A new type of agency is to launch in June, promising to sell a property for a guaranteed price within 90 days – or buy it itself.
One of Purplebricks’ earliest investors, Errol Damelin, has now invested in Nested, a cross between an online agency and a “we’ll buy your home fast” business.
Damelin is best known for having founded payday loans company Wonga.
Nested makes the usual promise to shake up the UK property market – but certainly its business model is very different.
Founded by Matt Robinson, it will give customers a valuation and guarantee to sell their home at or above the asking price within 90 days.
If it fails to do so, it guarantees it will buy the property itself and then sell it on.
If it sells at or above the asking price within three months, it will charge 2% commission plus 20% of the difference above.
Robinson told the Sunday Telegraph yesterday: “What we want to do is give those people certainty, a concrete promise they can sell their house.
“There’s a massive company to be built here, even if it’s only one in ten sales.”
The business model is similar to one in America, Opendoor, which guarantees a sale on the day picked by the vendor – anywhere between three and 60 days.
Nested has already raised £700,000 from investors including Damelin, Tom Hulme of Google Ventures, and Tim Bunting of Balderton Capital.
It is now looking to secure £5m in debt financing.
Robinson, who co-founded UK payments company GoCardless which he left last year, said Nested will appeal to sellers wanting a guaranteed sale – for example, if they are in a chain and want to be able to commit to the purchase of their next home.
Other examples could include parents who need to be certain of moving before the start of the school year, or before the arrival of a baby.
Unlike other online agents, Nested’s fee structure means the company has an incentive to get the best price.
However, the guaranteed price that Nested will attach to a property will be 5% below what it believes the property is worth.
For example, a home worth £500,000 would have a guaranteed sale price of £475,000.
The 5% discount is considerably less than those offered by existing quick-sell firms, which may offer only 80% of a home’s valuation.
Damelin, like fund manager Neil Woodford, backed Purplebricks from a very early stage and well before its float.
You can hear Matt Robinson pitching here – it starts a minute or so in; there is also interesting, if mixed, feedback from the prospective investors.
The whole thing lasts over 20 minutes but it does address issues familiar to agents, and also the hurdles faced by proptech companies which have big ideas but have yet to have a single customer – and lack estate agency experience.
Opendoor is here:
Comments (12)
Let me share two like for like scenarios.
1. webuyanycar.com
Set the price below 25% market
pay the admin fees of 2%
deduct value against, 1% for stubborn dirt on the car floor, 2% for the scratch on the bumper, 1% for not having water in the tank, 3% for unusual noise coming from heating system, 5% for error sign on dashboard, 2% for different color code as logbook says, 2% disposal fees and 9% for misc.
In total 50% deducted. Mr Dave, here is your check. Thank you for using our service.
2. PB.com
Set the price below 10% based on own Surveyers valuation which is already15% less than the benchmark valuation. So let’s set it for 25% less than the market price.
2% commission
deductions to be made, 1% for dump in brick wall, 1% for repainting, 2% utility, drainage checkups and fault repairing, 0.5% for cleaning, 0.5% for additional admin work surcharges, 5% standard quick sale fee, 5% reserved to deduct if any other issues appear. So in total, 41% deducted.
Congtarulations Sarah, your house is sold.
Thank your for using our service. We look forward to seeing you again.
Auction them! No uncertainty, guaranteed transparency and the market will find the true value.
Fancy the founder of Wonga setting up another business that takes advantage of the desperate and in need by taking £25,000 on a £500,000 house
I hope it fails spectacularly
I don’t like this. Something very shady and desperate about it – and we all know it will be the scared and impressionable vendors who get preyed on. Wonga is hardly a business with integrity, is it? The fewer companies of its kind in the UK, the better.
Who in their right mind would go for this. Its all well and good taking a chance when the market is poor but in a buoyant market like this you would have to be mad to try this rip off idea. As said above the 5% will end up being more like 10% lower than market value and then they’re sitting pretty ready to make it work whether it sells or not.
95% of market price. That assumes a pretty accurate valuation which as we know is never easy as ultimately buyers decide price but we all know how surveyors can disagree. My house has recently been valued with a range of 17% by some pretty decent agents.
Assuming the price is right, it’s great in a rising market when they may well sell for more than the valuation. How does this model work if, as some predict, prices start to fall? Is the value determined contemporaneously, or will it factor in market trends?
Guaranteeing to pay 95% of market value and then selling on? 95% of the average of three agents valuations or 95% of their valuation? I know which one it will be and I bet their market value will average at least 10% below giving them 15% to flip. This type of agent will appeal especially to those who are finding their houses difficult to sell which likely means a big price cut if the company wants to sell and get their money back quickly to pay for more properties they have guaranteed to buy. I see trouble ahead.
Really sorry “Mrs Owner” your home did not sell, terrible news to have had one viewing and one really low offer; but hey as we said we will buy it, I know it’s a shade lower than what you had hoped for but cash is cash and its much better than the really low offer we had.
**sale completes to Agency**
Right staff, those people who called, get on the phone, tell them the owner is now ready for viewings and back off the cruise, the property has been emptied for their benefit and we have complete control and go go go…..oh and get the price up another £10k from the original asking price…… it was too blaady cheap last time. Any questions ask Dave, he has been inside it when he offered on it a month ago! oh and the owner is Sarah in accounts on this one.
Obviously this is not the business model for the above company…… as nobody could (would) think up a scenario like above, too far fetched. There is no Dave and there is no Sarah, there was no cruise and no agents were harmed in the making of this novel.
I would think this business model simply prays on desperate and possibly naive people. I’m also sure that any estate agent could sell a property within 90 days if the property was 5% under market value, guarantee or not!
Smoke and mirrors. These type of allegedly innovative products have come and gone within the residential investment market. Now they seem to be finding their way into retail.
Not great for the client but great for the company. Set a value, offer to buy at 95% of value if the sale doesn’t go through. Take a pretty good fee of 2% for the sale. Have 20% of the uplift on the valuation you gave. If all else fails flip the property when bought ideally as a back to back so that you don’t need to fund it.
Lovely Jubbly, Rodders
We thought there is a regulator exists called TPOS who’s duty is to make sure everyone is playing fair!
PB apears to be a foul player and needs to be held accountable right now before it pollutes the sector.
Remrmber wonga.com? who looted millions from the vulnerable people by lending £50 for a week ? then got fined and then scaled back .. then so on?
In property industry, PB may be facing extinction that’s why they needed a backer like Damelin to stay active.
Do they think it will be successful? Well, the formula fails on itself. People invest in property to gain not to loose. You will manipulate on price which is already the bottom price and then ask for leaving 5% behind? We can only remember another dodgy business model called webuyanycar.com that matches with this.
At this stage, we strongly feel a need to have an united platform across the industry to stand against these vile providers. Please share your thoughts.
A great idea that will appeal to a significant sector of the market however, there is a huge potential conflict of interest in this set up.