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> We track all the properties in our portfolio daily. Any on paper depreciation will result in us depositing funds into the 3rd party account. Whenever a proper

by ac29 7y ago

> We track all the properties in our portfolio daily. Any on paper depreciation will result in us depositing funds into the 3rd party account. Whenever a property price moves above the original purchase price on paper, we will withdraw any previously deposited fund. This on-going process along with the hedging instruments are what allows us to guarantee the downside protection. So how does it work if your system values a property above what it's actually able to sell for? It sounds like so long as you value the property at or above the initial purchase price, there is $0 set aside to pay out any loss of value claims. If the owner sells into a falling market, and needs to sell for less than the initial price how can you pay out? Why wouldnt they just take any price they can get if they have 100% downside protection? Moreso - if the overall housing market is falling, how does the business survive if all of your customers sell at a loss? I can't think why someone wouldn't sell if they have 100% downside protection and can then move into a cheaper home.

loftyai 7y ago
Great question! In our agreement, we set the initial sales price for the customer. However, for every 30 days it does not sell on the open market, they can lower the price by up to 5% until it sells. So, if it ultimately sells for a loss as a result, we would still provide the loss protection. In the event that a customer wants to buy us out after 3 years. The rate used to calculate change in on paper value is derived from the median home price rate of change from that neighborhood. The value comes from the MLS and it's a rate that neither we as a company nor our customer can artificially manipulate. So, we think it's the best representation of the market change. If the overall house market is falling, our hedging instruments will provide us enough revenue to offset our customer's losses. If it's not a market wide recession, the gains from some contracts should very easily offset some of the losses along with our own capital we use to guarantee the loss. These methods combined should allow us to guarantee the losses in all different market scenarios.

by ac29 7y ago

loftyai 7y ago

Great question! In our agreement, we set the initial sales price for the customer. However, for every 30 days it does not sell on the open market, they can lower the price by up to 5% until it sells. So, if it ultimately sells for a loss as a result, we would still provide the loss protection. In the event that a customer wants to buy us out after 3 years. The rate used to calculate change in on paper value is derived from the median home price rate of change from that neighborhood. The value comes from the MLS and it's a rate that neither we as a company nor our customer can artificially manipulate. So, we think it's the best representation of the market change. If the overall house market is falling, our hedging instruments will provide us enough revenue to offset our customer's losses. If it's not a market wide recession, the gains from some contracts should very easily offset some of the losses along with our own capital we use to guarantee the loss. These methods combined should allow us to guarantee the losses in all different market scenarios.