Homeward, a modern home finance company that enables real estate agents to give every client the negotiating power of cash, has expanded its markets to include Phoenix.
Phoenix was an obvious choice for Homeward, which already operates in Texas, Georgia, and Colorado, for several reasons. As of July 2021, cash transactions as a percent of home sales were 23% compared to 15% from the previous year.
“That represents a 79% increase from the previous year,” says Homeward CEO and Founder, Tim Heyl. “But not all cash offers are created equal. Most — including cash offers from iBuyers — optimize for speed, which means the buyer leaves equity on the table.”
This announcement comes on the heels of Homeward’s successful series B fundraise in May 2021. The startup secured growth capital of $371 million, including $136 million in equity and $235 million in debt to accomplish several growth goals.
“Our first goal was to scale service and support to meet the outsized demand of this historic housing market,” Heyl says. “Now that we’ve done that, our goal is to open additional markets.”
The Homeward Cash Offer was designed to eliminate the limitations of the traditional financed offer.
“The listing agent and seller aren’t just looking for the highest offer,” says Brian Gubernick, Homeward’s Chief Real Estate Officer, a 15-year industry veteran who is based in Phoenix and owns both a brokerage and an agent coaching and training company. “They’re looking for the offer that is most likely to close swiftly and smoothly. So we eliminate the finance, home sale, and appraisal contingencies to make that happen. That’s why our buyers go under contract even when they’re not the highest bid.”
Population boom, housing shortage
For the past 15 years, the population of Phoenix has grown faster than the housing supply. Phoenix boasts the second best-performing labor market in the country, so much of this growth is due to net migration — or people moving to the area, rather than being born there.
“People come here to work for the same reasons they come here to retire,” Gubernick says. “They come for the great weather, the strong economy, the relatively low cost of living and the natural beauty.”
Three companies, one great customer experience
Homeward launched two affiliate companies — Homeward Mortgage and Homeward Title — which are both now licensed to operate in Arizona.
“When you work with us, you can complete your entire transaction under one virtual roof instead of working with three separate companies,” Gubernick says. “After we buy your home with our cash offer, you buy it back from us. We provide a sellers credit when you finance that buyback with Homeward Mortgage. And then you can close on it with Homeward Title.”
Bundling services saves homebuyers money, time, and effort, Gubernick says.
Working with agents, not against them.
The housing bubble of the early 2000s created a glut of housing, but today demand is greater than supply. “That makes the market ripe for innovation,” Gubernick says, who cites 2020 census data that identifies Phoenix as the fastest-growing city in the country for the fifth consecutive year. That growth, he explains, is expected to continue through 2050.
“The traditional real estate transaction is problematic,” Gubernick says. “But so are some of the innovations coming from outside the industry. Most of the newcomers minimize or replace the agent. Homeward partners with real estate agents, preserving the agent-client relationships and protecting agent commissions.”
Homeward’s solutions are available to any agent, but the company strategically partners with top brokerages and teams, providing dedicated support, white-label branding, and digital marketing tools to help them generate more leads.
Homeward has experienced tremendous growth. In the first half of 2021, the company saw a revenue increase of 6x. And in the last 12 months, Homeward saw a 4.5x growth in its Homeward Certified Agent community.
“We’re proud to play a part in one of the biggest financial decisions of a consumer’s life,” Heyl says. “And we’re thrilled that we’ve done that by creating solutions that also help agents build their business.”
Creating customer-centric solutions
Both of Homeward’s solutions — Buy before you sell and Buy with cash — involve two transactions. Homeward buys homes with cash on behalf of their partners’ client, then the client gets their mortgage and buys the home back.
Cash offers are four times more likely to beat financed bids. In a city like Phoenix, where the difference in housing costs for renters and homeowners is one of the smallest in the nation, the ability to become a cash buyer can mean the difference between renting and owning. In fact, according to a recent study, Phoenix’s median monthly gross rent is $1124 while the median monthly housing cost with a mortgage is $1514. “With a housing cost gap of only $390 and low interest rates, more and more renters are looking for ways to become homeowners on their terms,” Gubernick says.
Buy before you sell customers get the competitive advantage of cash plus the ability to move into their new home before they list their old home, giving them the confidence and certainty they need to put their old home on the market.
“List-buy clients shouldn’t wait around for prices to go down while interest rates are still relatively low,” Gubernick says. “They should use Buy before you sell to make their move so they can benefit from real estate appreciation, which is expected to continue.”