Sellers can use the guaranteed floor price to buy and move into a new home, and the old home can be listed once they’ve moved out.
A real estate technology firm working with Canadian Imperial Bank of Commerce is making a pandemic-driven pitch:sell your home without having to let prospective buyers roam your corridors by getting a guaranteed price that lets you shop for and move into a new house.
“The pandemic has made an already stressful home buying and selling process even more volatile,” said Anshul Ruparell, chief executive and co-founder of Properly, which is launching the product in Toronto and will also be rolling it out in Ottawa.
The tech firm compares itself to a traditional real estate agent, with the usual five per cent commission fee, but machine learning is used to determine the price a home is likely to fetch on the open market and the firm guarantees that backup offer if it doesn’t sell within 90 days.
Instead of going the traditional route of buying a new home and then selling the old one — hoping to get the expected amount, and having prospective buyers sometimes making multiple visits — the seller can use the guaranteed floor price to buy and move into a new home, and the old home can be listed once they’ve moved out.
This allows them to “substantially reduce risk” when managing what is often the biggest transaction of their lives, Ruparell said.
In the early days of the coronavirus pandemic, residential real estate sales plummeted and prices fell, but both have begun to rebound. Toronto registered an increase in residential transactions of nearly 30 per cent in July compared to a year ago, due to pent-up demand, according to the Toronto Regional Real Estate Board. The average selling price, meanwhile, rose by almost 17 per cent.
Tracy Best, a senior vice-president at CIBC, said Canada’s fifth-largest bank is dipping a toe into a partnership with Properly by providing advice to the tech firm’s clients through referrals, similar to arrangements the bank has with agents and brokers in the real estate sector.
The startup is “another partner in that ecosystem,” she said, adding the bank is also keen to gain insights into new and innovative technology.
Best said she could not comment on the state of the mortgage market and how that might influence the relationship because the bank is in a “quiet period” before the release of third-quarter earnings on Aug. 27, but noted that “COVID might make (Properly’s pitch) more interesting for people.”
Ruparell, who worked in private equity at the Canada Pension Plan Investment Board and was involved in a number of startups before co-founding Properly in 2018, said the company’s pitch has attracted some clients specifically due to concerns about the COVID-19 pandemic. He said a couple that moved from a condominium in Toronto to a bigger home in Niagara, for example, didn’t want to let anyone into the condo because the wife was pregnant.
But he said the business model, which has drawn more than $15 million in venture capital and a dedicated pool of capital “many times larger” to fund home purchases, isn’t dependent on the pandemic.
Another enticement Properly offers sellers is the firm will cover any mortgage payments due on the old home once the seller assumes a mortgage on their new home. Ruparell says this money would come out of Properly’s five per cent commission, rather than the portion of the ultimate sale price of the home that goes to the seller.
“We are comfortable covering this cost, which … wouldn’t be done in a traditional transaction,” he said, noting the average Toronto home is selling within 17 days of listing.If a home doesn’t sell in 90 days, the seller and Properly split any proceeds above the startup’s guaranteed price on an eventual sale on the market, with the client getting 90 per cent of the difference, Ruparell said, adding the majority of clients sell on the open market.
His partners in the Toronto-based startup that also has operations in Calgary include Research In Motion veteran Craig Dunk and Sheldon McCormick, who helped Uber expand in Canada.