Remodeling firm aims to help home sellers

SCOTTSDALE - A new home-remodeling franchisee is hoping to gain some business is Scottsdale's tepid housing market and help some homeowners sell their property.

Marlin Kirsch of Value Builders is remodeling a home in Terravita to use as a demonstration model for his company.

He bought the 2,900-square-foot home for $600,000, plans to spend about $100,000 remodeling it and hopes to get $850,000 for the 13-year-old house.

But Kirsch's Value Builders is not a fix-and-flip operation.

Value Builders describes itself as a shared-profit renovation service.

And with Scottsdale home sales creaking along at a slow pace, this concept might be worth a careful review.

The concept, started by Chris Hotz and Brad Licht in Denver four years ago, involves a cooperative deal to work with homeowners on remodeling and selling their houses.

"I think it's a great business," Kirsch said. "It's just getting people to understand the concept."

Builder pays for upgrades

Here is how it works.

Value Builders and a homeowner establish the market value of a home before any remodeling is done. Then the two sides agree generally on what remodeling will be done and how much Value Builders will spend in updating the home, painting, adding new flooring, cabinets and updating kitchens and bathrooms.

They also establish how much the remodeled house will list for when it is completed, usually in 60 to 120 days.

After Value Builders recovers its remodeling costs, the company and the homeowner split any additional value of the home. The seller does not put money into the deal up front, but they must move out for the remodeling.

Owner splits home profit

For example, Value Builders might put $30,000 in upgrades into a home with an agreed-upon value of $300,000 before the remodeling.

If the home then sales for an agreed-upon price of $400,000 then the seller and Value Builders would split the additional profit. In this case, $100,000, minus the $30,000 Value Builders put into the deal.

Both the owner and Value Builders would walk away with $35,000 each, plus whatever the seller made on their equity in the overall sale.

Value Builders also stages the home with furniture, art and its own decorating touches to more quickly sell the remodeled home.

If the home does not sell, the price is lowered each month at a contractual percentage, usually about 5 percent, said Kirsch, a Scottsdale Value Builder franchisee with his contracting partner Bruce Keim.

Company takes risk

If it sells for the pre-remodeling price then Value Builders eats the construction costs.

"It's never happened that way" with well over 50 deals in the Denver market, said Hotz, the Value Builder co-founder.

"It ensures that we do our homework," he said.

Value Builders takes control of the remodeling decisions, choosing colors and materials for the home.

"We're not remodeling the house for the (seller), we're remodeling the house for the market and we know what sells," Hotz said.

Value Builders started franchising its business two years ago. It has seven franchisees in the Denver area and Kirsch's in Scottsdale, Hotz said, adding that he thinks there is room for five more in Denver and a total of 12 in the Valley.