For nearly a month, Julie Youngblood has been traveling across Florida to meet with real estate agents.
She’s helping the Austin-based company Homeward — which pays cash for homes upfront while homebuyers finalize their own financing — launch in the state’s hot housing market. From city to city, Youngblood trained local Realtors on this alternative home-buying method meant to help people compete against cash-flush investors.
Realtors in Miami were a little hesitant about Homeward’s proposal to pay cash for homes, Youngblood said. But Tampa was ready for it.
“Tampa was like ‘You have what? Come on. Let’s go,’” she said.
Cash is king in Tampa Bay. The number of homes bought without additional financing like mortgages boomed in 2021 — the bulk were bought by investors or wealthy out-of-state buyers, according to data from Florida Realtors. There are hundreds of buyers coming to Florida each month looking to purchase homes out-of-pocket compared to before the COVID-19 pandemic. With demand at all-time highs and inventories low, this seller’s market has made it difficult for many to find a home they can afford and can win in bidding wars.
Homeward isn’t the first company offering cash-buying options to enter Tampa Bay’s housing market. Another startup, Ribbon, launched in August that also lets buyers make cash offers and the rent-to-own company Divvy based in San Francisco has been in the area for over two years. They offer homebuyers the option to use unconventional methods as a means to compete in the competitive housing market.
“Look at cash, low inventory and at institutional purchases and that makes it very difficult for your traditional homeowner,” said Homeward’s chief real estate officer Brian Gubernick. “That’s that’s why we at Homeward felt like Florida and Tampa specifically were the next place we needed to be.”
Homeward, founded by the Austin Realtor Tim Heyl in 2018, 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 house through a cash offer, which is four times more likely to win a bid, and lets clients either get a mortgage from the company to buy it back or use another lender.
“We’re not an iBuyer. We want it to be pure cash offer which means we close on our purchase. It’s not a bridge loan, it’s not some sort of creative financing,” Gubernick said. “We are literally paying cash for this home, letting the client move in and then buy back from us.”
Homeward is also attracting potential sellers. Some homeowners are worried to sell, Gubernick said, because they’re worried they won’t be able to find another place. The company’s buy-before-you-sell option lets Homeward buy a house with cash and the homeowner can then sell and pay back with the money they would have used to buy the house themselves.
Keller Williams real estate agent Michael Notbohm in Tampa said at times he has felt uncomfortable advising clients through taking shortcuts, like waiving appraisal contingencies or inspections to win a contract on a house. But he said many of his clients are tired of losing bidding wars.
Follow trends affecting the local economy
Subscribe to our free Business by the Bay newsletter
We’ll break down the latest business and consumer news and insights you need to know every Wednesday.
You’re all signed up!
Want more of our free, weekly newsletters in your inbox? Let’s get started.
“I don’t feel good telling my client to do this, like I know you really want the house. But people were like, ‘We don’t care what it appraises for. We don’t care if it’s falling apart, we’ll still waive all of that just to get the deal done,’” Notbohm said.
He’s one of the first agents in Florida to use Homeward. He said he knew a family that wanted to sell their father’s home after he passed to someone who would live in it — but they also wanted the ease of a cash offer. A buyer ended up using Homeward, who didn’t have a strong chance of getting the house without it, and closed on 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 anyone into a cash buyer, he said, “almost seems too good to be true.”
And is it? Experts told the Tampa Bay Times that these companies, which offer similar solutions to the same problem, are still new. Buyers should do their due diligence and read the fine print.
“This high velocity [for housing] is painful. Cash-upfront businesses are arming you to compete in a really fast market but it also defaults to it,” said economist Skylar Olsen at the mortgage company Tomo.
The average Tampa Bay home is on the market for 6 days before a sale is pending, which is nearly half national average, according to Tomo’s data. It’s a sign of how competitive the market is and how little time people have to make one of the biggest decisions in their lives, Olsen said. While some thought mortgage rates rising above five percent could cool the market, Olsen said it’s driving people to get in before rates go up even higher, building on this “fear of missing out” and further stressing the market.
If people chose to use companies like Homeward or Divvy, Olsen said they need to understand it might be more expensive in the long term.
Homeward claims they save customers money because sellers are willing to lower 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 focus more on people struggling with access to financing.
Stacie Gause, a 44-year-old teacher, said she wanted a home in the Orlando area but because the pandemic affected her income for several months and she couldn’t qualify for a loan. Divvy bought a house of her choosing a year ago with cash and she said she rented the house until she was able to buy it outright 9 months later.
“We just wanted to own our own property and we’re not getting any younger,” Gause said. “We just wanted to have that American Dream.”
Adena Hefets, the founder of Divvy, visited Tampa in April for the first time since the pandemic to get a pulse on the market. She said the need around the region has exploded since Divvy entered Tampa Bay in 2019.
“Incomes have stayed constant … but home prices have appreciated,” she said.
Divvy has been pushing advertising campaigns this year on local TV stations, radio and Youtube. Florida, Georgia and Texas are the company’s biggest markets, Hefets said.
Divvy buys a home for cash and rents it. A percentage of the rent goes toward a down payment until a customer like Gause can buy it within three years.
Rent-to-own programs have been around longer and historically have been controversial. But Hefets said most predatory practices in this realm were happening with smaller-scale landlords. Because Divvy is a corporation, it is regulated.
Even without the help of startups, most homebuyers have to sacrifice something in order to get under contract on a home. About 82 percent would be willing move into a less desirable neighborhood in order to buy, according to recent survey from Bank of America. About 70 percent are willing to buying a smaller house or let go of outdoor space. Millennials are the leading age group trying to get in the market right now, the survey showed.
“A lot of them are even contemplating getting second jobs to bridge the gap with potential higher interest rates or higher housing costs,” said Scott Stange, Tampa lending market leader at Bank of America.
Over half of millennials are delaying purchasing a home to save up, the survey said. Many have to increase their budgets in order to buy.
“They feel a lot of pressures to be a homeowner,” Stange said. “They just need to find the right location. And a lot of instances it may not be near Tampa. It might have to be a little further out.”