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Rush or Renovate: What's the best advice to give your sellers?

June 29 2022

house close upIn the past, when a hot seller's market began to cool, listing agents often advised their sellers to get their homes on the market ASAP. They didn't want their clients to miss out on market momentum. But today, sellers have many new options, including the ability to choose a presale renovation.

The real estate market is shifting. But successful real estate agents know that staying on top of the local market trends ensures they provide their sellers with the best — and most current — intelligence and sales strategies.

The questions for real estate agents today are, "What's the best advice to give your sellers? Is there a way to avoid trying to 'time' the market? Would your seller benefit from a new way to maximize their home sale profits — with a presale renovation that increases their listing price – and not spend a dime out-of-pocket?"

Real estate agents can best help their sellers by thinking like a home flipper in today's market.

A changing real estate market

The one universal truism for real estate is that it is local. So what's happening in the real estate market in a nearby suburb may be completely different than where you live.

Nationally, trends are signaling a shift. For example, real estate brokerage firm Redfin reports a drop in recent home touring activity in their markets, declining 6% since January. In addition, mortgage purchase applications nationwide are off 10%.

The rapid rise in mortgage rates has significantly impacted first-time buyers, who find it much tougher to afford a home. The monthly payment for a median-priced home has jumped almost 50% because of rising mortgage rates.

The National Association of Realtors recently reported national home sales fell 3.4% in May — the fourth straight month of a sales decline. In addition, month-over-month sales dropped in three of four major U.S. regions, while year-over-year sales were lower in all four regions.

Yet prices are still trending upward, and an existing home's new national median price was $407,000, eclipsing the $400,000 mark for the first time.

Moreover, well-qualified buyers are still buying higher-priced homes because they can afford them despite higher mortgage rates.

Keep in mind that buyers using cash purchased one in four homes. In some markets, all-cash sales are more than 50% of the market. Considering that iBuyers only make up a little over 1 percent of all sales, you quickly realize that there still is a tremendous amount of purchasing power in today's marketplace.

Take the money and run?

In a market where inventory is still historically low and prices are still rising, agents may be tempted to tell their clients to listen to the Steve Miller Band and "take the money and run!"

But when we look at the numbers for sellers who opt for a presale renovation, agents might change their tune, giving sellers advice from Pet Shop Boys: "Opportunities (Let's make lots of money)."

Research tells us that most homeowners who put their home on the market "as-is" are missing out on between 15% and 20% of the value. A presale renovation unlocks that capital.

Instead of rushing to list, by taking a little more time to make intelligent renovations that have a proven ROI, sellers can earn an average of $186,000 more when they sell. We also know that renovated homes sell 72% faster and provide an average return on investment greater than 250%.

Presale renovation is the hottest tool in today's real estate market because it provides massive property gains. In addition, presale renovations deliver a triple win: with a bigger sales price comes greater profits for sellers, higher GCI (gross commission income) for agents, and more brokerage revenue.

The impact of presale renovation is potentially massive. Total U.S. annual existing home sales typically average between 5 million and 6 million. If just 5% of these homes took the presale renovation path, that would generate $56 billion in additional wealth for home sellers.

That would generate an additional $1.4 billion in agent real estate commissions and $280 million in additional brokerage revenue.

Thinking like a home flipper

When you flip over 1,000 homes in Southern California, you learn a lot about how to maximize the value of a house. You figure out the best renovations to make and the ones to avoid. You understand the importance of establishing a network of reliable, high-quality contractors and how to keep them busy and working exclusively for you.

As a real estate agent giving the best advice to a seller today, you don't need to be a house flipper; you need to think like one. The No. 1 goal of a flipper is to figure out how to get the most money out of a home sale. That's the new tool for sellers that a presale renovation offers a listing agent.

By recommending a presale renovation firm, sellers and their agents won't do any of the heavy lifting: all the work is being done for them. Sellers also don't spend a dime upfront yet can tap into tens to hundreds of thousands of dollars in improvements to boost their home sale price.

Like a flipper, a presale renovation firm is taking a risk, too, but delivering the benefits of a successful flip back to the seller.

Agents also benefit by understanding the impact of recommending a presale renovation from a holistic point of view.

When an agent recommends that a seller renovate versus rush to list their home, they do more than increase the money a homeowner receives from selling their home. Agents also are helping people create wealth.

If an agent helps a seller increase their wealth by $100,000 or more, that home sale can be life-changing for the seller and their family. A successful presale renovation also can create a powerful lifelong bond between the seller and the agent who recommended this new path.

You can learn more about the benefits of presale renovations and the massive wealth it created for customers 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.