Freemodel Presentation

All right, Joe, can you let me know if you can see my screen? I can, yes. Perfect. Okay, so I'm Heather Brunelli with FreeModel, and if you've never heard of FreeModel— but Joe might have already shared this with the team in advance— we are a full-service concierge provider that plans, manages, and pays for your clients' remodels so you can sell homes for more. Now, if you've never worked with a concierge program before, this is truly a win-win for both you as the agent and the homeowner. Now, from your perspective as the agent, I know several of you are doing project management for your homeowners, coordinating painters and plumbers and stagers. We really want to take that off of your plate and give you guys more time back in your day to be productive, meaning winning more listings and selling the current ones that you do have right now. And then also that last bullet point I like to point out is, even if you don't leverage FreeModel but you're putting it in your listing presentation as just a tool that you can offer your homeowners, I believe that you can win more listings. Now, on the flip side, why this is a win for the homeowner, you know, we don't want them doing any project management. Obviously, none of us can control that process and how long it takes them to coordinate subcontractors. They're not going to have to pay cash upfront out of pocket. And then especially with the market that we've shifted into, you guys are probably already seeing that the homes that are at least cosmetically pleasing are the ones that are selling faster. So why free model? We've got local project directors throughout California. So I know there might be some NorCal and SoCal agents on the phone. I'll dive a little bit deeper into that. I have a couple maps that I'll show you. But as of today, we've got, I think, 52 boots-on-the-ground project directors, plan to be at about 60 by the end of the year. And then we also have a deep bench of local subcontractors. So I think the number is actually 485 this morning, but we have 485 subcontractors. And also, we have a team that is solely dedicated to onboarding and vetting out all of our subcontractors. So making sure they're licensed, bonded, and insured, checking out their rating on BBB. And also, I like to throw a little side note out here because I always get asked this question, especially seasoned Asians may have their subcontractors that they've worked with throughout the years. We're happy to onboard them into FreeModel and leverage them on your projects. And then lastly, we have deep design skills within FreeModel. So all of our project director directors are renovation trade experts themselves, but we also have an interior design team that we can tap into as needed. So we have super friendly business terms for your homeowners. We don't have a cap on what we're willing to spend. So we've done everything from $5,000 cosmetic renovations to a half a million dollar deep renovations. We're typically trying to target a 2.5x return on the homeowner's investment. And then essentially we're deferring our payment up to 400 days that is then paid out of escrow when the home sells. So to clarify that 400 days, or to dive in, when we're done with the project and we hand it back to you as the agent, you have 1 year to get the home into contract and an additional 35 days to close, hence the 400 days. And then lastly, we're not a lender, so there's not going to be any interest fees or any hidden charges. Essentially, the homeowner will get a fixed bid. Let's say it's $50,000, and that's exactly what they will be paying us back for— $50,000, not $50,000 plus 10% interest, etc. Now, it's super easy to qualify with us, that free model. So the homeowner only has to have one criteria, and that is we'll look at the balance of their current mortgage. plus whatever the project cost is with us, that cannot exceed 70% of the after-renovation value. So we're not running any background checks or income checks. That's our one underwriting criteria. And then from a contractual perspective, on all projects, Free Model will do a home improvement contract directly with the homeowner, so leaving the brokerage and you as the agent off of that contract. And we'll also do a seller's escrow demand for the same dollar value that the home improvement contract is for. And then for any projects that are greater than $50,000, we do do a deed of trust as a security instrument. And then lastly, we do provide a 1-year warranty on our work that is also passed over to the new buyer for extra protection. So we offer a broad range of services. can't really list everything that we do. We'll cover moving expenses, dehoarding, decluttering, pretty much anything in the interior and the exterior of the home— paint, carpet, landscape, cleaning. Staging is a big one as well. I know some agents will front the money for staging. We could actually include that in our scope of work and cover that for you guys. The things that we typically are looking to avoid are Anything that could take an extensive amount of time to get through the permitting process, like a new addition or building a ground-up ADU, as an example. Now, on the right side of the screen are kind of the deal scenarios that we will handle. A majority of our business, I think about 70%, is in presales, meaning you guys as agents come to us before you list the property. But we will also work on post-sale or owner-occupied, as well as rentals. So let's say you sell a fixer to a homeowner and they don't know exactly who to go to, we can be that person for them or that company for them to do the design and the renovation. Now the only difference between those bottom 2 bullet points is we're not fronting the money. Essentially, we would just still do that home improvement contract but come up with invoicing terms, which typically ends up being about every 2 weeks. We'll invoice them while we're working on the project. So this diagram just shows kind of how it works with FreeModel. So you, if you have a project that you're interested in leveraging FreeModel, you can reach out to us. I'll show you how to do that in a couple slides here, and essentially we'll do a project intake call with you. So we're asking you, you know, what's the location of