Flyhomes, a company that once pioneered cash offers in real estate, is ending its brokerage operations this month. The company will now focus entirely on expanding its 'Buy Before You Sell' bridge loan products. This strategic shift involves working with lender partners and third-party real estate agents across the United States.
The decision marks a significant change for Flyhomes, which launched in 2016. It aims to support loan officers and agents by providing financing options for homebuyers. This includes equity-based backup offers with low down payments, according to company statements.
Key Takeaways
- Flyhomes is discontinuing all real estate brokerage operations by month-end.
- The company will now focus solely on its 'Buy Before You Sell' bridge loan products.
- Flyhomes plans a national rollout of its financing solutions through lender partners and third-party agents.
- A recent $15 million Series D funding and $200 million warehouse facility will support this expansion.
- This move completes a shift from direct-to-consumer services to a third-party distribution model.
Strategic Shift to Financing Solutions
Flyhomes announced on Wednesday that all its brokerage operations will cease by the end of the current month. This means that agents currently working for Flyhomes will move to other brokerages. Clients with active brokerage agreements will transition with their agents to ensure continuity.
The company stated it will now concentrate exclusively on enabling lender partners to offer its bridge financing solutions. This includes distribution through third-party real estate agents. The goal is to streamline the homebuying process for clients of these partners.
Key Numbers
- $15 million: Amount raised in recent Series D funding.
- $200 million: Secured in warehouse funding for national rollout.
- 30,000+: Number of mortgage brokers Flyhomes Mortgage works with.
- 36: Number of states where Flyhomes Mortgage currently operates.
- 5 percent: Minimum down payment for some equity-based backup offers.
Expanding Lender Network
Flyhomes Mortgage, operating as a wholesale mortgage lender, already works with a large network. It collaborates with more than 30,000 mortgage brokers across 36 states. The company has plans to expand into additional markets in the coming months, aiming for broader national coverage.
This expansion is supported by recent financial achievements. Flyhomes recently closed a $15 million Series D funding round. Additionally, it secured a $200 million warehouse funding facility. These funds are intended to support the national rollout of its 'Buy Before You Sell' program.
"Nearly two years ago we eliminated our direct-to-consumer mortgage business to avoid channel conflicts with our loan officer partners," said Adam Hopson, Flyhomes Chief Operating Officer. "Today we’re doing the same on the brokerage side. We’re now laser-focused on driving the success of all loan officers and agents by giving their clients a simpler, more cost-effective path to buying their next home."
Evolution of Flyhomes Services
Tushar Garg and Stephen Lane founded Flyhomes in 2016. The company initially aimed to provide comprehensive, end-to-end homebuying services. This included various subsidiaries like Flyhomes Brokerage, Flyhomes Mortgage, and Flyhomes Closing.
Flyhomes was a pioneer in the 'power buying' trend. In 2017, it introduced a cash offer product. This allowed homebuyers to make cash offers to sellers, giving them a competitive edge. Buyers would then refinance into a long-term loan, either with Flyhomes or another lender.
Background on 'Buy Before You Sell'
The 'Buy Before You Sell' model allows homeowners to purchase a new home before selling their current one. This removes the contingency of selling the old home, making their offers more attractive to sellers. It typically involves a bridge loan that covers the down payment or even the full purchase price of the new home, using the equity from the old home as collateral. This product helps buyers avoid temporary housing and moving twice.
Market Challenges and Pivots
A significant $150 million Series C funding round in 2021 helped Flyhomes expand its reach. The company grew beyond its initial core markets, which included Seattle, the San Francisco Bay Area, Los Angeles, San Diego, Portland, and Boston. This expansion occurred during a period of strong housing demand.
However, the real estate market changed in 2022. Rising mortgage rates led to a cooling of home sales. This market shift impacted Flyhomes, leading to three rounds of layoffs that year. These workforce reductions reflected the changing economic environment.
In 2023, Flyhomes began a strategic pivot. It stopped providing mortgages directly to consumers. Instead, it launched its current main business: 'buy-before-you-sell' solutions. These are now offered through a national network of lender partners. The closure of the real estate brokerage arm is the final step in this strategic transformation to a third-party distribution model.
Competitive Landscape and Offerings
The 'Buy Before You Sell' market has other notable players. Competitors include Knock Lending LLC and Rocket Mortgage. Knock Lending LLC works with lenders nationwide, providing homebuyers with up to $1 million in bridge financing. This helps buyers secure their new homes.
Rocket Mortgage also entered this space. In June, it launched its own bridge loan product. This product offers homebuyers up to six months to sell their existing home. During this period, buyers make interest-only payments on the bridge loan.
Flyhomes' Unique Backup Offer
Flyhomes' specific backup offer product provides several benefits. It allows homebuyers to utilize the equity in their current home for a down payment on a new property. This feature is crucial for many buyers seeking to upgrade or relocate.
Furthermore, clients can exclude their monthly mortgage payments from their current home when qualifying for their next loan. This can significantly improve their debt-to-income ratio. The product also enables buyers to make cash-equivalent, non-contingent offers. These offers can be made with as little as 5 percent down, making them highly attractive to sellers.
Previous Asset Sales and Company Valuation
Before this latest pivot, Flyhomes made other strategic moves. The company previously sold an AI-powered home search portal. This portal, launched last year, was acquired by The Real Brokerage Inc.
According to disclosures from August, The Real Brokerage Inc. paid $3.25 million for the search portal and its related technology assets. Additionally, The Real Brokerage Inc. acquired a 2.3 percent ownership stake in Flyhomes for $2.5 million. This transaction valued Flyhomes at approximately $108.7 million at the time.
As of 2023, Flyhomes Brokerage operated in several states. These included California, Colorado, Massachusetts, Oregon, Texas, and Washington. State records indicate that Flyhomes employed a total of 15 real estate agents and brokers in Washington, 13 in California, and three in Texas.
