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Money Pit Or Act Of Genius? Brit Company Launches “The Amazon For House Sales”

By Jeff Vasishta September 26, 2016

Would you fuel an open fire by throwing stacks of cash on it? Didn’t think so. But that’s what skeptics feel London real estate start up, Nested is doing. Their ground breaking—or perhaps foolhardy—promise is to sell your house within 90 days or else lend you the money to buy another. They just raised $3.8 million and are launching to the public. And they’ve got some pretty big names backing them. Maybe they know something we don’t.

Related: Want to quit Your Job? Here’s How To Retire On Real Estate

Here are the players throwing their money away, we mean, investing in the plucky start up; Passion Capital’s Tim Bunting, Balderton’s Tom Hulme, Google Ventures’ Paul Forster, the founder of jobs website Indeed and the Samwer brothers, founders of venture builder Rocket Internet. That’s a serious list of investors. Kinda makes you go hmmm.

Here are the guys whose idea commanded the attention of such an impressive list.

Matt Robinson, CEO – He’s young, good looking and may just have the cojones to pull it off. He’s got good form. He was one of the co-founders of London direct debit startup GoCardless.

Phil Cowans, CTO  – An early executive with SongKick. He went to Cambridge and not to watch the football team. He got a PhD in Computer Science at the university while he was there.

James Turford, COO – originally trained as an architect at Aedas before moving to McKinsey & Co and then private equity firm PEP. He knows his I-beams from his I-phones.

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Those are the players—here’s how their scheme works. Nested lets a seller get immediate cash offers on his/her property as long as it’s priced marginally under market value. Nested will take over the house selling process from the seller and if they don’t move it within 90 days they will lend the seller the cash, interest free to buy a new house. Yes, it does sound a tad crazy. Nested never takes ownership of the house it is trying to sell. If it sells for above their initial valuation the seller gets 80 percent of any upside and Nested takes 20 percent.

An example of their model goes like this: A seller’s house is worth $100,000, Nested gives the seller a guaranteed offer of $95,000. The house eventually sells for $120,000 which is $20,000 above Nested’s valuation. Nested takes 20 percent of the $20,000 while the seller keeps the rest—$16,000. The seller ends up with $95,000 in cash after 90 days and a secondary windfall of $16,000 when it eventually closes.

There are, of course, many questions. What if the house doesn’t sell? How long will Nested keepmarketing it for? What is their lending criteria? Are their certain neighborhoods Nested won’ttouch? Will they their program work for investment properties? What happens if the market tanks?

The upside is clear. The process brings liquidity to the market and means sellers aren’t contingent on selling their home so they can buy another. There’s a chance it could revolutionize home sales the way Amazon changed online shopping.

[perfectpullquote align=”left” cite=”” link=”” color=”” class=”” size=””]”It’s based around chains, which are the bête noir of anyone trying to buy or sell a house,” says Nested’s Matt Robinson.[/perfectpullquote]

“If you want to go and buy a house and you already own a house, you can’t buy this one until you’ve sold that one. It means that a transaction goes from being six weeks to six to twelve months, possibly even longer. Worse still, one in three fall through because no one has certainty in the market. For us, it’s giving people the peace of mind and financial freedom to do what they want to do in life. It’s more powerful than you realize because in the market if you’re a cash buyer or a certain buyer, you can pay up to five percent less. Actually, we’re potentially allowing people to go and buy better houses.”

Sounds good in theory, almost too good. But like any revolutionary idea, if it back fires people will scoff in derision, if it works everyone will be kicking themselves wondering why they didn’t think of it first. We eagerly await their results.

Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

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