the home? What's the high-level scope of work? What's the current value? What do you think it will be when it's, you know, remodeled? And then essentially we are introducing you to that local project director. And that will be your point of contact moving through— moving forward throughout the entirety of the process. And that project director will coordinate a walkthrough of the property with you. You guys will be chatting about the scope. They'll be taking some photos. And then within 1 business day— if it's a larger project, it could take a couple business days, but within 1 business day, we'll deliver that initial estimate. And that is what you as the agent can then go and present to your homeowner so they can decide if they want to move forward with us. Or not. And if they do, because they see their return on investment, then we'll pull all of our subcontractors on site to provide us final fixed bids. As soon as we have all those bids back, we'll put together that home improvement contract that I mentioned to you. We'll send that over to the homeowner via DocuSign, CCing you as the agent again, so you're in the loop. And as soon as they execute our DocuSign, we're off to the races ordering materials, coordinating our subcontractors. Now, throughout the duration of the project, our project director will communicate with both you and the homeowner on the status and any, you know, completion items that are happening throughout the week. So you're not having to run back and forth to check on progress of the project. And then obviously, we want to deliver a home that you guys are proud to list and sell. And once you sell it, then we are paid back out of escrow. So for those of you that are in NorCal, here's kind of our breakdown of the map that we have. I think we actually just moved into Sacramento as of, I think, last week, but all of these stars represent where at least one of our local project directors is located, and we just moved out to Tahoe as well. Now, for those of you that are in SoCal with me, I'm based in Laguna Beach, but here's our Southern California map. So we've got you covered from Santa Barbara down to San Diego. all the way out in Palm Springs as well. And there's a couple optional services that we offer. We have a partnership with a company called Inspectify. I know this is more common in NorCal, where they will do pre- and post-inspections. So again, it's an inspection company. They'll come out just like a normal inspection company, find all the deficiencies. We can add remedying those deficiencies to our scope of work. And then once we're done with the project, the exact same inspector comes back out and essentially has a checklist saying, yep, free model has resolved all of these items that I found on my initial walkthrough. And that inspection fee, should the homeowner move forward with us, can get deferred to the close of escrow as well, just like everything else. And then another, another optional service that we have is we call these design engagements. Typically, these are for larger-scale renovations, or like I said, maybe you sold a fixer to a homeowner and they can't envision what they want to have done, or they don't even know all the scope of work. So for a fee, again, that could get deferred to the close of escrow, essentially the purpose of these design engagements is to really kind of hone in on the scope of work, hone in on the finished goods and materials. So we would do a design board like this for every room that we're going to be remodeling for the homeowner. As well as do any architectural drawings that we would need in order to pull permits. And then the last part of that design engagement is to provide them that fixed bid final quote. So again, they can decide if they want to move forward with us or not. Essentially, they have a shovel-ready project. So I've got a couple case studies. I tried grabbing different price points, NorCal and SoCal, so you guys can see. We have many more on our website, but these are just a few that we have. This is one that we did in Studio City. It was a larger renovation, spent $217,000, earned the homeowner $682,000 extra in their pocket. And as you can see, you know, everything is just light and bright. Redid the entire bathroom from floor to ceiling, gave that kitchen definitely a nice refresh— new flooring, new paint, backsplash. As well, new countertops. And the exterior, we did do a lot of work. It's hard to tell from this one photo, but refaced the decking, repainted the exterior, did a lot of landscaping, and then there was staging done throughout on this one. So this is a SoCal example. This is one that we did in NorCal, spent $95,000, earned the homeowner almost a couple dollars shy of $155,000. Again, making everything super light and bright, new flooring, paint throughout, obviously a kitchen renovation. You can see some staging done as well, and then a bathroom remodel too. I think I've got one more. This is more of the cosmetic example, more of a refresh versus a remodel. So this one we spent $42,000, earned the homeowner an extra $108,000, only took us a couple weeks. So this is that flooring, painting, staging throughout, did some lighting and some hardware as well. And then obviously in that bedroom, new flooring, new paint, and staging too. So we have definitely have some marketing support for you should you need it. We have an agent resource center, there'll be a hyperlink here that I'll send out to Joe. But you can grab the QR code as well. On our resource center, we've got custom personalized flyers that you can have us create with your logo and your photo. There's also diagrams of like how it works, some talking points with your homeowners. And then lastly, when we finish our projects with you, we love doing case studies that we'll post on our website, but happy to share with you that you can post on your website as well. And then lastly, the best way to get ahold of us. freemodel.com. There's several bright red buttons that you cannot miss that says let's talk, and that's the best way to get a hold of us. And I will pause because I know I've been chatting here for a while and see if there are any questions. So feel free to either chat in the box or take yourself off mute, and happy to answer any questions.

