A new company called Faira is the latest in the Seattle area aiming to disrupt the home-buying process.
Launched by former Microsoft and eBay employees, Kirkland-based Faira doesn’t charge a commission. Traditionally, brokerages charge 6 percent of the sales price for the home. Instead, with Faira, the home buyer pays a 0.5 percent fee. The service is free to home sellers, according to Faira officials, though sellers do have to pay the real estate excise tax and other closing costs, including a commission if the buyer uses a broker.
Following in the footsteps of Zillow and Redfin, Faira joins a growing list of real estate startups that pose a threat to the established real estate industry.
This summer a company called Xome, which says people can buy a house entirely online, opened an office in Bellevue.
In Seattle, startups Quill Realty and Surefield are lowering the cost of selling houses.
Faira is able to greatly reduce the transaction fee by reducing risk and promoting transparency, says company CEO Kamal Jain. By the time a house is listed for sale, Faira has done much of the due diligence. The house has been inspected, for instance, and the title report pulled. In addition, Faira does appraisals and guarantees they’ll meet lending criteria.
Buyers, can see competing offers all of which are made online. Since all parties are privy to the same information, bluffing by sellers is eliminated.
By greatly reducing risk, buyers who use Faira don’t have to put down earnest money, which goes toward the down payment and closing costs. If problems with the property are found, buyers usually get this money back, but if the deal falls through for other reasons buyers could lose this money, which in Seattle typically is between 1 and 5 percent of the sale price.
“Earnest money is what makes the whole thing so complex because it introduces all kinds of risk,” said Jain.
Haresh Sangani, a serial entrepreneur, and Eduardo Oliveira, Faira’s chief technical officer, co-founded the company, which launched this summer and has nine employees. Faira has raised nearly $1.4 million from Pessoa and Partners Tech 10 Ltd., bringing totaling funding to just over $1.5 million.
As of now, Faira has facilitated the sale of six homes, and has one under-contract sale and one active listing.
Among the sellers are Carrie Nilsen, a dental hygienist, and her husband David Nilsen, an engineer. The parents of two young children had been trying unsuccessfully to sell a house in Lynnwood through an agent.
When the house wasn’t selling, the Nilsens reduced the price to the point that they would have been short the amount they owed. When the agent suggested a short sale, the couple put the house up for sale on Faira and got a full price offer just after listing it. They did pay the buyer’s agent’s commission plus the closing costs.
“We ended up making $621 on our house,” Carrie Nilsen said.
Source: Puget Sound Business Journal, Marc Stiles
Photo: Faira CEO Kamal Jain says that by removing risk from the house selling process, the Kirkland company can charge buyers a fee of only 0.5 percent. (FAIRA, DYLLAN HACKET)