Debra Hazel
For many homeowners, performing the repairs needed to get a home ready for resale and then keeping it in prime condition for showing is an inconvenience. For others, it’s financially impossible. The result is that these owners accept much less than their property could be worth, if it sells at all.
“That was unfair,” said Josh Stech, co-founder and CEO of Sundae, a San Diego-based off-market buyer that aims to offer top dollar to distressed real estate owners for their as-is home, fixes it and re-sells at a profit.
Unlike predatory investors who buy distressed real estate for rock-bottom prices, Sundae pays as much as possible for homes in need of some TLC. Potential sellers file a request online, speak with a customer service rep by phone, and then a market expert will conduct a short home visit, all at no cost. Sundae will make an offer for the highest possible price, even advancing the homeowner up to $10,000 after the inspection is complete. The sale can close in as little as 10 days or as long as 60 days after the offer is made.
Sundae determines the price offered by assessing the cost of the repairs, calculating the value of the house once they’re complete and adding on a small profit margin. The owner thus receives as much as possible for the house without undertaking the expense or hassle of making the repairs and marketing the home.
Stech entered the residential real estate business straight out of Stanford University graduate school. Moving to Las Vegas, he’d gone into the lending side, focusing on financing, fixing and flipping properties as co-founder and CFO of Purpose Build Investments, a residential real estate private equity firm.
He then became a founding partner and senior vice president of sales at online mortgage bank LendingHome. But after working with distressed real estate for 10 years, he saw something that had been neglected in the industry: why the property was distressed to begin with.
“No one focused on the seller of the distressed home, the person who needs an advocate,” he said. “Whether it was because of a death, a divorce or a job loss, they needed to access some of the value of the home. But they find that the house won’t sell because of its condition. So they get taken advantage of. I think I finally saw the light.”
Doing the right thing by these homeowners became a mission, even as Stech searched for a company name.
“We looked at a landscape of names, but none were consumer-oriented,” Stech said. “We looked for a name that spoke to the customer but wasn’t intimidating. And then, finally, we saw it. There are no Sundaes in real estate.”
Stech and co-founder and president Andrew Swain (the former CFO of Lending- Home) launched Sundae in San Diego in October 2018, and the company has since expanded its reach to the Inland Empire and Los Angeles. It was the right time in the right market, Stech said. Southern California comprises 15% of all fix and flip homes in the United States.
The keys for Sundae’s success are the ability to control construction costs through economies of scale and volume. If a $338,000 home can be resold for $478,000, nearly half the difference is pure profit. Meanwhile, the original homeowner is getting the most value possible.
Sundae has quickly grown to a staff of 50, but Stech is wary of overexpansion even as he aims to enter new markets this year.
“The biggest risk to our business is growing too fast and losing our culture,” Stech said. That culture includes developing ongoing relationships with the homeowners.
“Closing managers have developed scrapbooks for the owners,” Stech said. “And the owners spread the word about Sundae.”