Hi Heather, I got a couple of questions. I saw your map for Southern California. Do you do the Inland Empire, like Menifee, Murrieta? Like, I didn't see any stars in that area.

We, we do. Yeah, it's kind of hard to tell because it's just one person and they can cover a certain distance outside of that little star, but yes, we can.

Okay. And, um, what's, what's the, what's the, uh, do you have any limitations about the type of homes you work on? Like, for example, if, if it's a mobile home, uh, on land or in a park or whatever, is there limitations to that?

Um, specifically we're doing residential, but I actually just got a call for, um, a mobile home that we're going to be working on in like Santa Barbara area. So we can do mobile homes.

And is that in a park or is that on its own land?

I have no idea, to be honest with you. I'm not sure. I don't know what restrictions there would be Um, are there concerns about that, or just the rules and regulations of the park? Is that what you're thinking?

Right, just, yeah, I guess I wanted to know what, you know, what scenario situation it would be set up like I would know, like, okay, forget it, like this is not a free model type of project.

Yeah, I, I don't know about the rules and the regulations of the mobile home parks, um, but You know, we will obviously work with them. We work with HOA as well. So to me, they would just be the same.

No, more so the Escondido home. And I'm sure you covered this, but, um, what's the fee? I probably missed it. What is Free Models fee, or what do they take from that? So if, if the home now sells for $100,000 more because of the renovation, what part of that is, is sort of the, um, Free Models take?

Yeah, so our fee is Our fee— I mean, you're quoting— our margin is included in our estimate that we provide to you. So there isn't like an extra line item to the homeowner. It's $50,000. That's what they'll be paying us back for is $50,000. Now, behind the scenes, so you know, basically for every $100, Free Model will take $20 back. So that goes to pay our debt, all of our insurance, because we are a general contractor and have our own, you know, insurance that's associated with that. That also goes to pay our local project directors because we are set up just like a brokerage to agent is, where we're— we provide all the backend support for our project directors.

Okay. So your, your quote includes the, the, all of the material, project management, your fee, everything is included in that. So if it sells for $100,000 more, that's just pure profit for the homeowner.

Exactly.

All right.

Appreciate your time. Thank you.

Thank you. I have a question. I don't know if you answered it. I may have missed it. What if for any reason the seller decides not to sell because the house looks so beautiful? Yes, we did not cover that question. But everybody asks. So far, that has not happened where a homeowner has decided to stay and not sell. And so to kind of dig into that a little bit, so you know, our contract that we do with the homeowner says, homeowner, you're listing your property. Now, if you take your property off of the market, we will be sending you an invoice immediately, and we, FreeModel, are then owed within 10 business days. Thank you, Heather. You're so welcome. And we haven't had anybody go past our Because we recently extended our terms. It used to be, I think, 135 days, because the market has shifted. We now have that 400 days that I mentioned, so we haven't had anybody go past that 400 days either. Let's see. Looks like Debbie was asking if we are in San Jose. We are in San Jose. I think our map is like a little bit behind, because we just added, I think, 8 new project directors in October, so we've got you covered. Actually, it's another Debbie that is in San Jose. I was looking at the map really quick, and then I think Claudia, I already answered your question, but let me know if I did not.

