Real Estate By Design


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  • Real Estate By Design

    1. 1. REAL ESTATE BY DESIGN Design your Sale Design your Purchase
    2. 2. What is a Realtor? <ul><li>A sales professional that has a fiduciary duty to a client. </li></ul><ul><ul><li>Loyalty </li></ul></ul><ul><ul><li>Obedience </li></ul></ul><ul><ul><li>Confidentiality </li></ul></ul><ul><ul><li>Disclosure </li></ul></ul><ul><ul><li>Reasonable Care and Diligence </li></ul></ul><ul><ul><li>Accounting </li></ul></ul>
    3. 3. The Motivation for Real Estate by Design <ul><li>Real estate is the basis of many client’s financial viability. </li></ul><ul><li>One challenge of selling and buying real estate is to maximize financial outcome. </li></ul><ul><li>In many markets it is possible to enhance value by making strategic improvements before a sale or after a purchase. </li></ul><ul><li>This can apply to any type of property. </li></ul>
    4. 4. Traditional Real Estate is Marketing Focused: <ul><li>Marketing is essential in alerting clients and their Agents that a property is to be sold. </li></ul><ul><li>Marketing has become very standardized in sophisticated markets. </li></ul><ul><li>Once the Buyer sees a property, a decision is made on the attraction to the property not on the marketing materials. </li></ul>
    5. 5. The Best Choice: Preparation is the key to motivating Buyers:
    6. 6. One Way to Analyze Value: <ul><li>Homes and their attributes can be analyzed by price per square foot: </li></ul><ul><ul><li>$300 range-structural fixer </li></ul></ul><ul><ul><li>$400 range-cosmetic fixer </li></ul></ul><ul><ul><li>$500 range-good condition </li></ul></ul><ul><ul><li>$600 range-premium condition </li></ul></ul><ul><li>GOAL: Increase one price range profitably. </li></ul>
    7. 7. Test Case 1: Commercial Bldg. <ul><li>Before improvements </li></ul><ul><li>2 offers of $700,000. </li></ul>
    8. 9. How value was added: <ul><li>BY CREATING A COHESIVE, SIMPLE UNDERSTANDING OF THE BUILDING BY ADDRESSING: </li></ul><ul><li>Cosmetics – Color is fundamental to an understanding of any property both spatially and stylistically indicating value. </li></ul><ul><li>Water – Elastomeric paint and simple roof drainage repairs. </li></ul><ul><li>Cleanup - Interior and exterior. </li></ul>
    9. 10. Test Case 1: Commercial Bldg. <ul><li>After $10,000 of improvements </li></ul><ul><li>2 offers of $850,000. </li></ul>
    10. 12. Price per Square Foot Change: <ul><li>Original Offer: $166 per square foot </li></ul><ul><li>Final Offer: $202 per square foot </li></ul><ul><li>Investment: $2.37/sq.ft. </li></ul><ul><li>(total original sq.ft. price = $168.37) </li></ul><ul><li>Profit: $33.63/sq.ft. or $141,750. </li></ul>
    11. 13. How the Brain processes information and makes decisions: <ul><li>Characteristics have value and can be added and compared. </li></ul><ul><li>Characteristics can be balanced and counter-balanced. </li></ul><ul><li>The brain makes a list of negatives and positives and makes a decision by weight. </li></ul>
    12. 14. How buyers make decisions and gain enthusiasm. <ul><li>House and reports have clarity </li></ul><ul><li>Strong points brought out </li></ul><ul><ul><li>Strengthen architectural style </li></ul></ul><ul><ul><li>Minimize need for repairs </li></ul></ul><ul><ul><li>Stylish or trendy details </li></ul></ul><ul><ul><li>Light and open w/pizzazz! </li></ul></ul><ul><ul><li>Weak points clarified or minimized </li></ul></ul><ul><ul><li>Engineering, furnace, roof reports </li></ul></ul>
    13. 15. Test Case 2: Fixer Home in the Berkeley Hills (Vistamont) <ul><li>Home Before </li></ul><ul><li>Home After </li></ul>
    14. 16. Decks before and after:
    15. 17. Entry: <ul><li>Entry w/ deteriorated deck </li></ul><ul><li>Entry w/ new deck and stone </li></ul>
    16. 18. Kitchen before and after: <ul><li>Cabinet doors missing, old tile, rotted maple counter </li></ul><ul><li>Cabinet refaced, new counter and appliances. Slate floor. </li></ul>
    17. 19. <ul><li>Living room before </li></ul><ul><li>Living room after </li></ul>
    18. 20. Adding continuity: <ul><li>Master bedroom suite before </li></ul><ul><li>After </li></ul>
    19. 21. Stair between:
    20. 22. Bath before and after: <ul><li>Replace tile and sink </li></ul>
    21. 23. Identified problems: <ul><li>Foundation (poles), engineering and shear problems </li></ul><ul><li>Exterior access deck severely rotted </li></ul><ul><li>Interior in poor condition </li></ul><ul><ul><li>Water-stained wood paneling </li></ul></ul><ul><ul><li>Kitchen very deteriorated </li></ul></ul><ul><ul><li>Baths deteriorated and/or dated </li></ul></ul><ul><ul><li>Surfaces needed attention </li></ul></ul>
    22. 24. How problems were addressed: <ul><li>Engineering report clarifying work and remediation. </li></ul><ul><li>Decks rebuilt. </li></ul><ul><li>Interior painting, trim and floor refinishing. </li></ul><ul><li>Kitchen remodel ($25,000). </li></ul><ul><li>Bath updates. </li></ul><ul><li>General interior and exterior cleanup. </li></ul>
    23. 25. Vistamont results: <ul><li>Estimated sales price $925,000 – </li></ul><ul><li>$383 sq.ft. ($825,000 by independent agents) </li></ul><ul><li>Final sales price $1,250,000 - $540 sq.ft. </li></ul><ul><li>Cost: $100,000 (double because of friend) </li></ul><ul><li>$42 sq.ft. </li></ul><ul><li>Profit $225,000 - $93 sq.ft. </li></ul>
    24. 26. The brain is an imperfect observer <ul><li>We perceives things accurately about 50% of the time and the conclusions we draw from observations are subject to faulty perception. </li></ul>Now what do you see?
