Case Study: the Transformation of 1220 Pitman
July 12th, 2021
At the Young Platinum Group, we work a lot with new construction - we build a lot! But what about our clients who are looking to sell a property that is not brand new? Can we use our construction contacts and our realtor skills to deliver a positive return on investment to spruce up an older property? Here’s a case study on how we did just that.
Executive Summary
$110,000 was invested, and the return was $1,050,000 in 46 days
The property drew rave reviews for being charming and perfect, which made it easy for a buyer to make a pre-emptive offer at a premium price.
The Challenge
Our client engaged us to sell his lovely Crescent Park property at 1220 Pitman Avenue. We knew the area well… for seven years we lived 12 houses away on the next street, and we’ve walked around this neighborhood countless times pushing our boys in a baby stroller. Gloria actually worked with this client in a life before real estate, where he was a larger-than-life executive at a large tech/media company. We’d never seen the inside of his house, but we were honored when we were invited to help him manage his sale.
Homes are for living in, not for selling. People’s real lives are full of dog hair, red wine spills, and lemon juice etchings. In our personal home, we adore our awful kitchen table that is already so far from perfect that we feel so liberated (nothing can kill that thing!). So when a client invites us into their home, we do not expect a spic-and-span Apple showroom. Every house needs some rejuvenation, and most houses have deferred maintenance of some kind or another. Our job is not to judge the hard-living ways of our clients, but to transform their family hearth into the sort of space that prospective buyers wish their lives were like. We create something that is more neutral and sparse than how most people live, so that visitor can easily imprint their busy lives into this delightful space ready to accept them. And the art of what we do is to spend limited money and time most judiciously, generating maximum bang for the buck, under time pressure.
Most of the time, you do your best for your client and get a return, but you can’t wind back time to test what would have happened if you’d chosen to do nothing. But in this case, we kinda did know. How?
The Valuation
This client was an executive in a big corporation. One of the benefits they gave him was a relocation service that would cover some of his costs, as long as they followed the Relo company’s process. And part of THAT process was to get competing realtors in to formally estimate what the go-to-market price was, and what it would eventually sell for. So two other realtors in addition to us walked the client’s home, crunched the numbers, and came up with their professional assessments of the value of the home. These estimates controlled the go-to-market price, so the realtors were trying to be as accurate as possible, but high enough to win the business. Their estimates converged on $4,250,000.
We saw 1220 Pitman a bit differently. Our “competition” saw a 71-year old structure that was tired and under-maintained but in a premium neighborhood. They each estimated the “as is” sale price— doing no improvements— as $4,250,000.
We looked at the same place and saw a lot of potential. It would take more work than normal, but it should pay off, we thought. As switch hitter developer-realtors, our trouble is not knowing what to do… but knowing when to stop. Sure, a fresh coat of paint would be a strong return on investment. But would re-doing the cabinets in the kitchen? Would opening up a wall and taking a gamble on what we might find inside? We would catch ourselves starting to think about big changes that may or may not pay off (but would be awesome!). We slapped ourselves a few times and snapped out of it. Return on investment, not creative expression or the pursuit of perfection, was our goal.
The seller was amazing, and his decisiveness and clarity made it possible to realize the upside of the property. As a successful entrepreneur, he knew that maximum return would happen if we made a product that was as perfect as possible. There is a big psychological difference to the buyer between a house that is “good enough but we’ll need to do a bunch of unknown difficulty work when we move in” versus a house that is “immaculate for what it is.” That delta is far greater than the cost of appropriate repairs, but the seller has to bear the risk and pay upfront. Our seller scrutinized our recommendations but ultimately approved every one of them.
In the end, a market valuation said the property was worth $4,250,000 for an “as is” sale. But we proposed to do a lot of prep work and target a sale of $5,150,000. We estimated our costs to be around $110,000. Could we invest $100k and get a fast return of $900k? Would this investment pay off? We got to work to find out.
