Startups are crowding Tampa Bay’s competitive housing market

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For almost a month, Julie Youngblood has been traveling around Florida to meet with real estate agents.

She’s helping Austin-based Homeward — which pays cash for homes in advance while homebuyers complete their own financing — get started in the state’s hot housing market. From city to city, Youngblood trained local real estate agents in this alternative home-buying method designed to help people compete against cashless investors.

Miami real estate agents were a little hesitant about Homeward’s proposal to pay for houses in cash, Youngblood said. But Tampa was ready for it.

“Tampa was like, ‘You got what? Come on. Let’s go,’” she said.

Cash is king in Tampa Bay. The number of homes being bought without additional financing like mortgages boomed in 2021 — the majority being bought by investors or wealthy out-of-state buyers, according to Florida Realtors. Compared to before the COVID-19 pandemic, hundreds of buyers are coming to Florida each month looking to buy homes out of their own pocket. With demand at all-time highs and low inventories, this seller’s market has made it difficult for many to find a home they can afford and win the bidding war.

Homeward isn’t the first company to offer cash purchase options to enter the Tampa Bay housing market. Another startup, Ribbon, launched in August and also allows buyers to make cash offers, and San Francisco-based rent-to-own Divvy has been operating in the area for over two years. They offer home buyers the opportunity to use unconventional methods to compete in the competitive housing market.

“Look at cash, low inventory and institutional buying, and that’s making it very difficult for your traditional homeowners,” said Brian Gubernick, Homeward’s chief real estate officer. “That’s why we at Homeward felt like Florida and Tampa were the closest place we needed to be.”

Homeward, founded in 2018 by Austin real estate agent Tim Heyl, announced its expansion into Tampa on May 10. The company offers two programs: buy before you sell and buy with cash. Homeward will buy a home through a cash offer that is four times more likely to win a bid, and lets customers either obtain a mortgage from the company to buy it back or use another lender.

“We are not an iBuyer. We want it to be a cash only offer, which means we complete our purchase. It’s not a bridging loan, it’s not creative financing,” Gubernick said. “We literally pay cash for this house, let the client move in, and then buy it back from us.”

Homeward also attracts potential sellers. Some homeowners have concerns about selling, Gubernick said, for fear of not being able to find another place. The company’s buy-before-you-sell option allows Homeward to buy a home with cash, and the homeowner can then sell it and pay back with the money they would have used to buy the home themselves.

Keller Williams real estate agent Michael Notbohm in Tampa said he sometimes felt uncomfortable advising clients through shortcuts, such as: B. Foregoing contingencies in appraisal or inspections to win a contract for a home. But he said many of his clients are tired of losing bidding wars.

“I don’t feel comfortable telling my client that, like I know you really want the house. But people said, “We don’t care what’s rated. We don’t care if it falls apart, we’re still giving up all of that just to close the deal,'” Notbohm said.

He is one of the first agents in Florida to use Homeward. He said he knew one family who wanted to sell their father’s house after going to someone who would live in it – but they also wanted the ease of a cash offer. A buyer eventually took advantage of Homeward, who didn’t have much of a chance of getting the house without him, and completed the sale. It felt “empowering” to solve a problem that was a win-win for both the buyer and seller, Notbohm said.

The idea of ​​turning someone into a cash buyer, he said, “seems almost too good to be true.”

And is it? Experts told the Tampa Bay Times that these companies offering similar solutions to the same problem are new. Buyers should do their due diligence and read the fine print.

“This high speed (for housing) is painful. Cash-up front companies arm you to compete in a really fast market, but it also comes by default,” said economist Skylar Olsen of mortgage company Tomo.

The average home in Tampa Bay is on the market 6 days before a sale is due, which is nearly half the national average, according to Tomos data. It’s a sign of how competitive the market is and how little time people have to make one of the biggest decisions of their lives, Olsen said. While some thought that mortgage rates going above 5 percent could cool the market, Olsen said this is pushing people to get on before rates rise any further, building on that “fear of missing out” and the put further pressure on the market.

When people choose companies like Homeward or Divvy, Olsen said, they need to understand that it could be more expensive in the long run.

Homeward claims they’re saving customers money because sellers are willing to drop their price for the ease of a cash offer, Youngblood said. While Homeward and Ribbon are services for homebuyers who can get a mortgage, rent-to-own companies tend to focus more on people struggling to access financing.

Stacie Gause, a 44-year-old teacher, said she wanted a home in the Orlando area but because the pandemic impacted her income for several months and she couldn’t qualify for a loan. Divvy bought a house of her choice with cash a year ago and she said she rented the house until 9 months later when she was able to buy it outright.

“We just wanted to own our own property and we’re not getting any younger,” Gause said. “We just wanted to have this American Dream.”

Adena Hefets, the founder of Divvy, visited Tampa in April for the first time since the pandemic to get a feel for the market. She said demand in the area has exploded since Divvy arrived in Tampa Bay in 2019.

“Incomes have remained constant … but house prices have increased,” she said.

Divvy has been driving advertising campaigns on local TV stations, radio and Youtube this year. Florida, Georgia and Texas are the company’s largest markets, Hefets said.

Divvy buys a house for cash and rents it out. A percentage of the rent serves as a down payment until a client like Gause can buy it within three years.

Rent-to-own programs have been around for a long time and have historically been controversial. But Hefets said most predatory practices in this area happened with smaller landlords. Because Divvy is a company, it is regulated.

Even without the help of startups, most homebuyers have to make some sacrifices to get a home under contract. According to a recent Bank of America survey, about 82 percent would be willing to move to a less desirable area to shop. About 70 percent are willing to buy a smaller house or forgo outdoor space. Millennials are the leading age group currently trying to enter the market, the survey found.

“A lot of them are even considering getting a second job to fill the gap with potentially higher interest rates or higher housing costs,” said Scott Stange, Tampa Lending Market Leader at Bank of America.

According to the survey, more than half of millennials are putting off buying a home to save money. Many have to increase their budget in order to buy.

“They feel a lot of pressure to be a homeowner,” Stange said. “You just have to find the right location. And often it’s nowhere near Tampa. It might be a bit further out.”

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