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Why Pre-Sale Renovation Is the Hottest Tool in Real Estate

June 08 2022

home renovationAmericans spent $420 million in 2020 remodeling their homes, according to the Joint Center for Housing Studies at Harvard University. While you may think the pandemic was the catalyst, according to the National Association of Realtors, most consumers who remodeled – 83% – said they would have remodeled regardless of the pandemic.

Consumers are accustomed to upgrading their current homes.

Research tells us that the most common motivation for nearly one in three consumers (30%) is to replace worn-out finishes, surfaces, and materials. About one in five renovation projects add features and improve livability. A majority are pleased with the result.

Renovating a home increases one's desire for a home significantly, a recent NAR study reports.

Renovating a home before you list it for sale is arguably the hottest and one of the fastest-growing trends in real estate today.

Why? Because a pre-sale renovation increases wealth.

With a marketplace of 5-7 million homes sold every year, the pre-sale renovation sector has the potential to generate billions – yes, billions with a "B" – of increased wealth for home sellers by maximizing the return on their most significant asset: their home.

What does pre-sale renovation offer real estate brokers and agents? Potentially billions of dollars increase revenue, both company dollar and gross commission income.

Understanding the individual impact

Before they go on the market, most homes need a little love. Sellers often rush to list their homes in a hot market, but that's often not the best choice.

Revive found that most homeowners who put their home on the market as-is are missing out on between 15% and 20% of the value.

When sellers take a little more time and make smart renovations, they maximize their profit. Digging into Revive data, we found that sellers who choose a smart renovation path typically earn $186,000 more when they sell.

Remarkably, the average return on a seller's renovation investment (or ROI) is an incredible 257%. Most importantly, using Revive, sellers renovate now and pay later. Remember that the ROI they achieve doesn't come from their funds, as Revive fronts the dollars needed for the pre-sale renovation.

Moreover, Revive also found that renovated homes sell 72% faster.

When you think about how the financial benefits of a pre-sale renovation could impact the overall marketplace, you can better understand its burgeoning growth and vast potential.

Measuring market potential

According to a recent report by Redfin, the number of US homes now worth $1 million or more is at a record high of 6 million properties as of February. That's just under 10% of all homes in the US, nearly doubling from 4.8% or 3.5 million homes in 2019.

With about one in ten home sales nationwide, California also has the most million-dollar-plus property markets: 7 of the Top 10 Metro markets with the highest percentage of homes worth $1 million or more are in the Golden State.

Last month, the average price of a new home in Orange County eclipsed the $1 million threshold. In San Francisco, 89% of all homes are worth $1 million or more. In San Jose, it's 86%, and more than half the homes – 55% – in Oakland.

If just one in 10 sellers of all homes worth $1 million or more opted for a pre-sale renovation, sellers could potentially gain tens of billions of dollars in additional net proceeds from their sale, when you consider the average ROI at Revive is 257%.

Pre-sale renovation is a massive wealth-builder.

Consider the overall US real estate market annually. Between 5 million and 6 million total existing-home sales occur in a typical year. Revive data reveals that if just 5% of these homes chose to perform a pre-sale renovation, sellers would net an additional $56 billion from their home sales.

Real estate agents collectively would earn more than $1.4 billion in additional real estate commissions. If the brokerage nets .5% of the sale, that's an additional $280 million in revenue.

Impact on personal lives

While the market potential of listing concierge companies that can scale like Revive will be attractive to investors, pre-sale renovations are creating something profound.

People's lives are changing for the better.

As a former highly successful home-flipper in Southern California, I turned over 1,000 homes. It was gratifying to see a renovated home's impact on an entire neighborhood. Yes, it was financially rewarding because I created a process and system that could scale. But the greatest pleasure came from watching surrounding homeowners improve their homes. It often seemed to have a chain effect.

Pre-sale renovations make a more direct impact on people’s lives because it increases their wealth.

I remember helping my parents complete a pre-sale renovation and the difference it made. For my father, the windfall created was the difference between retiring with dignity or not retiring at all.

Revenue generated from a pre-sale renovation does more than creates a business that lifts all boats – agents, brokers, and sellers – it gives lives a lift.

Learn more about pre-sale renovation and Revive at revive.realestate.

Michael Alladawi, CEO and Founder of Revive, is a Southern California real estate veteran with a proven track record as a builder, investor, and respected home flipper. Michael created Revive to share his spectrum of knowledge and help homeowners maximize their profits when selling their homes.