The Work
When prepping a house, we have a few objectives: to make the house beautiful, to make it beautiful “under the skin” in ways only a property inspector could appreciate, and to do all of this with a strong return-on-investment filter. So before we get working, we brought in our valued partners. Our property inspector brought decades of experience to bear as he tested the integrity of all the house systems. Our pest inspector poked and prodded and crawled around to look for hidden dangers like termites or rot. And our designer brought his billion-dollar sensibilities and design aesthetic. We ourselves… hauled off unwanted items that the sellers left, and even emptied the fridge— hey, we pride ourselves on being full service! Armed with their expert opinions, we had our six-point battle plan to rejuvenate Pitman and bring out its maximum value.
1. Bring in the Light
The house was somewhat overgrown by mature trees, which were trimmed back. A strangely-located tree, almost at the front door, was gently but firmly ushered off the property. Windows screens were labelled and stored in the garage. Window treatments were entirely removed. Most shutters were removed, labelled, and stored away. And the light flowing into the house seemed to double.
2. Un-Defer the Maintenance
Lots of mundane things needed attention. We can do it efficiently, whereas a buyer might hesitate at the complexity of a project and thereby offer less to our seller. So we retired the old water heater and brought up an energy-efficient rookie to take its place. The air conditioning and furnace systems got a lot of overdue love. The fireplace had years of congealed soot scraped off and thereafter gleamed with pride. Batteries in smoke detectors were replaced. Plumbing fixtures were tightened. All the systems of the house purred nicely. Aside from trying to maximize revenues, turning over a beloved property to new owners should be done with dignity and respect for an old friend. So we do the less glamorous work so everyone feels great about the transition. And so that the property inspection report has nothing to complain about.
3. Modernize the Look
The floors throughout were of lovely quality and workmanship, but the wood was fairly red by today’s standards. So we were delighted when our investigations revealed that they were actually lighter and more neutral underneath a top layer of stain. So away the top layer went. The entire floor was restored to a lovely natural white oak color, smooth and ding-free. We were delighted to discover that one carpeted room actually had lovely hardwood underneath, so we took advantage of this lucky find. Railings and stairs were refinished. Most light fixtures were replaced with more modern variants. Half the electrical trim faceplates were swapped out for fresher versions. Wallpaper from an earlier, more innocent era was removed. Perhaps most importantly, the entire interior walls and ceiling were repainted to “White Dove”. The accumulated decades of excited children’s fingerprints and scuff marks were sacrificed in the process, but the karma of raising good kids remained.
4. Freshen the Bathrooms
Perhaps nowhere shows the cruel pounding of the years more than bathrooms. We cleaned and repaired all the grout. We replaced damaged plumbing hardware, and repaired the overflow drain in the primary bedroom tub. Shower glass sweeps were replaced. A handheld showerhead was replaced with a modern-looking fixed version. A new shower curtain was procured. One especially interesting challenge was the primary shower, where two small pieces of tile were missing, and no match to the original could be found. So we chiseled out a band around the entire shower, and matched the attractive tile on the shower floor. Our poor handyman was chiseling out old tile with a jeweler’s precision and cutting new tile with a soldier’s ferocity, and he got the job done beautifully. This pulled the entire look together; many buyers assumed it was a brand new shower.
5. Upgrade the Kitchen
The old stove was leaking gas. No one noticed until we started fixing things up. Multiple trips by Palo Alto Utilities isolated the problem to the range itself. So we junked it and found a beautiful replacement. In mid-2021, with COVID-related home shortages rampant, this was no mean feat to pull off—appliance vendors we spend hundreds of thousand of dollars on in the past were unable to even find a floor model for us. But we persevered, and then we procured. New hardware was selected and installed throughout the kitchen. A super-awesome dining nook needed a new highly irregularly-shaped cushion, so we had one custom-fabricated to match the kitchen countertop colors. A long-absent door handle on the inactive side of a lovely French door was procured. The newfound sunlight and other improvements made the place feel custom and airy.
