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When Tim Heyl got the idea to launch a company that turned home seekers into cash buyers, he had been a real estate agent for nine years and lead a successful team. At first, he tried to turn his real estate business into that new company, but quickly realized it wasn’t going to work. So he shook hands with his business partner and handed over the keys to his brokerage.
“He stepped up to the plate and took over all the operations of that business so that I could go start from scratch,” Heyl said. “Starting from scratch, there’s no strings attached and you can sort of imagine a new world.”
Heyl spoke at Connect Now on Thursday, in a session called The Biggest Challenges And Opportunities For Today’s Real Estate Agent. He’s the founder and CEO of Homeward, a power buyer founded in 2018 that buys a home for a homebuyer with cash and then rents the buyer the home until they can secure a mortgage to buy the home back from the company. Power buyers say they give homebuyers a leg up in bidding wars where cash offers are often favored.
“We came out the gates booming because the core problem we were focused on was that buy-before-you-sell bridge situation that’s always been a chicken-or-the-egg problem for a homeowner for as long as I was a real estate agent,” Heyl said. “We came out growing really fast just based on that problem.”
The pandemic and its accompanying demand for homes and record-low inventory have supercharged the company’s growth, from 24 employees in 2020 to nearly 500 today.
“[The market’s] been really good for Homeward as a business because we wake up every day trying to figure out how to help those homebuyers to go out and compete,” Heyl said.
“We grew by 500 percent last year, and this year … nobody’s slowing down.”
Just as buying a home with a mortgage from the bank was “weird” when it was first introduced, Heyl thinks having a company buy or invest in a home on your behalf will be as normal decades from now as a mortgage is today.
“What’s going to happen is all these models that are coming out, they’re all setting out to solve critical problems right before the point of purchase,” Heyl said.
One thing venture capital-backed companies do really well is focus on one specific problem to solve rather than many, according to Heyl. Opendoor, for instance, saw that some homeowners wanted instant liquidity without the hassle of marketing and selling their home in the open market.
“They said, ‘Boom, let’s go solve that problem.’ By narrowing their focus, they started getting an influx of demand,” Heyl said.
“But as real estate agents, we do this thing that we should stop doing, which is we try and solve all the problems. We’re generalists and we don’t stand out in the crowd.”
Agents and brokers should focus on solving a problem that no one else is able to solve, according to Heyl.
“Being able to brand yourself as one of those core solutions will start to register in people’s heads and [they’ll] go, ‘You know what? I’m going to call Dave because I think I remember Dave saying that he solves this particular problem,'” Heyl said.
He encouraged brokers trying to recruit agents to identify the one thing their brokerage is able to do better than anyone else.
“What’s the one problem you solve that your target agent really cares about?” Heyl said. “Narrow in on that and go big. It’s hard because you don’t want to do it because you think you’re leaving all this open space, that they’re not going to come to you, but it’s better to win a niche than to try and compete in the broad.”
One thing venture capital-backed companies could learn from brokerages is to provide what Heyl called “one throat to choke.”
“What the brokerage world does really well is they actually understand the customer experience,” Heyl said. “When a homebuyer goes through a home buying experience, there’s all these different service providers, and nobody takes full accountability over the entire experience except the real estate agent. And that’s why people like real estate agents because they want one … throat to choke.
“A lot of these companies that are trying to integrate everything, they lack that and so I think [in] the venture world they need to figure out, ‘How do I, in my business, create that one person who’s going to take ownership and accountability over the customer’s entire experience?'”
He’s taken Wayne Gretsky’s famous quote — “Skate to where the puck is going” — to heart. In the next three to five years he sees “the bundled transaction” — where consumers get their brokerage, mortgage, title, and insurance services in one place — gaining steam.
The bundled transaction is not a new concept. For instance, Berkshire Hathaway has pursued that strategy nationally for 40 years and has not gotten its attachment rate — the rate at which consumers take up other in-house services — higher than 20 percent, session moderator Clelia Peters, managing partner at Era Ventures and Inman’s editor at large, noted.
But Heyl said brokerages tend to offer the bundled transaction at the local, agent level rather than as “an experience” that consumers can “latch into.”
Moreover, Heyl believes companies offering a seamless, bundled transaction will offer bundled pricing and start to bring costs down for consumers, which he said add up to 11 percent of the home price when brokerage, mortgage, and title fees are tallied up.
“What you’re starting to see is that when one company can sort of start to bring those services in, not only can they streamline the experience, but they can also figure out how to bring the overall cost down from 11 [percent] to 10, to nine, to seven to five,” Heyl said.
He said attachment rates would be driven by whoever generates the customer relationship. For instance, Zillow refers leads to agents, but also owns a mortgage company.
“If Zillow says, ‘I’m going to hand you this lead, and I’m also going to introduce them to my mortgage company,’ they’re going to drive a lot more attachments,” Heyl said.