There has never been a better time for innovation in the mortgage tech and proptech space with the high-octane U.S. housing market continuing to create new pressures for buyers and sellers. A Seattle-based company called Flyhomes, a startup that launched five years ago, just raised $150 million in Series C funding and has been valued at $800 million, according to Forbes.
Flyhomes may not have anticipated today’s market when the company first started, but the impact of the coronavirus pandemic on U.S. real estate has created unprecedented demand for their cash assistance and rental model. From Forbes:
The Seattle-based company is capitalizing on a pandemic-fueled home-buying frenzy that has made cash offers a critical strategy for winning bidding wars in overheated markets like San Francisco and Seattle, and increased its transaction volume by 240% since last May.
“We’re trying to build the world’s best home buying experience,” says Tushar Garg, CEO and cofounder of Flyhomes. “With this round of funding, it really sets us up to go deliver on that.”
Garg says that Flyhomes has now worked with 2,700 customers and initiated $2.6 billion worth of home buying and selling transactions, including $850 million of brokerage transactions and $200 million in mortgage transactions last year.
The Cash Offers program Flyhomes offers gives the company the go-ahead to purchase a home on behalf of a buyer. Once the buyer moves in, they pay rent to Flyhomes until they’re able to come up with the financing for the home. In the event the buyer isn’t able to do so, Flyover purchases the home through an addendum to the buyer’s offer.
Another valuable program the startup offers is its Buy Before You Sell Option, which enables sellers to use equity on their homes to buy a new one. Flyhomes will guarantee a price for the buyer’s home, and if it doesn’t sell within 90 days, the company will go ahead and purchase it.
And if the home sells above the guaranteed price, the buyer gets to keep the difference. Flyhomes takes half of the real estate commission, at about 2% or 3% of the purchase, according to Forbes.
The problems Flyhomes is working to address are apparent across the housing landscape. Consider homeowners who are selling their homes to buy larger homes, but are finding transaction timeline hard to manage. Even if a homeowner anticipates selling their home for a profit, the reality is that the price tags for the homes they want to move into are also going up.
Some of the workarounds for this are a bit clumsy and risky. As the Wall Street Journal recently reported, realtors have increasingly advised sellers to stipulate in the contract that the sale is contingent on finding a new home to buy. This strategy may work when dealing with a hyper-competitive and cooperative buyer, but it doesn’t change the fact that the seller is dealing with the same competition as they search for their own new home to buy. “In this market, with a contingency you’re not going to get that new house, someone else is going to sweep it out from under you,” Amir Noor, director of financial planning at New York-based United Financial Group, told the Wall Street Journal.
The solutions a company like Flyhomes can offer may give buyers and sellers a leg up in circumstances when they might otherwise not be able to compete or effectively navigate a competitive, uncertain situation.
Investors in Flyhomes include Norwest Venture Partners and Battery Ventures, Andreessen Horowitz, Canvas Partners, Fifth Wall and Zillow co-founder Spencer Rascoff.
For now, Flyhomes is only operating in West Coast cities including Seattle, Los Angeles, San Francisco, San Diego and Portland. Garg, a former Microsoft executive, says he hopes to go public in the future but is focused on expansion.
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