Demonstrating once again that it’s not just about mortgages, Better Holdco Inc. has rolled out a cash offer program to its real estate brokerage clients that has already expanded its business to 45 markets in 12 states in only two months.
Better is following in the footsteps of companies like Orchard, Flyhomes, and Homeward that allow homebuyers to bid cash to improve their chances of winning a bidding war. But business leaders are confident in their ability to differentiate their offering.
Better’s vertically integrated business structure – it operates mortgage, real estate and securities brokerage subsidiaries – creates efficiencies that allow it to outperform its competitors in terms of price, said Paul Tyger, chief executive at Better overseeing the cash offering program.
In addition, Better’s massive size – it has more than 8,100 employees, including 600 who work in technology and product development – has allowed it to expand the reach of its cash offer program to a pace that smaller competitors may find it difficult to match.
After launching a pilot cash offering program in July, Better expanded it to include 32 markets in eight states in August: Arizona, Colorado, Florida, Georgia, New Jersey, Pennsylvania, Texas and Washington. With the recent addition of the Illinois, North Carolina, Oregon, Virginia, and Washington DC markets, Better’s all-new cash offering program is already more widely available than some competitors. more established.
Markets where Better’s cash offers program is available include Seattle, Phoenix, Denver, Miami, Atlanta, Philadelphia, Pittsburgh, Austin, Dallas, and Houston.
âIn many ways, we rest on the shoulders of Better Mortgage and Better Real Estate,â Tyger said of the rapid expansion. âWe optimize simplicity rather than finding the optimal structure for each state. “
Launching cash offer programs in new markets can be complicated by the fact that transfer taxes vary from state to state, and even county to county. The companies providing the service typically pay cash to purchase a home on behalf of a client and then transfer ownership to the client once they secure their own financing. Transfer taxes are levied whenever ownership changes hands.
Many cash offer providers must partner with other companies to provide services such as real estate brokerage, financing, or title and closing services. But Better’s vertical integration makes it easier for the company to expand its cash offering service to new markets, Tyger said.
The four companies under the Better umbrella – Better Mortgage Corp., Better Real Estate LLC, Better Settlement Services LLC and Better Cover LLC – are separate operating subsidiaries of Better Holdco Inc.
âWe own everything, so we can break even on 10 transactions and make money on the 11th,â Tyger said of Better’s ability to provide end-to-end services.
Better, which has also been busy growing its real estate brokerage and title insurance business this year, says its cash offering program will attract both buyers and sellers to its real estate brokerage business.
Homebuyers who use Better Mortgage to finance their home and are represented by a Better Real Estate agent pay no fees for the cash offers program. They are also eligible for a 1% agent discount and $ 2,000 on their closing costs. There is a 2.5% transaction fee for home buyers who work with a Better Real Estate agent but end up choosing a different lender.
For “sell-to-buy” customers – sellers who wish to make a cash offer on a home before selling their existing home – Better will waive its listing fee if it is able to match the seller with a buyer represented by Better Real Estate.
The seller’s house is “an exclusive listing within our network” and is not listed in a multiple listing service if Better Real Estate is able to arrange a sale to a buyer it represents, said Christian Wallace, Head of Real Estate Services at Better.
âOften times, selling your home is very stressful,â Wallace said. “If you can buy [your next home with a cash offer], and not have to live in [your old home] and clean it five times a day [while itâs on the market], it is a way to eliminate this stress.
Wallace said the cash bid program has been successful because it allows buyers to win the auction and close quickly.
âWe’ve run a lot of different programs and pilots, but this has been by far the most important response,â Wallace said. âThe cash purchase page is our number one landing page on Better.com other than the home page. It’s something that people really care about.
The cash offering program was launched as Better prepares to finalize its bid to become a public company through a merger with a special purpose acquisition company, Aurora Acquisition Corp.
After Aurora went public on March 8, the boards of directors of Better and Aurora approved a PSPC merger in May that valued Better at $ 7.7 billion. The deal was expected to be finalized in the fourth quarter of 2021, subject to approval by Aurora shareholders and Better shareholders.
In a September 30 regulatory filing ahead of the shareholder vote, Aurora noted that “nearly all” of Better’s income comes from its mortgage lending business, but the company intends to expand its geographic coverage and of products, including its “Better Benefits” device.
âOur clients don’t want a real estate agent, mortgage or insurance policy – they want a house,â Better’s supporters said. âWe plan to expand the range of products and services we offer through our platform and provide a one-stop-shop for homeownership, allowing consumers to walk the entire journey to homeownership. , from research to ownership, life, maintenance and sale, all in one place.
âWe believe there is a range of products that we will be able to offer our clients on their homeownership journey, including home maintenance services and home improvement loans. , and a financial network of personal, auto and student loans, and life and disability insurance, leverage the equity that customers have in their homes to deliver profitable consumer credit products at a fraction of the speed. given the existing data that we capture on the client’s financial chart and real estate chart.
In the first six months of 2021, Better funded $ 28.8 billion in loans, up 306% from the first half of 2020 and surpassing $ 24.2 billion for full year 2020 .
Better mortgage, historical and projected arrangements
In May, Better predicted that it could increase its loans to $ 183 billion by 2023, capturing 5.6% of the market share.
As of September 1, Better was licensed as a mortgage lender in 47 states and Washington, DC, while Better Real Estate was licensed in 18 states and could recommend brokers in all 50 states through its agent network. Better Settlement Services, which provides title services, was licensed in 24 states, and the Better Cover insurance subsidiary was available in 37 states.
Email Matt Carter