Selling your home is stressful, but the process of moving is down right painful. After my last move, I promised myself that I would never do it again. According to the National Association of Realtors, the median time that someone stays in a particular home is 13 years. I’m convinced that’s the amount of time needed for the memory of the move to fade. The whole process is littered with opportunity. They say you should focus on building businesses around low NPS services with high TAM, so this creates the holy grail of opportunities. First, you need to research and hire a mover. No matter how much research you do, you always feel like you are overpaying. You need to box up all of your stuff yourself, which is actually an art form (one that I am not good at). You need to cancel all of your services and then set them up in your new home. The timing never aligns, so you usually spend the first week or so without cable and internet. Changing your address sounds easy enough, but honestly I had no idea how to actually do it. You need to go to the DMV to update your license. When you get into your new home, you usually need to paint, so your stuff sits in boxes in the middle of the room - where you have no access to anything that you need. I’m not handy at all, so I needed to hire a handyman to hang the TVs, pictures, blinds and a host of other services. Since I was new to that town, I had no idea who to hire. You then realize that 90% of the stuff that you paid to move doesn’t fit correctly in your new home, so you need to purchase and assemble all new furniture. The stress is compounded by the fact that you often close on your sale and purchase on the same day, so there is no margin for error. If you have kids and pets, they add another level of chaos to the mix. With all of the problems in the world, I realize how foolish it sounds complaining about these issues, but when you are in the middle of it, it really feels impossibly challenging.
Fixing an Outdated Process
There are some really smart solutions emerging that address some of the bigger pain points mentioned above. The first is through a new breed of companies that offer “Move Before you Sell” services. While each company in this category has a slightly different flavor to their model, the basic concept is similar. Once you find your new home, the company that you are working with purchases it under their name. You then move into the new home before they help you list and sell your old home. Once your old home sells, you officially purchase the new home from the company that you partnered with. This process allows you to focus on each transaction separately, instead of managing both at the same time. It sounds confusing, but the video below from Knock explains it best:
There is a ton of VC money flooding into this space. Companies like Knock (raised over $600M in Debt and Equity), Flyhomes (raised $160M), Orchard (raised $355M), and others have raised huge sums in an effort to completely disrupt how homes are bought and sold. Additionally, traditional real estate companies are getting into the game with their own version of this model. William Raveis Real Estate, the nation's 9th largest broker, just announced Raveis Purchase. Although they still offer traditional real estate services, their agents are now armed with a “Buy Before you Sell” offering. Many people have tried to modernize the real estate industry for years, but this concept (along with iBuying) might actually be able to pull it off. I covered the iBuyer model in detail in a prior article.
These companies are aiming to remove the stress of buying and selling on the same day, and although that solves a massive issue with real estate transactions, it is only half the battle. The second way that companies are tackling these challenges is by leveraging tech to streamline the actual moving process.
Modernizing the Move
There is a clear leader in this space and that is Updater. Updater has raised nearly $200M to streamline the process of moving. Here is how it works. Updater has built a digital checklist with all of the services needed for your move: hiring a moving company, changing your address, switching your internet provider, and much more. They have even thought of details which can easily slip your mind like installing an alarm system in your new home. A customer creates a profile on their App and selects the services that they need. Updater is essentially a marketplace where you can compare the different options to choose from. The different options are broken down by price, feature set, and best value:
Once you select all of the services that you want, Updater handles all of the coordination on their end. They claim to own a significant portion of the market for apartment moves, and they are aggressively expanding into the single family residential market through partnerships with brokerages and agents. Below is one of the ways that they partner with brokerages:
After the Move
There are other companies that offer similar services. Handy, which was acquired by Angie's List (now Angi) offers a marketplace for services for your home. The services include cleaning, installation of TVs and other handyman tasks, outdoor projects, and home renovations. They have also partnered with companies like Wayfair, Walmart, IKEA; when you buy a piece of furniture from one these companies that needs to be assembled, a Handy partner can show up to your home and assemble it for you. While Handy can handle many of the services needed to help you move, the delineation between the 2 models is that Updater was designed solely around the challenges of moving. Although there is overlap between the 2 models, they can actually compliment each other. A home buyer can utilize Updater to coordinate their move, and then Handy to book their regular home cleanings, lawn maintenance, and other recurring services that are needed to maintain your home.
These companies are powered by The Gig-Economy. The Gig-Economy is something that we hear about all of the time now. From ridesharing, to food delivery, to freelance work, the world is starting to move in the direction of utilizing a network of independent workers which are hired for short term project based assignments. Companies like Updater and Handy are perfect examples of the Gig-Economy. At their core, they are software companies. The services may vary, but what they provide is a technology layer that connects consumers to the services that they need.
Is this the Future of the Industry?
The real estate industry is still very fragmented, it operates on outdated technology, and is primed for disruption. Modernization of the industry is still in its infancy stage, but the different models mentioned above start to paint a picture of what the future of the real estate industry may look like. Companies like Knock remove the stress of buying and selling at the same time. Companies like Updater streamline the entire moving process so that you actually enjoy moving into your new homes instead of dreading it. And companies like Handy can make sure that you procure the best service providers through a single platform to maintain your new home while you live there.
There are two common themes here, increasing liquidity in the market and decreasing friction/stress for the customer. Either of these make a compelling pitch, both together are game changers. If one company can do both and execute well then they’ll own the market.
As the process of buying/selling/moving becomes more convenient, the benefits will stretch well beyond convenience and cost savings for homeowners. Asset liquidity generally affects their prices and expected returns, the higher its market liquidity the higher its price. This has some interesting implications, the obvious benefit is the increased prices for homeowners, however if there’s mass adoption then falling returns will create downward pressure on the rental investment market (still creating a benefit for the renters). Making it easier to move will reduce that average 13-year stay mentioned earlier - if that reduces by 50% then industry fees would double over the same time period. A typical year averages about 6M homes sales annually in the US, that potentially begins to look more like 10-12m. The number of homes sold annually is the primary metric which is used to gauge the health of the market. This is because brokers, mortgage companies, title companies, furniture manufacturers, hardware stores, and many other businesses make money when people move. Increasing the number of transactions will increase their revenue generated accordingly.
What Comes Next
What’s next? Companies like Block and Outfit are starting to democratize home improvement by make it more accessible without the need for contractors or lengthy RFP processes. By creating more liquidity and reducing the transaction time on properties, you’ll open up a wealth creation opportunity to the masses by allowing them to flip real estate far quicker and easier than is currently possible.
Each week I plan to showcase a featured product or service. My criteria for selecting each week’s featured product is that I will only include solutions which meet one of the following criteria:
increase my own productivity
truly unique and innovative
This week’s solution is Falkbuilt.
Falkbuilt is a construction tech startup that utilizes prefab materials and technology to make interior buildouts faster, cleaner, and more efficient. The company's software allows everyone to "meet up" inside a Revit model to virtually experience the space and make real-time design changes — a fascinating way to make better design decisions. Falkbuilt is also very unique on the materials side. Unlike most prefab construction solutions, (which use modular construction, and can construct whole rooms offsite), Falkbuilt does component construction — which uses a standard stick-build technique to piece components together on-site — so it is similar to the typical construction method, while creating significant efficiencies. Falkbuilt technology is especially relevant amidst the uncertainty plaguing the future of CRE. Projects built with Falkbuilt components are “designed to deconstruct,” which allows for the repurposing of components as needed. (e.g. Retailers uncertain of COVID’s impact on brick-and-mortar have looked to Falkbuilt to construct spaces with the potential to be temporary or permanent, as necessary.)