I have a question about ARV, how you guys calculate, because market is declining, you know, at least the That's what it looks like. So how do you know it's going to be 70% after?

So part of our intake process is we will ask you as the agent what you feel the after renovation value is. But also when we're in our process of doing our initial estimate behind the scenes, we do have an underwriter confirming your ARV number that you've given us. Okay, great question.

Heather, if I may ask one more question, what is the difference between yourself and Curbio? Has been coming up recently as well, like with your competitors. How are you, you know, what kind of differentiates you?

Yeah, so the differentiator between us and Curbio— Curbio comes out with a, I forgot what it's called, like a Matador or something where they basically scan your, scan the house and that like once, and then they run the project remotely. So the biggest difference between us is that we have local project directors that you and your homeowners are going to be meeting with person to person. And I believe that that adds more value than somebody trying to run a construction company from a remote setting. I don't know how you do that, but they do. So that's probably the biggest difference— differentiator.

And how do you mitigate— sorry, go ahead.

I was gonna say one other thing also. Some of the other concierge programs kind of have their standard materials that they use. So like they're always using these 5 different cabinets. Let's say we will design again. We have our project directors are also designers. So we design based on where the home is located, what the home looks like, what the comps are, right? So we're really giving a custom design to the home as well. So that's another nugget, I would say.

Okay. And how do you ensure that, you know, when you quote a price, it doesn't go above and beyond that? And I know sometimes it's hard with, you know, construction or renovation because, you know, it's like an onion. You know, as you peel the layers, you get into things that you weren't expecting. So Is there a cap or is it like, okay, we're going to quote you $50,000, but if we're removing these cabinets and then we discover mold or rot or whatever, then it's obviously going to go up from there depending on what the issue is?

Yeah. I mean, so obviously our bids are based on what we can see with our eyes. None of us, if you've ever flipped a home, you can't control if you take down a wall and you find something that you couldn't see. So just like any other contractor, we will do a change order. As needed.

Thank you.

You're welcome. Any other questions for me?

So in our market, we have Compass, and a lot of people like Compass Concierge. What is the difference between you?

Yeah. So I actually had a slide in here that I pulled out, but I will. I'll talk through the slide. So basically, Compass. It's not a concierge. They just use that word for fluff. Basically what happens is the homeowner is getting a loan and they keep changing it. So I don't know what it's capped at. The last I heard it was $45,000. It might be $60,000 now. But when I last checked, maybe about a month ago, is essentially the homeowner is going to a third party, they get a loan. Super hard to qualify. They're running your credit, they're running your background. Etc. And then they can only get $15,000 per million. So if your home is worth more than $3 million, you, you're done. That's it. You're capped out at $45,000. And also, there's no local project manager. So the project management ends up going on either the agent or the homeowner is doing the project management.

Okay, thank you.

You're welcome. And I think the other kind of difference between some of us and the other concierge programs that are out there is they also offer competing products like cash offers, trade-in offers. We don't do that. We stay in our lane as the pre-sales renovation service provider. So with that being said, Heather, do you have any direct competition with other companies that are doing exactly what you guys are doing? I mean, we all have competitors, right? That's for sure. I mean, they already mentioned Curbio is, is one of the competitors that we have out there. Yeah, we all have competition. I know we're kicking a few folks out. Because from what I have seen is they are going away from the presales renovation and kind of focusing on their other business lines down here in SoCal. There's a few others, but they seem to be, like I said, stepping away from the presales renovation and focusing on other— the other like 4 business lines that they offer. Our main focus is that's all that we do is renovations.

Okay.

Perfect.

Thank you, Heather.

