put laminate floors in this property which still looks great. We neutralized the colors from the orange, yellow, and brown tints, and painted everything white. We restrained the cabinets and staged the home. These cabinets were in great shape so we painted them and added fixtures. We replaced the countertops, as you can see they had the square tiles that were very common during that time. There were also square tiles on the floor which we changed both. So you can see with the change of color scheme it appears to be bigger and brighter. Now it’s a clean slate that someone could say they don’t have to change anything move in right away.
So those are four examples and we have many more that we can share with you. Here is one of our videos that documented the steps that we’ve gone through for some of the properties. We had the opportunity to record a highlight reel of just some of the work we have done throughout covid. A lot of these properties were trust sales where the owners were not in the area that we had to manage and send updates as they were out of the area and even out of state. If the consumer was interested in the selection of the actual materials and wanted to be a part of that process we would have no problem including them. If they want a hands-off experience where they trust the contractor and our stagers listing coordinator we obviously could take that approach too.
Here are some recent remodel results if anyone is interested in seeing slightly more data behind the exact work we had put in. For example, you see a variety of remodeling costs from $150,000 to as low as about $7,000. Some properties we inherit and get to work on are already updated to a certain extent and there’s only a minimal amount that we need to commit to and invest in and every property across the board is going to be very different. We calculated as-is value based on what comps have sold in similar size in respective neighborhoods with nothing done to it and compared to the sold prices that we were able to achieve. Now the caveat to this is some of these were sold during this year. For those that don’t already know this year the spring market, we have not seen an increase in inventory. I just did a video on the market today and I pulled some statistics. Usually, we start seeing a trend for an increase in inventory in April and in May, but we haven’t seen that yet. As the market has continued to become more and more of a lopsided seller’s market, part of our results we have are due to the market that we are currently in. Anytime we have committed proceeds to a property we always get a multiple in return. For the dollar that you spend you just want to make sure that you prioritize if you have a budget of 15, 20, 30, 40, 50,000 dollars to reinvest in your property. Keep in mind that pretty much any single-family in the area as small as 2 bedrooms is going to be $900,000 to even a million dollars now. Where that investment is always going to get you a return on your investment. For these specific ones, we help with the sourcing of quotations, the interpreting, the negotiation potential with the contractor if there are certain things that you want or don’t want if you want to get involved with the selecting of the material, and so forth.
We help front money for repairs by a signed listing agreement and there’s a stipulation that our company will pay upfront for all repairs, cosmetics updates, any sort of reports, or upfront payment that’s needed for the purpose of resale and then to be paid out of escrow or there will be a cancelation of contract to protect ourselves. That is how we are able to pay for the repairs upfront. We have our own budget and our contractors are trusting and are okay with being paid at escrow. Our brokerage provides us with a budget to make sure that we are investing it, with what they say as an interest-free loan to improve the property, for a period of 2-3 months until it’s sold to be repaid back. That is how we are able to handle that at this time. Our passion is to help families build wealth through real estate, and since 2011 we have helped over 500 families in the bay area primarily in San Mateo county. We have helped 87 in just the last 18 months. With that experience, we want our consumers to benefit too and share with them ideas. Now, just because we are talking about a lot of potential resale value, doesn’t mean we can’t help you with advice if you aren’t wanting to sell right now. We can give you tips for when you to go sell in the future.
As I was talking to my partner, Sherm, I asked him what is the one thing not to do while remodeling a property to increase value. He replied with
“I think the number one thing that is not worth doing would probably be any structural changes. I think a lot of time someone might go in there thinking they need to make more rooms or open up a wall and in the end, you might be doing something that the new buyer might not want, and that is going to cost you money that you won’t get back. So focus on the most minimal things that you can do to get the house ready and once the market kicks in and once our photography team and videography team kick in and elevates the quality of what we have done you’re good. There’s no need to do structural changes because you want to give the new buyer a blank canvas for how they want to take it on.”
To add to what Sherm said structural changes tend to require permits more and more so because you are making bigger changes to the property which will prolong the process of the preparation. With covid cities’ building departments may take longer to respond depending on how well they are staffed, so time may be a factor depending on the people we are working with. Another thing to add is most of the properties are going to have things that need to be updated and the buyers know that when buying a property there are going to be things to change or fix. So don’t worry about presenting a perfect home because all consumers know they are buying the home as-is, just worry about presenting a well updated, move-in-ready property that encourages positive emotions as they walk through the property.
Here is a highlight reel and behind-the-scenes look of some of our past home renovations:
Alok Shares About His Time Working With OWN Real Estate
A message from a client that became a friend, and a peek at a few special moments with the people we so enjoy working with. Thank you so much, Alok, for your kind words. We are delighted every day that we get to work with people like you and serve families through real estate!
Kristy Sells Her Transformed Childhood Home with Wilson Leung & Associates
Kristy found herself in a tough chapter of her life and the added stress of selling a home filled with memories and special moments wasn’t going to be easy. Wilson helped Kristy navigate the complicated Bay Area real estate market 2021 and compete with other bay area homes for sale. Our team of top real estate agents San Francisco and real estate professionals made the process stress-free, helping to make the sale of Kristy’s childhood home more comfortable. We were so happy to help her through the sale of her home and to lessen the weight a bit during this difficult time. Congratulations Kristy!
Whether you’re thinking about selling with home renovations or as-is, understand that who you partner with to help you with the process of sale makes a huge difference. Talk to us about our interest free home renovation loan where we pay upfront for all costs associated with the renovation while you benefit from all the upside when we sell your home. Just pay us at the close of escrow. We are committed to introducing you to our team to manage the process and to find the right contractors.
If you have questions, please reach out to us!