Flyhomes, an iBuyer that will make cash offers on behalf of homebuyers, has nabbed an additional $21 million in equity financing, plus $120 million in debt for purchasing and reselling homes.
The real estate startup also announced Thursday the debut of a “Trade Up” service under which the company will buy a new home on a customer’s behalf, while also guaranteeing the sale of their old one.
“Because we do everything from touring homes to funding their purchase, we have greatly simplified the process for buyers,” Flyhomes CEO Tushar Garg said in a statement.
The Trade Up service adds to a dizzying array of new financing options and services that venture capital-funded startups are churning out and blending together. Many of these fall under the category of iBuyers, which use technology to rapidly buy and resell homes.
“What you’re seeing is this bleeding together of different financing categories,” said Clelia Peters, president of Warburg Realty, a New York City-based brokerage. “If models like these were widely adopted, they would meaningfully disrupt the sales agent business model.”
Flyhomes has focused mostly on serving homebuyers as a real estate brokerage with in-house title and mortgage services. It operates primarily in Seattle and the San Francisco Bay Area but also has a presence in Portland and Boston, Garg told Inman. The startup plans to expand to Los Angeles, Irvine and San Diego later this year.
Like tech-powered brokerage Redfin, Flyhomes uses teams of agents who are salaried employees. It has a total employee count of 135, including a stable of engineers. And it plans to raise that number to 200 by the end of the year.
Flyhomes has most distinguished itself so far with two financing products designed to give buyers cash-purchasing power.
For customers who choose “Cash Offer,” Flyhomes will buy a home on their behalf and then resell the property to them sometime after they’ve moved in. For customers who select “Guaranteed Offer,” Flyhomes will add an addendum to a buyer’s offer promising to purchase the property only if the buyer’s mortgage falls through.
Flyhomes has also worked with sellers for some time. But now it’s driving hard into the listing side of the business with a new service called Trade Up. By offering a guaranteed price, the service allows customers to both buy a new home and sell their old one with certainty and convenience.
Here’s how it works for sellers:
Flyhomes offers a “guaranteed price” on the seller’s current home.
Then the seller gets pre-approved for a mortgage and finds a new home with help from Flyhomes. Once the seller has settled on a property, they can pull the trigger fast: Flyhomes will purchase the home on their behalf. The seller then moves into the new home.
Next, Flyhomes tries to sell the customer’s old home to a buyer. If it fails to do so within 90 days, it will purchase the home at the “guaranteed price.”
Either way, the customer puts the proceeds from the sale of their old home toward a downpayment for the mortgage to buy their new home — from Flyhomes. Flyhomes charges Trade Up customers a typical listing fee of between 5 and 6 percent, plus whatever it costs the startup to temporarily hold the customer’s new home.
Flyhomes sets the guaranteed price at between what it believes to be 90 and 95 percent of a home’s value, according to Garg. Should the startup sell a home it buys at this price for more in the future, the customer will receive the additional proceeds, less whatever it cost Flyhomes to hold the old home during the selling process.
The holding costs that Flyhomes charges — whether they are for a customer’s new home or the customer’s old one — mostly represent the cost of the financing used by Flyhomes to buy the home.
“They know the worst-case outcome, and they’re happy with the worst-case outcome, but they know they have the upside of the best-case outcome,” he said about sellers who use Trade Up.
Flyhomes Series B funding round was led by Canvas Ventures with participation from existing investor a16z (Andreessen Horowitz). The $120 million in debt for homebuying comes from lenders including Genesis Capital, which originates loans on behalf of Goldman Sachs Bank USA.
Editor’s note: This story has been updated with new information from Flyhomes about its Trade Up service and employee count.