As reported in the Australian Financial Review (AFR) earlier in the year, Sellable Australia’s first ibuying and instant buying platform raised $5.5m in funding in 2017 to help it launch a new property sales model in Australia.
It is reported that LJ Hooker Corporation and the White family’s Songpan Investments both invested in Sellable taking 14 per cent and 15 per cent stakes respectively giving Sellable a market valuation of around $19 million.
Sellable, whose board includes Ray White director Dan White and LJ Hooker chief executive Janusz Hooker is a property startup that is looking to disrupt how real estate is sold in Australia. Its founder and CEO, Justus Hammer, was previously the co-founder of group buying site Spreets, which sold to Yahoo!7 for $40 million in 2011.
Sellable’s innovative proposition, allows property owners looking to sell their property to request a property purchase offer through Sellable’s website. Within 24 hours, Sellable will provide the property owner with an all cash offer to purchase their property.
If the owner accepts the offer, the property owner can choose the date they would like to settle on the property, then at settlement the owner receives the cash payment.
But it doesn’t stop there, Sellable than takes the property and performs some minor renovations before it places it back on the market and sells it again (using a RayWhite or LJHooker agent). After property renovation costs, Sellable will provide the original property owner with 75% of the profit from the sale of the property over and beyond what Sellable purchased the property from the original owner, keeping 25% for themselves.
Sellable’s value proposition is based around providing property owners with a guaranteed upfront price for the sale of their property (a floor or minimum price), delivering the owner convenience, speed, and certainty during the property sales process.
This iBuying and instant offer model is used extensively in the US where it has been gaining steady traction since 2014. Sellable is the first company to explore this model in Australia. The fact that Australia’s two largest real estate network groups have invested in the platform is interesting to say the least, as theoretically, this approach to selling a home and removing uncertainty would be appealing to some homeowners.
Whether the model takes off, only time will tell. However, I see one of the key risks with the model is that Sellable is acquiring properties hoping they can sell them for more at a later date. If their property valuation is incorrect and they purchase a property higher than market value and end up not being able to sell the property then what happens? Do they keep it or sell it at a discount?
When property markets are increasing the Sellable model makes sense, but when prices are reducing then is it realistic that Sellable can purchase, renovate and flip properties for a profit all within a few months.
If they are required to hold properties they can’t sell or sell them at a loss, then they’d soon burn through that $5.5m in funding.
Two other points are worth raising around their model. Firstly, the ibuying model is capital and labour intensive, meaning they are probably only offering the service in Sydney. The second, how do they get around Stamp Duty if they are buying and selling a property within months? Perhaps they are holding the property in the original owners name and then moving this into the new purchaser’s name once they have completed the renovations and sold the property? Not sure, but I assume the model wouldn’t work if they haven’t worked out how to get around this issue.
Anyhow, it’s a super interesting model which we look forward to monitoring and seeing how fast Sellable gain traction across Australia.
