Why this real estate startup wants to buy your house before you’ve even sold it
Thursday, February 22, 2018/
Sydney based startup Sellable is hoping to change up the property sector by offering younger, time-poor homeowners “the Uber experience” when it comes to selling their homes.
Latching on to the increasing ‘economy of convenience’ and instant gratification, Sellable will instantly purchase houses from homeowners for an agreed upon minimum price, before renovating and marketing the property themselves and then selling it again, hopefully for a profit.
From that post-renovation profit, Sellable pockets 25%, and the homeowners receive 75%, with the company aiming to smooth the selling process and provide returns for owners they may not have achieved otherwise.
The company’s founder, Justus Hammer, explains to StartupSmart he came up with the idea after surveying multiple homeowners and finding the pain points of the property market, discovering the majority said selling a house was one of the most stressful experiences of their lives.
“If you’re downsizing or upsizing, you need to make the decision to sell first, or buy first. If you buy first, then you’re under more pressure to sell your existing home, and if you sell first, then you have to rent or move back in with your parents until you find a place and settle it,” Hammer says.
“And if anyone hates moving as much as me they’ll probably try not to do that.”
“We want to give sellers full certainty about how much cash they’re going to get, and our process is very transparent. And there’s convenience for them with the improvements and selling of the property, they don’t have to do 10 open houses or deal with real estate agents, we do that for them.”
After thinking about ways to solve the problem, Hammer and his team launched Sellable at the start of 2017, backed by an undisclosed amount of capital from Apex Capital, and a line of debt financing.
The company also has partnerships with real estate agents LJ Hooker and Ray White, which it uses as its “preferred” agents when selling its properties.
Since then the team have bought and sold close to 30 properties across the wider New South Wales area, and are now moving into parts of Queensland and the Perth CBD.
Hammer explains the company’s debt facility only allows Sellable to pay customers up to $1 million, locking the startup out of some of the higher-end suburbs. But he explains the facility will get larger with time, allowing them to look at “those six bedroom houses with harbour views”.
Out of those 30 or so properties, the average sale price – post renovation and marketing – has been $700,000, and Hammer says the spends have been anywhere from $350,000 to $1 million.
Not every property sells above the purchase price
However, things don’t always go to plan, and Hammer reveals two of the properties handled by the startup so far were sold for less than it bought them for.
“We don’t always sell the property for more than the guaranteed price, but that’s because we’re being quite aggressive with the guaranteed price we give to customers. We’re trying to be fair in terms of market price,” he says.
“On average, we’ve sold our houses six to seven percent higher than the independent valuation of the property before our improvements.”
Remarking on the ability of a service like Sellable to scale, Hammer believes it has the potential to significantly permeate the market.
“I’m not doing it to do ten properties a month,” he says.
He says there is a huge chunk of homeowners looking for convenience and speed when selling their houses, and “a lot of people are quite willing to pay for that”.
For now, the scope of Sellable’s market is just Australia, with other markets’ differing sizes and regulation meaning the startup is focusing locally for now.
“Australia’s real estate market is quite a local market in terms of legislation, but it’s a big enough market with over 550,000 houses sold last year. You can build a big business in it,” he says.
“There’s no one doing what we do in the Australian market. In the US there’s a company called OpenDoor with a billion dollar facility and $300 million in funding doing 3000 properties a month, even in smaller markets than ours.”
Looking broadly at the property tech market, which has seen many recent attempts at innovation from startups, Hammer says the industry is attractive for companies thanks to the lack of change over the past 30 years.
“Now the tech is at a point it can impact the trust you have as a consumer, and more and more are looking to try something new,” he says.
“As well as this, younger homeowners are looking for that convenient ‘Uber experience’, looking at what better experience there is out there to sell, rent, or manage properties.”