How Acre's partnership benefits you as an Acre Resident
The Acre model is designed to align our resident’s interests with the company’s interests so they are on the same team - we call this "aligned incentives." This sounds simple enough. People generally take this to mean that when the home’s value increases, both parties benefit financially. That’s true and yet it doesn’t capture the way co-ownership sets up the right motivations for everyone. We believe the way we’ve designed the Acre model results in win-win outcomes that create more value than working alone. This is particularly true in buying and living in an Acre home, not just when you tally up the dollars at the end. Let’s walk through some real-world examples.
Getting the home for the right price
Acre and the resident both have better outcomes if we’re able to get the home for a good price. The residents have a lower monthly payment, which means more money in their pockets each month. Getting the home at the right price also means that we're capturing more of the upside potential of the home as it appreciates. This directly translates to more money available when the Resident decides to buy, cash out, or transfer.
For example, Samantha and James* find a beautiful home in their ideal neighborhood. It’s on the street they’ve been watching for over a year, super close to their church, and has many ofl the finishes they’re looking for, like a newly updated kitchen. The only thing it’s missing is a fence, but they are ready to put in an offer. It’s listed for $565k after a recent price reduction. Acre’s analysis shows this is still on the high side. A more appropriate price is $555k. Acre works with their agent to craft an offer: $542.5k all cash, a credit to install a fence, and a quick 3 week close. This price is over $20k lower than list based on Acre’s disciplined analysis.
When purchasing a home with a mortgage from a bank, they are unaffected when the home appreciates as the loan amount is fixed. With Acre, we are trying to best position the purchase of the home for appreciation, and that starts with winning it for the right price.
Getting the appraisal
The bank will often fund a loan only up to the home’s appraised amount. Working alone, the customer makes an offer, has it accepted, and then sends their due diligence money (a North Carolina specific, non-refundable deposit). If the home appraises for less than the purchase price, the customer is responsible for the cash to make up this “appraisal gap” or they lose their due diligence payment. While due diligence payments have come down from the market peak in 2022, they are still often $10,000 or more (depending on the value of the home). This is a classic example of misaligned incentives in traditional single family home purchases.
When agents realize that Acre covers the due diligence and closing costs and the customer only has to fund their 5% share of the home they often take a deep breath. Agents are relieved because their client won’t be at risk of losing due diligence or earnest money payments. Often homebuyers are already stretching financially to win the home they love and could lose their due diligence money on top of this – money they will need if they don’t have the offer accepted and need to make an offer on the next home. One of our agent partners described this as, “They only have $35,000 in the world and I’m tracking this in my own spreadsheet.”
In a traditional purchase, the bank works to meet their internal criteria and is not negatively affected when a customer’s purchase falls through. The Acre model is built to reduce or eliminate these transaction fees and financial uncertainty for everyone so that we are all in a better position to benefit from the purchase of the home.
When the laundry room floods
Acre Resident Hazel goes about her daily routine including doing laundry. Instead of draining, the water floods her laundry room with 3 inches of water. She’s upset and immediately calls Acre. No one knows what caused the issue yet, but cleaning up the water as soon as possible limits the damage so Hazel and Acre feel the same urgency.
- Acre sends a water remediation company over and they arrive within the hour. They vacuum up the water, dry the area, and leave heavy duty fans in the room for 3 days.
- Acre inspects the washer and sees it wasn’t hooked up properly and brings out a vendor to reconnect the line. Also, Acre has the damaged baseboards replaced.
- Acre gets the bills, sends them to the insurance company, and makes sure they get paid the right amount.
- Acre analyzes the root cause and finds their plumbing vendor hooked up the washer incorrectly, which makes it Acre’s responsibility. Acre adds an extra quality check for this previously trusted vendor and will take them off the approved list if there are more issues.
- By day three, Hazel is able to do laundry again. She’s relieved when Acre’s inspection shows there is no water damage under the house and pleased not to deal with the scheduling and paperwork.
Acre wants the home to be in great working order for the Resident today and for the long term so that it retains and increases its value.
With a mortgage, the bank doesn't care about damage to the laundry room as it doesn’t change the loan amount.
The toilet is clogged
This is a typical example of the type of “small maintenance issue” that a Resident is responsible for. Acre Resident Andrea has a clogged toilet while she’s hosting friends over the holidays. She calls Acre for advice. An Acre property expert helps troubleshoot over the phone. He offers to save her the hassle of calling around, if she's still having trouble. Acre has relationships with high quality vendors and is likely to get a faster response as a regular customer. Luckily, she’s able to solve it quickly and with no expense thanks to the coaching from the Acre property expert. Both Acre and the customer win.
Similar to the flooding in the previous example, the bank doesn’t care or have a stake in the day to day maintenance of the home.
Summary: here’s how these scenarios play out with each path
As a homeowner under the traditional model, you are responsible for everything. You’re both the CEO and plumber, the investor and the handyman. Acre is deep in the details of evaluating the quality of neighborhoods and homes, making strong and disciplined offers, doing maintenance well, and much more. Acre translates all this knowledge into a better experience for residents who know they’d rather not go it alone.
As a lender, banks facilitate a transaction, nothing more, nothing less. In contrast, Acre is for those who want more from their homeownership experience – a little support and coverage when things get sticky and a share of the upside when things are going well.