You're welcome. I have seen a shift as well as presales used to be kind of the big thing. But I've also been hearing from brokerage leaders as well is, you know, with the higher interest rates, your homeowners might not be able to afford what they used to be able to, that price point. And so I'm seeing agents getting their homeowners to buy homes that need a little bit of love. what we would call a post-sale, and they're bringing us in as the design and the construction company to do the remodels on the homes before the homeowner moves into this new home that they just bought. So I'm seeing that lately as well. Oh, and you guys also do post-sales renovations? Post-sales, yep. We'll do rentals as well. Like if somebody owns a multifamily unit and they need a rental remodeled, we've done that.

Thank you.

You're welcome. Fantastic. Any other last-minute questions, or I think we'll, we'll give you time back in your day.

Good morning, Casey Brummer. Quick question, do you guys do any ADUs? Do you add, uh, would you build an ADU into the back of a project or anything like that?

Um, unfortunately, Casey, not right now. We're not looking to do any new construction. We will remodel an existing ADU, but we're not doing any new Thank you. You're welcome.

Heather, if you don't mind, is it okay if Laura kind of gives her 2 cents on what she does for you guys?

Yeah. Is she on? I was trying to skim for her.

I see her.

Laura?

I think it's— Can you guys hear me? Hey, Lara.

Hey, I am here. How's it going? Yeah. So I'm actually not only an agent with Pelago, I'm also a project director for remodel. So yeah, I, being an agent has been super helpful on, you know, being able to speak the language with with our clients who are agents. I'm also an interior designer by trade, so a free model has been a really good fit for me. And so I've been working with them this summer. I've just started my second project with them. There's a— I see a huge value in the service that we provide. It's like I've told agents, and like Heather mentioned, it's It's really like we're a service we can provide to agents. So we can be under your umbrella of services you can provide to your clients.

Wow.

I just had a client in— an agent in Manhattan Beach leverage us to get the listing. So he basically beat his competition by having this service that he could offer to the client, and the client needed the service. It's a trust sale. The client lives in a different state. They had zero desire or capability of managing a, you know, a quick cleanup of a property that needed it before sale. So we're going to do it in like 2 weeks. It's gonna be really fast and they should get a pretty good return on their investment for it. I'm happy to answer questions anybody has, or if Heather, if you want me to elaborate on anything. Let me know. But I've been— I find the company, you know, I've never worked with a startup before, although Polygon, I guess, is also a startup in some sense, right? But they're a really great company. They make our jobs really, really easy. And contractors love working with us because we pay them on time, and that free model makes it really easy for us to pay our contractors. So, so far the process has been great. Oh yeah, just flipped a project. Let me see, I'll talk about the one in Harbor City. It was in a hoarding condition as a condo. We went in and flipped it. Mostly just trash removal, paint, carpet, and a deep clean for less than $50 grand. And there was some plumbing issues that we took care of as well, and an HVAC issue. Less than $50 grand. We did it in 3 weeks and it's already in escrow. And not, I mean, it was on the market less than 2 weeks. So yeah, if we, if we hadn't come in to help, and then the owner, by the way, had like no cash to help himself, like get the property into like a market-ready condition. So, um, you know, I, I go to a lot of sidewalks, some properties in really bad condition. A lot of them are trusts that just haven't been updated since the '60s and '70s. And the heirs are just looking for some help. I think Pellegrino agents have seen all of like everything around the board. Some, sometimes I go into like higher-end properties that just need staging. I just did, I just did a bid for staging in a Manhattan Beach property this weekend. Um, so it's kind of, there's like, like Heather said, there's not a lot that they won't consider except for new construction. So, um, and again, Heather, I'm happy to elaborate on other areas if you want me to.

And Laura's in our South Bay area. That's what she covers. I know.

Yeah, I live in Torrance, so I handle a lot of projects like Long Beach, coastal. I just started, kicked off a project today in like Western Hawthorne. That's like west of the 405, not like every area of Hawthorne. I look at projects in Downey, so we have kind of quite a big range. So, you know, those stars that you saw on the map, it's— that's like the center point, but there's quite a bit of overlap with the project directors. So you've got— there's quite a bit of coverage with everyone. Yeah.

Well, thank you very much. I appreciate it, Heather. Thank you for speaking with us today.

I appreciate that.

Anybody have any last questions before we let Heather go?

Okay. Okay, I'll, I'll go ahead and stop the recording now.