Chris Hotz had seen his share of "We Buy Ugly Houses" billboards while driving through Denver. Over time, they planted a seed.
Hotz had some experience with fixer-uppers, but until 2004 he hadn't made them his business. "I thought, why not just fix up the homes at no cost to the homeowner, sell them and share in the sale?"
In April, Hotz put his idea to the test. With his friend Brad Licht, he opened Value-builders LLC.
"We don't consider ourselves a remodeling business," Hotz says. "We help property owners get more for their properties."
Here's how it works: Greenwood Village-based Value-builders and the property owner come up with an "as-is" value, then agree on what remodeling will be done, how much they will then list the house for and how much Value-builders will get from the sale. Value-builders then contracts out the remodeling, which usually takes four to six weeks and costs an average of $16,000.
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When the property sells, the money is split. If the house sells below the as-is value, Value-builders makes no money and loses its remodeling costs.
Hotz says a loss has yet to happen. So far, the company has sold 10 properties, listing them for an average of 19.2 days and increasing the properties' selling price an average of 31 percent. Another 20 are on the market or are being remodeled, he said.
Doug McArthur listed his southeast Denver home for $630,000 and left it on the market for 14 months before contacting Value-builders. Prospective buyers told him it was a gorgeous custom home but dated on the inside.
The company invested $35,000 to paint, add carpet and remodel the kitchen, bathroom and fireplace, then bumped the asking price to $669,000. Within a week McArthur had a serious nibble, and now he says he's confident the house will sell.
"To have a company put up the capital risk like (Value-builders) does means to me they're motivated as much as I am to sell the home," McArthur said, "and that makes me think they may have something special."
Although Value-builders' customers have included homeowners, banks and investors, the company also works with people who expect a foreclosure. It's the same group targeted by HomeVestors of America, the Dallas-based company that proclaims "We Buy Ugly Houses," said spokeswoman Monica Feid.
Colorado is home to 11 HomeVestors franchises - eight in Denver, two in Colorado Springs and one in Fort Collins - that bought 186 houses last year, 157 of which were in Denver. Unlike Value-builders, the company buys the homes it renovates and then resells them.
"We get calls from all kinds of people, just typical homeowners, investors and some who are going through foreclosure," said Becky Creighton, an owner of GHG Denver LLC, a HomeVestors franchise. "Most of our business is driven by our billboards."
Denver buyers aren't interested in houses that need repair, said Carl Dawson, a Realtor with Re/Max Professionals in Lakewood.
"Houses that need repair just don't move, unless it's a fix-and-flip, but then sellers don't get very much money for their houses," he said.
He used Value-builders to upgrade a 91-year- old home he had listed in Washington Park. It had been on the market for nine months and had been shown 350 times when he contacted Hotz.
"(The house) needed some work, but the seller didn't want to do it," Dawson said. "I talked to him about Value-builders; it took him awhile to decide, but he finally agreed."
Value-builders remodeled the kitchen, refurbished the hardwood floors and landscaped the yard.
"It sold to the third person I showed it to after the work," Dawson said, "and it sold for $45,000 more than the price we were asking before the remodeling."
Hotz believes he'll start seeing copycats soon. In fact, he's already helped spawn one.
"I met for an hour with a guy who wanted to know more about us, and then about month later I found fliers basically promoting the same thing we were doing," he said.
The pie appears to be big enough to support them both, considering the number of homes for sale that were built in 1995 or before.
"Homes that are 10 years old or older need at least some improvements," he explained.
For now, Hotz says his biggest challenge is "getting the owner to take the property off the market long enough for the remodel and then waiting to sell it."
