HomeLight expands cash-offer products to Texas

HomeLight on Wednesday expanded the reach of two financial strategies that it’s been offering to buyers and real estate agents who are looking to compete with cash offers in an insanely hot market.

The strategies, which HomeLight’s been using in California since January of last year are now available in Texas. With HomeLight Cash Offer, the company steps in to temporarily buy the house with cash on behalf of qualified borrowers for a fee, later turning the title over to the borrower and lender when the mortgage involved closes.

In eight days or less after the client's loan closes, HomeLight sells the home to the client at the purchase price plus a small program fee. If the client uses HomeLight Home Loans, the program fee is 1% of the home amount. If the client chooses to use their own lender, they will pay a program fee of 3% of the home price.

The other product, HomeLight Trade-In, involves a similar process in which the fintech company purchases a house hunter's home in the short-term, typically for 90% of its expected value, in order to provide equity as they shop for a new home. Any difference in the actual purchase price when the former property is listed and sold is reconciled, minus a fee.

Qualified buyers working with a real estate agent that’s been approved to work on HomeLight’s website can avail themselves of these options. Loan applicants work either with the company’s in-house mortgage unit or another lender willing to finance a home purchase based on HomeLight’s criteria.

Given how hot housing is, HomeLight expects its strategies could be made available more broadly soon, and it’s obtained a $100 million credit facility from Credit Suisse to fund that expansion.

“We’re looking to scale Cash Offer as quickly as possible because the demand is so high across the country,” said Vanessa Famulener, a vice president at HomeLight, in an interview.

HomeLight’s products are among many in the market designed to help consumers who require financing and must compete with cash buyers in a fiercely competitive market. Online real estate and mortgage site OpenDoor also makes cash-backed offers for homes on behalf of borrowers but uses a direct-to-market rather than a referral model for home sales. Startup Haus pays the rest of the purchase price for borrowers who can put 10% down, allowing consumers to buy back equity from the home over time. And ZeroDown offers a rent-to-own arrangement in return for making a cash offer for homes upfront.

While these strategies intensify competition for the mortgage industry to some degree, they have limitations. One thing to know about HomeLight’s two products, for example, is that the quick switch in ownership from the company to a mortgage borrower is not in accordance with Federal Housing Administration rules, so those types of mortgages can’t be used in conjunction with Cash Offer, Famulener said.

The extreme home inventory shortage that has created the market for such bidding-war-ready financing products has been a concern not only for lenders but for real estate agents, who are a key referral source. Competition is intense not only among buyers but within the real estate industry, as some numbers comparing the number of agents to the number of homes for sale recently suggested. On that basis, the number of real estate agents looks like it roughly outpaces supply by nearly 40%, but estimates for the number of agents who are active must be taken with a grain of salt, as some portion may be inactive or working part time.

However, it is fair to say the market is competitive, Famulener said. HomeLight has a large queue of real estate agents lined up to see if their performance statistics are deemed strong enough for them to use the platform, she added.

The 2% growth outlook for the real estate brokers and agents from 2019 through 2029 is currently not as strong as the job market’s overall 4%, but it’s healthier than for the more general forecast for a -1% decline the sales industry, according to the Bureau of Labor Statistics.