Home Buyers Protection: Big Sky-based business could change the national state of the Real Estate Market

BY EMILY STIFLER

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."