6. Improve the Curb Appeal
The first showing of any home these days is online, and the hero image of an online listing is typically the exterior front shot. 1220 Pitman had super-charming dormers on the second floor, so our entire theme was to create a “picture-perfect Cape Cod” home. Tree-damaged fences were repaired. Damaged roof tiles were replaced. A new lawn replaced some struggling grass in the front yard. All fences were painted. New house numbers were added to the front, and new front door hardware was installed. A non-functioning hot tub in the back yard was hauled out, backfilled, and planted over. All the hardscape was power-washed and missing mortar between certain bricks was replaced. Most crucially, the house itself got a major color palette shift— moving from a chiffon yellow weathered by a decade or more of Palo Alto weather to a fresh coat of “Winter Ice” with “Grenada Villa” accents and “White Dove” trim. Flowers were planted, and artificial flowers were installed in the charming dollhouse in the back yard. The house always benefitted from an excellent street in a highly desirable neighborhood with mature trees around the perimeter, but now, it radiated with pride at its revealed true beauty.
With all the work done, the cleaners moved in and we professionally deep-cleaned the house. Windows were cleaned inside and out. Gutters were cleansed. Now that the property was living its best possible life, the stagers could install our carefully curated furniture and furnishings. The photographers, videographers, matterport crew, and drone photographers swarmed. And the beautiful Golden Gate Sotheby’s International Realty sign went up as soon as they decamped.
The Results
We talked our client into spending $110,000 to improve their chances of a strong sale. The property went on the market on May 12, 2021. In the first 5 days we had 34 showings. This was during COVID times when every visit was more meaningful due to the paperwork and hassle of seeing anything. We followed up with each and every agent, so we had a good idea that people thought the home was indeed “picture perfect”.
And one of those 34 buyer parties had fallen in love. We had a strong inkling, but nothing is real until an offer is in hand. We had not set an offer date yet. They made a pre-emptive offer (a higher priced offer before a formal date is announced) of $5,300,000. The seller accepted. After 41 days of prep, it was all over in a scant five days.
So to summarize, a professional estimate (its unusual to have access to this information!) said the property was worth $4,250,000. With an investment of $110,000, the home sold for $5,300,000. That means a return of $1,050,000 in 46 days. In annualized return on investment terms, the seller made a (mathematically accurate but logically silly) ROI of 854%.
The Sale in Context
We set a list price of $4,899,000, and sold for $5,300,000, or 8.2% above list. How good is that? Let’s compare sales over the past two years in Palo Alto’s Crescent Park neighborhood by that metric:
We are the red circle in the chart above, and the blue circles are every other on-market Crescent Park sale since the start of 2019.
The median % “over” list was -5%... whereas 1220 Pitman sold for 8.2% over!
Days on Market
We can also compare days on market for these same properties. We received our offer 5 days after going on market. How does that compare to the market?
The median Days on Market is 14.5, and we were significantly below that. Some sorry sellers waited big fractions of a year, with the associated property tax, utilities and insurance costs eating into their eventual gain on the sale.
Indeed, the “% over list” calculation and the “DOM” calculation are related… aggressive sellers often overprice, leading to long days on market until price is gradually reduced to something that clears the market. To have a high, fast sale is the “goldilocks” scenario!
Dollars Per Square Foot
Realtors and builders often default to this single measure of a home to compare it to others. While its obviously unfair to compare 1220 Pitman to a new construction, or a large lot, its nonetheless still interesting to see it in context:
Not bad for a 71-year old home, right?
Before and After
Here are a few of the images before and after the work we did:
Front exterior, Before
Front exterior, After
Rear exterior, Before
Rear exterior, After
Conclusion
It’s hard to apportion the outsized return on investment between the work done, our negotiating skill as agents, the marketing we did as agents, and just random luck. A cynic might even add that we just all underpriced it… but the $/ft2 calculations, for a mid-sized older property suggests that we didn’t. And while we believe that we did a great job in marketing and representing our client, the real impact was the home prep. $110,000 transformed a property that was good into one that was great. It transformed the property into something a buyer could pay top dollar for without hesitation. It transformed the property from a charming fixer-upper into a move-in-ready picture-perfect dream home.
And we can do this for you.