When the economy crashed in 2008,
Tim Flynn was already retired from
his position as CEO of the billiondollar
Sioux Falls, South Dakota
company, Lodgenet. A Montana native, Flynn and his wife Janet had just
moved full time to Big Sky. Flynn
started research for a book he planned
to title Joe Six Pack: What Happened
to his Life Savings?
“My wife basically told me I’d cleaned
out the cupboards too many times and
to get out of the kitchen,” he says,
laughing. “When I started writing,
nobody knew what caused the recession. A lot of the problems led me
back to the housing industry. [There],
I discovered a major disconnect in
valuation, especially in the mid and
upper price range… It was painful but
obvious what would fix it: If the seller
put economic skin into the game,
where they’d never had to before, it
would reduce buyers’ fear that they’d
lose money on investing in a house at
the current price.”
Flynn got through chapter 17 of the
book before he started working on a
new business model for the real estate
industry. In October, HomeBuyers
Price Protection started doing business
in Bozeman, Big Sky and Sioux Falls,
offering a service that was new to real
estate transactions. Flynn says that for
every buyer in the marketplace, there
are 20-30 competing sellers, even in
relatively healthy markets.
“Before HomeBuyers Price Protection was in the market, the only
way a seller could raise his hand in
the crowd and say ‘pick me’, was to
lower his price,” Flynn says. On top
of that, buyers have been afraid the
market would continue to drop. He
says HomeBuyers Price Protection
solves buyers’ fear and gives sellers
an advantage.
HomeBuyers Price Protection insures
buyers against a decline in the value
of a house or land by requiring the
seller to put five to 20 percent of the
purchase value of that house into a
federally insured escrow account. If
real estate values decrease over the
next 24 months, the buyer receives
a check out of the escrow for the loss
in value incurred. If the value of the
property increases, the seller’s money
is returned, with interest. Like a real
estate brokerage, Flynn’s company gets
a commission only when a house sells.
Flynn admits it’s a difficult proposition for sellers: “Anybody selling
their house these days has different
plans for that cash – pay off debt,
send kids to college, buy another
house.” But, he says, “You’ve got to
have something tangible that people
can connect with that will make a difference
to all parties.”
He believes that by getting real estate
transactions moving again, it will
create a floor in the market. He hopes
this service will take fear away from
buyers, so more of them will enter
the market. He says while real estate
agents where initially unsure, his
company is now affiliated with over
20 major realty companies in Bozeman
and Big Sky.
Big Sky realtor Ryan Kulesza says, “It
gives sellers an advantage over other
listings and helps address buyer delay
from people who are unsure if the
market is at the bottom… The market
is hopefully nearing the bottom. If
we’re not quite there, this gives buyers protection to get good properties
at good prices, and gives them insurance that if the market continues to
drop, they’ll get that money back. It’s a
clean, simple, easy system.”
Loan officer Caroline Roy says she’s
already heard a lot of buzz about
HomeBuyers Price Protection. Roy,
who is with Yellowstone Load in the
Gallatin Valley, says if a buyer comes
in and demands the protection, a seller
doesn’t have many options. “It’s a win-
win situation for a buyer. Sellers are
already in a depressed market, having
lost equity in the last 18-24 months.
It does give them more opportunity
to sell their house – and maybe at
a higher price. If sellers are feeling
confi dent that we’re at the bottom
[of the market], then they don’t have
anything to lose either.”
While Flynn hasn’t worked in real
estate, he has business experience.
In 1978, he started Lodgenet, a small
public company that provided communication services to hotels all around
the world. When he retired in 1999,
the company had 1500 employees.
He attributes Lodgenet’s success to
its strong management team that took
his concept and extended it to other
markets—exactly what he hopes to do
with Home Buyers Protection.
The business is based in Big Sky, but
is a South Dakota corporation. Home
Buyers Price Protection team is made
up of nine professionals, including
fi ve in Montana. “Having never done
this before, we’re learning the operational uniqueness of it. Everything is
theoretical until you go to the market
and start doing it.” Now, they’re working to advertise their new product
and “stir up the market.” By mid-year
he projects they will be operating in
several surrounding states.
If HomeBuyers Price Protection
is successful, Flynn thinks it will
completely change the market. The
product is unique, but is patterned off
of title insurance, which was created
in the 1890s due to a similar recession
and today is a requirement.
“I was retired, but it was pretty compelling to me,” he says. “It’s rare you
get an idea like this. I couldn’t let it go
to waste. I think it has the potential of
really resolving many of the problems
in the industry. I’ve got kids, and I care about what happens.”