Trying to buy a house in a competitive market is perhaps one of the most stressful things an adult can go through.
Competing with a bunch of people all putting offers on a house that fly off the market in a matter of days is not fun. One startup that is trying to give home buyers a competitive edge by giving them a way to offer all cash on a home has just raised a boatload of money to help it keep growing.
Austin-based Homeward, which aims to help people buy homes faster, announced today it has raised $136 million in a Series B funding round led by Norwest Venture Partners at a valuation “just north of $800 million.” The company has also secured $235 million in debt.
Blackstone, Breyer Capital and existing backers Adams Street, Javelin and LiveOak Venture Partners also participated in the equity financing, which brings Homeward’s total equity raised since inception to $160 million.
Homeward’s model seems to be appealing to both home buyers (including first time ones) and agents alike, with lots of growth occurring since May 2020 when it raised $105 million in debt and equity. The company declined to reveal hard revenue figures but noted that its GMV (gross merchandise value) run rate is up over 600%+ year over year.
Also, as of March, Homeward says it had experienced a 5x increase in the volume of homes transacted and 9x year over growth in the number of new customers. Plus, It’s hired 161 employees since January alone, and currently has a headcount of 203, up from about 33 at this time last year.
CEO Tim Heyl founded the real estate startup in late 2018 on the premise that in most cases, sellers prefer to receive all cash offers because they are more likely to close. Loans can fall through, but cash is cash.
Heyl started the company after having worked in the industry for the previous decade, first as a broker then as the owner of a title company. During that time, he saw firsthand many of the problems in the industry. And one conundrum he frequently ran into was people not wanting to make an offer on a home without knowing for sure their current house would sell in a certain amount of time. This is a dilemma many are facing during the COVID-19 pandemic as demand outweighs supply in many major U.S. cities.
“The pandemic has greatly increased demand for our product,” Heyl told TechCrunch. “It’s a historic seller’s market with unprecedented demand from buyers and the lowest inventory levels in decades.”
The company plans to use its new capital to “double down” on its offering, scale up to meet "outsized demand” and open additional markets. Currently, Homeward operates in Texas, Colorado and Georgia.
“Right now, we have a waiting list in every market across the country, so this growth capital will enable us to meet that demand,” Heyl said. Its ultimate goal is to open its offering to agents nationwide.
Homeward also plans to double the size of its title and mortgage teams in the latter half of the year so it can offer its clients and partner agents “a single streamlined experience.” It’s also planning to integrate its consumer and internal software systems for approvals, offers and closing “so everyone can be on a single platform and we can eliminate confusion and waste,” Heyl added.
So, how does it work exactly? Homeward will make an all-cash offer on behalf of a customer wanting to buy a house. Meanwhile, that customer can hire an agent (from brokerages such as Redfin or Keller Williams) to list their home with less pressure to sell it in a certain amount of time or at a discounted price. Once Homeward buys a home, it will lease the property back to its customer until they sell their house, get a mortgage, and can buy the property back from Homeward. During the process, Homeward offers a predetermined guaranteed price for its customer’s home with the promise that if it’s unable to sell the house for at least that amount, it’ll buy the house from them.
The company charges the buyer a "standard convenience fee," which varies by state and service. The buyer can get a closing credit when they use the company's mortgage services.
Heyl believes Homeward’s “alternative iBuyer” model is a better deal for customers since it doesn’t purchase a customer’s old home for below market value. The company also works with agents, and not against them, he said. For example, its offerings are available to any agent, but the company “strategically” partners with top brokerages and teams, providing them with what it describes as “dedicated support, white-label branding, and digital marketing tools to help them stand out from the crowd and attract more clients.”
“Most alternatives to traditional real estate minimize or replace the agent,” Heyl said. “But we are agents ourselves, and we’ve built this for agents.”
Homeward is profitable on a per unit basis if you count transaction revenue minus costs to acquire and complete each transaction, according to Heyl. However, it is not yet profitable on a net income basis.
Jeff Crowe, managing partner at Norwest Venture Partners, will join Homeward’s board as part of the funding.
“Homeward is innovating at the intersection of real estate and fintech — that’s the next frontier,” he said. “Homeward’s cash offer addresses real problems for homebuyers in all market conditions, and the team has identified a winning strategy by partnering with agents and their clients.”
Jim Breyer of Breyer Capital describes Homeward as one of Austin's most innovative companies.
"We are inspired by the company's mission to build home finance solutions to overcome the limitations of the traditional mortgage and we are proud to support them as they continue to scale rapidly and efficiently," he said.