Why Residential Real Estate is Ready for Disruption

August 28, 2018

Mike DelPrete recently wrote an article about why residential real estate, one of the largest asset classes in the world, has not experienced the same level of disruption, similar to what Uber did to the taxi industry and AirBnB to hospitality. Mike points out that in a high value-low volume transaction, like when you sell your home, the consumer’s tolerance for loss aversion exponentially increases. Loss aversion means the consumer would rather protect their downside risk than optimize for their upside gain. In other words, a homeowner would rather not lose money than make more money. What if the consumer did not have to choose between the two?

For the first time, Felix Homes makes loss aversion a thing of the past by giving sellers the ability to get the highest price for their house while ensuring their home will sell at the end of the day. We achieve this through 3 distinct value propositions:

  1. We guarantee we’ll sell the home in 90 days or less. That’s right, Felix will list the home on the market and if for whatever reason it does not sell in 90 days, we’ll offer to buy it ourselves at a predetermined, guaranteed price.

  2. We give the homeowner an upfront payment, allowing them to gain immediate liquidity on a portion of their home, which they can use for everyday expenses.

  3. We’ve done away with the traditional 6% commission and flipped the incentive structure on its head, so we only make money when we sell the home for the highest price.

What about the iBuyer model? Over the past 5 years, iBuyers have gained popularity since they have been able to satisfy the consumer’s need of certainty. However, as Mike pointed out, iBuyers will never represent more than 10% of all residential real estate transaction volume. At Felix, we believe this is due to the high ‘convenience’ fees charged by iBuyers. While the iBuyer model is great for folks that need instant liquidity, this model will not satisfy the needs of the vast majority of home sellers as their price sensitivity will outweigh their loss aversion. Of the 5.5M homes sold every year, iBuyers as a whole may represent 500K transaction, but that begs the question: Who will represent the remaining 5M home sales that take place each year?

At Felix, we consider our model to be Agency 2.0 as we provide homeowners with the full-service touch that consumers get with a traditional agent, while providing sellers with the certainty of an iBuyer.

Since our launch less than 2 months ago, we’ve received overwhelmingly positive reviews ranging from “A much needed breath of fresh air in real estate” to “Finally a real estate model that makes sense.” We know we’re on the right track and, given the stiff competition we face from traditional real estate agents, we are humbled by the amazing reception that we have received.

As we continue to scale, we spend a lot of time thinking about how we can simplify the transaction process for our clients. To us, this means removing inefficiencies across the transaction value chain by vertically integrating services such as title & settlement, mortgage and other closing processes. This would allow us to provide our customers with the most comprehensive package ensuring they enjoy a smooth consumer experience from start to finish.

About Felix Homes

Felix Homes is the only real estate platform that gives homeowners the certainty of a guaranteed sale, an upfront cash payment to help with everyday expenses and an incentive structure that gets them the highest price. Unlike traditional brokers, Felix does not charge a standard 6% commission. This incentivizes Felix to secure the highest price for our clients’ because we only get paid if the home sells above market value.

At Felix, we don’t want to be your agent, we want to be your home selling partner.

Buy and sell real estate with confidence.

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