Canadian startup Properly offers new way of buying and selling homes in Calgary
But uncertain market conditions in Calgary have some experts worried Properly's arrival is opportunistic
A Canadian tech startup is hoping a new way of buying and selling houses shaking up the U.S. real estate industry will catch on north of the border.
"We are in an era when transparency and convenience and choice is being offered to homeowners," says Properly CEO Anshul Ruparell. "And they have an opportunity to go through the transaction in a way that hasn't really been done before."
Properly is what's known as an institutional buyer or "iBuyer."
Also known as direct buyers, iBuyers use algorithms to determine the market value of a home. They can make an initial offer to buy the property directly from the homeowner within 48 hours, and the whole process can be completed in a week, with the seller setting the closing date.
Though based in Toronto, Properly is currently operating only in Calgary.
The company's data driven model is focused on buying only detached or semi-detached homes in the city, built after 1960 and worth $250,000 to $550,000.
Properly launched last summer with $8.5 million from investors and access to credit to buy more homes. It claims to be the first to bring this model to Canada and has big plans for 2019.
Seen as disruptive players in American real estate, iBuyers first emerged in 2015. U.S companies, such as Opendoor, Offerpad and Knock, have raised hundreds of millions of dollars in investment and are operating in over a dozen markets.
How it works and what it costs
Selling a home is one of the most important financial transactions in people's lives, and one that can carry a commensurate amount of anxiety.
Properly's sales pitch is that its process can save time and reduce stress.
Marie Poulin was eager to offload the stress of selling her family home.
She discovered Properly through a Facebook ad. After 19 years living with her husband and four children on a tidy suburban street in southeast Calgary, it was time to downsize.
After she filled out an online form, Properly offered $368,000 for the family's spacious five-bedroom home and stuck with that price after its home inspection. The family rejected that offer but settled for $375,000.
Poulin says she was happy to be relieved of some work. "I don't have to stage. I don't have to clean before every open house."
Instead of paying an agent a commission, Poulin paid Properly a service fee.
The service fee ranges between six and 11 per cent of the offer price. It's based on the condition of the house being purchased and repairs it needs to be sale ready.
Poulin's service fee was 6.6 per cent, close to what Properly says is its average seven per cent rate.
So, her cost was just under $25,000, and while the combined commissions for both listing and selling agents in Calgary could have been just over $13 000 at typical local rates, Poulin was also factoring in closing costs and more.
"Going with the traditional Realtor route, we had no way of knowing how long our house would be on the market," said Poulin, who was worried about the possibility of owning two and carrying two mortgages.
Why Calgary, why now
While Poulin contacted Properly six weeks ago and is free of her old home, a neighbour who listed a similar house with a traditional agent in November has yet to sell.
It's not the only home lingering in the listings. Calgary's real estate market has suffered as the Alberta economy has struggled both in near lockstep with oil industry troubles and job losses.
The Calgary Real Estate Board reports that detached home sales in the city for January 2019 were down 16 per cent from January 2018, and prices were off by four per cent in the same period.
Calgary is a market that Properly's Ruparell knows well because he's from the city.
"The Calgary market today is one in which very few homes that are listed sell. Only about one in four after two months have sold," he says. "So, it's a market in which homeowners are facing more uncertainty than they ever have."
The uncertain market conditions in Calgary have some experts worried Properly's arrival is opportunistic.
"Making the wrong decisions on a real estate transaction can haunt you for 10-15 years," says Allan Dwyer, an assistant professor in the Bissett School of Business at Mount Royal University.
Dwyer believes that Properly's ability to move quickly will be attractive to some clients, but some of them may be in a vulnerable state.
"It reminded me a little of how the payday loan business kind of works and is very profitable around the margins of the economy," he says. "If someone was in a hurry or perhaps desperate, they could want to sell their house quickly but it's not always the best frame of mind to sell your home."
Does data mean a fair deal?
Ruparell says his company is committed to giving customers a fair price through technology.
"Our data model looks at hundreds of data points and factors things like proximity to local schools and hospitals to the level of traffic on the streets, which allows us to ensure that we give the homeowner the most accurate offer possible."
Unlike a house flipper, the company's primary profit is not selling the house for a premium, but in service fees. On homes in good shape Properly says it will refund back 75 per cent of the difference if it sells a property for more than it paid.
Ruparell won't say how many transactions the company has completed since launching in June. However, in January, Properly purchased seven homes, representing about 1.5 per cent of the city's total deals on detached houses.
For 2019, the company plans to buy about $50 million worth of homes in Calgary, which could add up to more than 100 houses.
After that the idea is to take their real estate revolution national. Ruparell says the concept can work "not only in Calgary, but in every other city across Canada."