Move over Opendoor — and OfferPad, and Knock, and Redfin, etc.: a new online homeselling startup has entered the fray.
This one, named Bungalo (not to be confused with new proxy landlord Bungalow), is backed by real estate giant Amherst Holdings, and more than $1 billion in capital. It offers a platform that lets buyers search, tour, finance and close on a home and if its funding is any indication, it looks positioned to flip thousands of homes in the years ahead.
The startup is launching with 20 listings in Dallas, Texas and six in Tampa, Florida, but has more than 100 others under repair in those markets, as well as 150 in a number of markets it plans to expand to later this year, according to Greg Stewart, chief operating officer of Bungalo.
Amherst Holdings, which has been a major player in the single-family rental space, has already invested $225 million to launch Bungalo and has committed to sinking another $1 billion into the project in 2019.
Among other practices that set Bungalo apart from other iBuyers (companies that buy and sell homes using online services and other tech, enabling nearly instant results) the startup makes extensive — not light — repairs to homes and uses “no-haggle” pricing.
“We can do what those iBuyers are doing, as well as we can do the heavier-lift projects which could often be $100,000 upfront rehab that needs to be put into the home,” said Drew Flahive, president of Amherst’s real estate subsidiary, Amherst Residential, and the former head of Goldman Sachs’ real estate capital markets division.
The advent of Bungalo, backed by a firm that deploys capital from pension funds — among other institutional investors — highlights voracious appetite for returns generated by the iBuyer model, which Opendoor’s purchase of discount brokerage Open Listings shows is quickly evolving.
Blackstone’s Invitation Homes‘s funding of Opendoor and Redfin’s announced expansion of Redfin Now, its iBuyer division, offer further evidence of this trend.
Credit: Bungalo
Unlike some other iBuyers, Bungalo currently doesn’t provide a platform that allows homeowners to request quick offers on their homes, but the startup plans to introduce one in the future. For now, the startup is snatching inventory off the multiple listing service (MLS) and at foreclosure auctions, among other sources.
Using high-quality materials, designer finishes and smart home technology, Bungalo will perform extensive renovations on its acquisitions to provide “high-quality turnkey move-in inventory,” Flahive said. That contrasts with some other iBuyers’ approach of making only light repairs before reselling properties, he said.
Unlike some other iBuyers, Bungalo will also use “no-haggle” pricing, meaning buyers who want to purchase a Bungalo home will have two choices: purchase at list price or take a hike.
“The price you see, is the price our buyers will pay,” Stewart said.
This approach means “all homes are sold on a first-come-first-served basis and never sell above the listing price — no hidden fees, no bidding wars,” Bungalo said in a press release.
Credit: Bungalo
Mirroring the practices of some other iBuyers, Bungalo provides a 160-point quality inspection to prospective buyers, as well as a 30-day “quality guarantee” and a one-year “whole-home warranty.”
Homebuyers can search for listings on bungalohomes.com, and when they’ve found one they like, use their smartphone to enter and tour the property anytime from 8 a.m. to 8 p.m. As with other iBuyers, keyless-entry and security technology make these self-guided tours possible.
If buyers want to move forward with a purchase, they have the option to use Bungalo Mortgage, Bungalo’s affiliated mortgage brokerage, to get pre-approved and underwritten for a mortgage within 48 hours, according to Bungalo.
Eventually, Bungalo won’t merely arm buyers with mortgages from outside lenders, the function of a mortgage brokerage; it will act as the lender itself through an affiliate, providing seller-financing to buyers of its homes, and further accelerating closings.
“We’ll quickly come to that realization on the financing side where we’ll need to own the mortgage as well,” Stewart said. Those seller-financed mortgages, like most mortgages, would be sold and packaged into mortgage-backed securities.
Credit: Bungalo
Bungalo hopes to form close partnerships with real estate agents, and will make typical offers of compensation to buyer’s brokers.
The company will market properties on its website for a week before listing them on the MLS, providing a chance for agents who monitor its website to tip their clients off to listings that they can’t yet find elsewhere.
Since launching in 2012, Amherst Holdings’ subsidiary Amherst Residential, has raised more than $5 billion of debt and equity financing to manage a portfolio of more than 20,000 homes, according to Bungalo.
Flahive said Amherst Holdings has more than 700 employees spread across 28 markets. Bungalo can tap Amherst’s existing real estate operation to expand rapidly.
‘We have a massive investment technology and infrastructure and human capital that was a lot of pain [to create] over the last four to five years to get to where we’re at, and we think that will be synergistic to get us into different business lines in the future,” Flahive said.
