Austin-based company Homeward was founded by a former real estate agent with a deceptively simple premise.
Homeward, which has just raised $20 million in equity funding from Adams Street Partners and another $85 million in debt from undisclosed lenders, pitches a plan where the company will loan money to would-be homebuyers equal to the amount of their home equity so these buyers can make an all-cash offer to purchase their next home. The company also makes a “floor-price” guarantee on the existing home if the owners aren’t able to sell the property for full market value.
That offer has attracted the attention of venture investors like Adams Street Partners, Javelin Venture Partners and LiveOak Venture Partners, which have invested $20 million in equity into the new startup, the company said. Homeward also said it has received another $85 million in debt financing from undisclosed lenders.
For the buyers who who use Homeward’s all-cash offer, there’s the promise of an average discount between 2 percent and 5 percent, which at least makes up for the 2 percent-to-3 percent convenience fee that the company charges for its services. Homeward also makes money off of the rent it charges to homeowners on their new home before they’re able to close a deal on the old one.
“Most of our customers are seeing discounts that exceed the cost of their fee that gets tacked back on the home,” said Homeward chief executive and founder, Tim Heyl. “Depending on the services that they use for homeward they will see discounts that would drive down the fees that they would have otherwise paid.”
Homeward compares its services to institutional buyers, who can charge up to 9 percent of the home sale price and may force homebuyers to work with an exclusive agent provided by the institution.
The benefit, the company says, is that would-be home buyers (through Homeward) can make an all cash pitch to sellers which often results in a discount on the asking price — and the new owners can move in faster — all while having someone else manage the process of selling their old home.
“We are focused on building the future real estate agent and putting the client relationship at the center of that experience,” said Heyl.
A former broker himself, Heyl said that the company’s willingness to work with real estate brokers rather than replace them was another significant differentiator for the company.
“Homeward is focused very specifically on helping the real estate agent deliver a home buying experience… homeowner wants to move but they don’t want to list their house til they know where they’re going,” said Heyl. “The real estate agent will refer the customer to Homeward… we gather that data and run it through our models and we approve or deny the customers.”
With the new cash, Homeward is looking to expand in the existing markets it’s working in: Colorado, Georgia and Texas, with an eye toward national expansion down the line.
To date, Homeward has raised $24 million in equity and $106 million in debt.
“We’re being very selective at the moment, but Homeward stood out.” said Jeffrey Diehl, a managing partner at Adams Street Partners, in a statement. “The company’s growth is impressive, the leaders have deep industry experience, and their traction with agent partners has been much better than expected.”
By working with real estate agents instead of trying to circumvent them, Homeward has a built in sales channel for its services. Roughly 43 percent of home buyers have an existing home to sell before they buy their next house, according to data from Zillow cited by the company. The need to sell a home before buying the next one slows down the process and hits the bottom line of real estate agencies that depend on turnover.
Homeward works with agents to register clients for Homeward’s service so they can be approved for a loan by the company.
“Working with Homeward, my clients got approved and made a winning offer within days.” said Grant Rothberg, a top real-estate agent in Houston, in a statement provided by the company. “They were able to move into their new home first, then take their time to sell their old home, ultimately earning them $40,000 more than low-ball ibuyer offers.”
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