[loftyai]

Any loss above 20% will be covered by the options purchased at the inception of the contract that go up in price if the real estate market suffers a larger drop (>20%).

So we personally guarantee up to a 20% drop with our own capital and use financial instruments to hedge any drop greater than 20% so as to make you whole regardless of the size of the drop.

[throwawayjava]

Thanks, that's much more clear. I'm still confused about how you make that guarantee on the first 20%. You keep it in reserve?

Edit: generally, I wonder if you have a huge perception problem even if you've designed a responsible insurance product due to the fact that people are (reasonably) suspicious of taking on enormous amounts of counter-party risk from a pre-seed start-up.

[loftyai]

Yep! That's exactly right. We keep that in reserve in a 3rd party account :)

Also, you have a great point on the perception problem, which is what we are trying to tackle right now. We have genuinely designed a product that is meant to be the most customer-friendly buyer model out there, but because we are a seed-stage company, many people are just concerned, because we lack a long standing reputation in the industry.