Investors and homebuyers aren't the only ones feeling the pinch in today's fierce real estate market. Reduced inventory and high demand have resulted in competitive bidding wars and homes flying off the shelf at record prices and speed, leading fintech real estate companies like Homeward to explore new methods to gain a competitive edge in the current market. Homeward, the Austin-based start-up specializing in helping homebuyers buy and sell their properties through their online platform, just raised an additional $371 million to introduce all-cash offers.
Gaining a competitive edge
In today's demanding market -- wherein sellers are receiving multiple offers just hours or days after listing -- cash offers can deliver the competitive advantage homebuyers need. Financing a home involves strict underwriting criteria that both the home and the borrower must meet, including appraisal contingencies, meaning there's an increased risk of closing delays or the transaction falling through due to financial issues. Cash means sellers can sell their homes faster and with less hassle.
The Series B funding raise, led by equity firm Norwest Venture Partners -- with participation from Blackstone Alternative Asset Management, Breyer Capital, and existing investors Adams Street, Javelin, and Live Oak Venture Partners -- secured $136 million in equity and $235 million in debt. The funding round values Homeward at over $800 million.
The money will not only help Homeward introduce all-cash offers but also help the private company expand into new markets. Currently, Homeward operates in three states: Georgia, Colorado, and its home state of Texas.
What it means for investors
Real estate tech and software companies, including iBuyers like Zillow, Redfin, and Opendoor, have already dramatically changed how cash offers and real estate investors work in today's world. Being able to get an instant offer via their online platforms and close with big-name companies in a hassle-free virtual setting is creating major competition among real estate investors.
Homeward's business model, which CEO Tim Heyl has dubbed an "alternative iBuyer" approach, caters to homebuyers and sellers looking to relocate to a new home without juggling the stressors and complications of simultaneously buying and selling a home.
Most sellers seek cash offers from iBuyers because the home is distressed or needs to sell quickly. However, Homeward's cash offers focus on enabling current homeowners to gain a competitive edge in a tight market and sell their current home through traditional methods and with a Realtor of their choosing. Homeward continues to lease the new home back to the seller until their original property has been sold.
Since most homebuyers are seeking move-in-ready homes, competition may only be felt by investors buying at par on the traditional market rather than those seeking fixer-uppers or value-add properties.