    25. 27. The Brain is Subject to Biases: <ul><li>Biases distort decision making </li></ul><ul><ul><li>Confirmation Bias (preconceptions) </li></ul></ul><ul><ul><li>Anchoring and Adjustment-Initial impression </li></ul></ul><ul><ul><li>controls decision </li></ul></ul><ul><ul><li>Premature Termination of Search for evidence-initial impressions are important </li></ul></ul><ul><ul><li>Incremental decision making and escalating commitment-keeping information simple and clear allows decisions to be easily made. </li></ul></ul>
    26. 28. In Real Estate this means: <ul><li>Try to anticipate basic biases and counteract them with clearly defined information (engineering reports) and attractive, meaningful upgrades. </li></ul>
    27. 29. Address outdated, cheap details: <ul><li>Kitchen Before </li></ul><ul><li>Painted with new counter, sink and hardware. </li></ul>
    28. 30. Make era-appropriate changes: <ul><li>Bath w/ late 60’s remodel </li></ul><ul><li>Bath w/ 40’s era remodel </li></ul>
    29. 31. Remediate distasteful details: <ul><li>Tub before </li></ul><ul><li>Tub after </li></ul>
    30. 32. Decisions are formed in various ways: <ul><li>Divination </li></ul><ul><li>Coin toss </li></ul><ul><li>Consulting Authority </li></ul><ul><li>Listing Options _______________ </li></ul><ul><li>+ - </li></ul><ul><li>+ - </li></ul><ul><li>+ - </li></ul><ul><li>+ - </li></ul>
    31. 33. When options are balanced or counterbalanced, perception is framed <ul><li>Characteristics of a home have values that are added and compared in making decisions. </li></ul><ul><li>These characteristics can be balanced and counter-balanced. </li></ul><ul><li>In real estate preparation, try to increase positive perceptions by offering better options. </li></ul>
    32. 34. Therefore framing is important How verbal definitions are framed has consequences: Trial Lawyer-------------Public Protection Lawyer Drilling for Oil-----------Exploring for Energy :
    33. 35. How physical characteristics are “framed” matters The center circles are both the same size.
    34. 36. Test Case 3: New Construction
    35. 37. Living Room
    36. 38. Dining Area
    37. 39. Kitchen
    38. 40. Color to address problems of blandness and dark hallway
    39. 41. Pulled off market to address buyer concerns <ul><li>Storage added to master bedroom, laundry and baths </li></ul><ul><li>Restaged from 1 master and 4 secondary </li></ul><ul><li>four bedrooms to 2 master bedrooms, 1 recreation/guest area and 3 bedrooms </li></ul><ul><li>Trees trimmed to increase view </li></ul>
    40. 42. Before: Not enough storage and five bedrooms
    41. 43. Restaged w/ second master suite and added storage:
    42. 44. Restaged to add 2 nd living area <ul><li>Before as bedroom </li></ul><ul><li>After as play room </li></ul>
    43. 45. View Developed:
    44. 46. Outcome:
    45. 47. Restoration of a Mid-Century
    46. 48. Walls and cork floors sanded <ul><li>Living room before </li></ul><ul><li>Living room after </li></ul>
    47. 49. Process:
    48. 50. Kitchen before and after:
    49. 51. Refinishing stair:
    50. 52. Adding space: <ul><li>Existing detached room </li></ul><ul><li>Room from furnace room </li></ul>
    51. 53. Cleaning up <ul><li>Bath before </li></ul><ul><li>Bath after </li></ul>
    52. 54. Laundry before:
    53. 55. Laundry after:
    54. 56. Analysis of Mid-Century:
    55. 57. North Berkeley Duplex:
    56. 58. How to evaluate the results:
    57. 59. Potential short sale:
    58. 60. The limits of staging: <ul><li>Living room as lived </li></ul><ul><li>Living room as staged </li></ul>
    59. 61. New flooring, cabinets refinished, paint, new faucet. <ul><li>Before </li></ul><ul><li>After </li></ul>
    60. 62. The benefits of staging: <ul><li>Living room as lived </li></ul><ul><li>Living room as staged </li></ul>
    61. 63. Thank You!