Ready to sell, but your house isn't?
Join the crowd. Though houses are selling in record time and for record prices, buyers expect the kind of HGTV perfection that's rare in most lived-in homes. But with remodelers already overbooked, there's a backlog of prospective sellers who would like to sell but can't hire out the work or spare the time or money to get the house ready to sell themselves.
"It's a hassle most sellers don't want to take on," said Samantha Strong, a Twin Cities real estate agent who does double-duty as the owner of a remodeling company that caters to clients who want to sell.
She's among a cadre of real estate agents who have long specialized in both real estate sales and remodeling through companies they own or relationships they've built with subcontractors. But with home improvement spending soaring and buyer expectations rising, that niche is now capturing the attention of entrepreneurs who aim to upend the remodeling industry by using technology to streamline the industry.
"We saw an opening in the industry that other brokerages aren't tackling," said Keith Castonguay, a Twin Cities real estate broker who recently launched Fix2Sell, a remodeling company that caters to people who want to sell their homes but delay the cost until closing.
The company is an affiliate of TheMLSonline, the Champlin-based brokerage Castonguay founded in 2001. Castonguay acknowledges that starting a remodeling company in the midst of a home improvement boom — and pandemic — is no easy feat.
Last week the Joint Center for Housing Studies of Harvard University said that while the economy shrank 3% in 2020, home improvement spending increased 3.5% as professional remodelers and DIYers alike tackled a host of projects. Gains are expected this year, as well.
"Many members tell me they are having to turn down jobs because they don't have the labor to get it done," said Beatrice Owen, executive director of the National Association of Remodeling Industry (NARI) of Minnesota. "They're busy."
She said such services have long been offered by real estate agents with a knack for knowing what makes a house sell and the connections to get the job done. Though demand for all sorts of home-improvement projects is on the rise, she said, it's already a challenging time for those who want to start a company or expand their business.
Castonguay said the advantage of his model is that he's only tackling projects that will appeal to buyers and help sell the house quickly. That means he's not trying to upsell his clients on projects they don't need, he said, and if sellers have the equity, they don't have to pay until the deal closes.
"We're saying this is your best investment to get a return," he said. "Or if not a return, to make your home sell a lot faster than the competition or to sell for more."
The remodeling business is notoriously challenging. From surprise cost overruns to weather delays, margins can be razor thin. He has already secured the technology that will help manage the projects. The biggest challenge so far has been assembling a crew, so Castonguay is building connections with local subcontractors.
"We knew that would be a challenge and it is the hurdle I expected it to be, but we're finding ways to overcome that," he said.
The upside for his brokerage outweighs the risks, he said. Most major real estate brokerages offer a range of affiliated services, from mortgage companies to insurance services, to help generate additional revenue. Though sellers working with an agent from any brokerage can hire Fix2Sell unless they want to delay payment until closing, Castonguay sees the business as a way to help drive sellers to his brokerage.
A handful of tech companies are also looking to streamline the selling process, raising millions of dollars by launching web-based home improvement and staging companies. They are using software to quickly bid jobs and manage local renovation contractors doing the work.
Opendoor, a national iBuyer, a company that makes instant cash offers to buyers who want a quick cash sale and flexible closings without the hassle of traditional marketing techniques, is offering home-improvement and staging services.
The Twin Cities is not among the company's 16 markets, but Opendoor said it has the potential to expand into 48 new markets by the end of 2023 and plans to broaden its services to include deferred-cost remodeling for sellers who choose to sell through the company's listing service.
While it remains to be seen whether such companies can influence the presale process the way Zillow and other online listing sites have upended the way people shop for houses, there's plenty of profit to be made for anyone who's willing to try. Last year Americans spent $420 billion on home-improvement projects, according to the Joint Center study.
Curbio, a Maryland-based tech/real estate company, started offering services in the Twin Cities and is one of the newest national players here. Unlike Opendoor and Fix2Sell, the company will work with any agent from any brokerage.
Curbio's CEO and co-founder, Rick Rudman, said one of the goals is to use technology and software to increase the speed, efficiency and transparency of presale improvements. "People [in the remodeling industry] are late or don't show up," he said. "And it's hard to check on progress, and all of that can be frustrating."
Rudman, the founder of Vocus, a cloud-based marketing and PR software company that sold recently for nearly $500 million, said the company is able to track the projects it has already completed to show prospective clients that move-in ready houses sell for more. The company also touts its ability to track the return on investment for certain projects.
Rudman said Curbio makes money by charging fees that are competitive with local contractors, but with more efficient service. (The company claims that it can complete projects 65% faster than the average contractor.)
"If you're trying to get a house ready to sell, time is of the essence," he said. "And if you're a real estate agent, [not getting it done quickly] can be a deal killer."