Rent-to-own startup Divvy unveiled a new, streamlined service today that pre-approves would-be homeowners in as little as 15 minutes, and tells them how much they can afford to spend on a property.
The service is essentially an upgrade of Divvy’s core offering, which involves the company buying homes on behalf of would-be owners. Those would-be owners then rent the home back from Divvy, which allocates a percentage of that rent to building equity in the home until it can be purchased outright.
In the past it took San Francisco-based Divvy “upwards of a week” to process an application and get a customer pre-approved for this service, according to co-founder Adena Hefets.
But thanks to advances in its technology, Divvy can now do the same thing in minutes. Hefets told Inman that the company still asks people to submit various financial documents. However, Divvy’s software now sorts through that information, “clustering” and “parsing” transactions into different categories as it makes sense of the customer’s financial profile.
The result is that the software can in some cases come up with a target home price for the customer as soon as the 15-minute application process is complete. Hefets said that in more complicated situations — some of which may still require review by human staffers — the process could take longer, though every customer should still get a response from Divvy within 24 hours.
“What we’ve done is create a very dynamic application,” Hefets added.
Customers can go through the application process on either Divvy’s mobile or desktop websites, which will present them with a series of questions about monthly income, savings and their timelines for moving, among other things. Once customers complete the process, Divvy connects them to real estate agents who help them find a specific home.
In a statement, Divvy said that the current homebuying process “wasn’t designed for today’s realities of employment, complex finances and family structure.” As a result, the company argued, “millions” of people are kept out of the real estate market.
Divvy believes that speeding up and simplifying the application process helps address that problem — and should result in an influx of new customers.
“Our goal is to create a homebuying experience that creates access to and simplifies the path toward homeownership,” Brian Ma, Divvy co-founder and chief product officer, said in a statement. “By expediting their application process and getting them a home budget within 15 mins, Divvy allows them to quickly get to the part they love most — finding their dream home.”
Other aspects of Divvy’s service remain unchanged.
Once a customer settles on a property, Divvy asks them to contribute 2 percent of the purchase price, then buys the house. The customer then rents it back, but 25 percent of their monthly payment goes toward building equity in the house. After three years, the occupant should have accumulated 10 percent equity in the home and can use that as a down payment to buy it from Divvy.
The company doesn’t work with condos, foreclosures and some other properties that have unique circumstances, but would-be homeowners otherwise have significant freedom to choose whatever homes fall within their price ranges.
Divvy first debuted in 2016 and made headlines last year after it raised $30 million in a funding round led by high-profile venture capital firm Andreessen Horowitz. The company aims to upend the rent-to-own world, which in the past has had a reputation for taking advantage of people who couldn’t afford down payments.
In Divvy’s case, the company will buy homes back from occupants who change their minds and don’t ultimately want to go through with a purchase.
A Divvy spokesperson also told Inman the company receives 11,000 applications per month.
Divvy currently operates in the Cleveland, Atlanta and Memphis metro areas. Hefets said the company currently owns “several hundred homes” that are rented to occupants who later plan on purchasing the properties. The company does plan to expand, but in the short term is “squarely focused” on its existing markets as it works to build up a portfolio of “several thousand” homes, Hefets also said.
Ultimately, Divvy wants to help put 100,000 families in their first homes. According to Hefets, the company measures its success both by how many renters it signs up and how many of them buy homes back from Divvy.
“The way we’re approaching it is extremely dynamic and very flexible,” she added. “We’re really proud of what we’ve built.”