Real Estate

HomeLight Founder And CEO Drew Uher: Power Buying Is Here To Stay

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With rising home prices and mortgage rates expected to slow home price appreciation and dent home sales this year and next, real estate industry insiders are asking, “Can Power Buyers Thrive in a Downturn?”

It’s a topic HomeLight founder and CEO Drew Uher and Knock co-founder and CEO Sean Black will discuss Aug. 3 onstage at Inman Connect Las Vegas.

HomeLight, which matches consumers with real estate agents and helps facilitate and finance home sales, launched cash offer products for first-time and repeat homebuyers more than two years ago.

HomeLight got into the mortgage business with the 2019 acquisition of digital mortgage lender Eave and built out its agent offerings the following year by acquiring, a provider of listing management tools.

Uher launched HomeLight in 2012 as the real estate industry was recovering from the Great Recession of 2007-09. A $100 million Series D funding round last fall valued the company at $1.6 billion. In June, HomeLight announced $115 million in new funding and an agreement to acquire cash offer provider HomeLight says the deal will make it the largest “agent-focused” cash offer program in the U.S.

The company hasn’t been immune to the ongoing slowdown in real estate that’s prompted many companies to downsize. HomeLight announced on June 29 that it planned to cut an unspecified number of jobs. But Uher is confident Power Buying is here to stay, providing buyers and sellers with certainty and convenience in any market.

The following interview has been edited and condensed for clarity.

Inman: With interest rates on the rise, there’s a lot of talk that we may transition from a seller’s market to a buyer’s market. If that happens, what’s the advantage of using a Power Buyer to make a cash offer?

Drew Uher: Certainly, in a strong seller’s market like 2021, and probably Q1 of this year, the value prop of that cash offer is undeniable. You almost have to have it to be competitive as a buyer. We’re certainly seeing less buyer demand than we did in Q1 or last year, right, but that’s off of just absolutely unprecedented levels. I think the rebalancing of the market is a really healthy thing — I haven’t talked to anybody in any industry who would say that it would be healthy if what happened last year just continued on indefinitely.

But really, there’s value there regardless of the market. In fact, when my wife and I bought our first home, we almost lost the home of our dreams because our lender couldn’t close on time. And then it was no fault of ours. We had great credit, plenty of money down, returning the docs quickly — it’s just they couldn’t get their act together because it was right after the Great Recession and a lot of lending standards had changed. And so a lot of lenders weren’t used to the new operational requirements to manufacture mortgages, and that’s what happened to us. The poor sellers — we were the third buyer they were in contract with, and we almost couldn’t close as well, because of the operational issues on the lender side. So I was blown away that I had to pick a lender, I had to make a commitment to the lender, but the lender didn’t really have to make a commitment to me.

They gave me a pre-approval. What I didn’t know at the time was a pre-approval doesn’t actually mean anything, it’s more of just an estimate to lend, and some of them are more powerful than others in terms of the work that the mortgage company does to actually underwrite the borrower. Oftentimes they just look at your credit score and stated income and that’s it.

So when we decided to start a mortgage company to solve the problem of uncertainty in the offer process, we said, let’s actually underwrite. We can develop technology to dramatically decrease the time and costs associated with underwriting. Then we can pull all of that underwriting work upfront and be absolutely certain about the fact that we can lend to that borrower before they make an offer to create that certainty, and that’s exactly what we’ve done.

To finish the story, this was 2010 when I bought my condo. So you know, that was not exactly a seller’s market, right? That was a buyers market. But I certainly would have benefited, and the seller would have benefited, from that certainty. So, I do think that you’ll see the cash offer product accelerate in market share gains at a more brisk pace in seller’s markets, but I do think that the product is very useful even in a buyers market.

So which of the business models employed by Power Buyers will be the most attractive to consumers as the market shifts? If a Power Buyer is actually buying homes then you’ve got a couple of transactions, which creates additional costs like transaction fees. If you’re providing a bridge loan, you avoid having two transactions, but you’ve got other costs, such as financing.

Sure, I mean, these are not lightweight products, in many instances. But these products are adding a tremendous amount of value to the consumer.
If you rewind to Q1, imagine this consumer has put in like six, seven, eight, nine offers and they just keep losing. Like, emotionally they just want to buy a house right? It’s so important to have any kind of advantage that they can get that there’s real value in the product, so a fee makes sense. Same thing with the trade-in product, right? We’re basically unlocking a transaction where one couldn’t happen before.

When we do take a home on balance sheet, there’s a real cost with that right? We have to finance that transaction. There’s oftentimes transactional costs, you know, holding costs, so on and so forth. But, you know, that’s why we’re coming up with other kinds of ways that we can structure these things.

We launched our free cash offer product earlier this year. With our express cash offer product, there is a 1 percent fee if we close in eight days. With the free cash offer products, we close in 21 days, so they are very similar products that provide that same amount of certainty. It’s just we take the closing periods a little bit longer.

What we do is we end up not taking the home on balance sheet — we actually complete the mortgage within that timeline. What we’ve told the seller in the contractual commitments to the sellers, is we will buy the home from you if there’s a problem [closing the loan in time]. But we don’t have to do that because we’ve done the homework upfront to know that we can actually lend to the borrower. So what that does is it kind of creates this win-win where there’s no reason not to use the product. So that’s one of the reasons why we think that these products can actually succeed pretty well, even in a sideways market or a buyer’s market.

You’re gonna get all kinds of different flavors of these products with different types of fee structures, and those fee structures will evolve. I think a lot of companies are going to end up changing their fee structures in this new world that we’re seeing. Just because you have to meet the homebuyer and seller where they are.

In terms of adoption, how important do you think it is to educate agents and their seller clients about the advantages of the Power Buyer model?

I think there’s a huge job on education. You know, a lot of agents we talk to are aware that these types of products exist now. So that’s very different from even a couple years ago. But look, these products are very complex. And every proptech company has approached the problem in a little bit different way, so they’re all different. So I think when an agent is explaining a product to a client, to teach someone about something you need a mastery of the material, right? One of the biggest blockers we face with adoption is agents. They hear about the product going, “Oh, that sounds great. I totally need that.” But then when push comes to shove and they’re talking to a client, they may not feel comfortable in describing the specific mechanics of the product.

So simplifying it and making the product really, really easy to digest is one of the things I think is going to be most critical to success with these products, for HomeLight and others. Our job is converting that person all the way through to a closed transaction. Where the rubber hits the road in terms of adoption is the education process, both for the agent and the client. But that’s also one of the reasons why I would say that it’s a foregone conclusion that these types of products will completely dominate the market in like five to 10 years, right? The need is there. It’s very clear that every single agent wants or needs these types of solutions. Most of the time the blocker is, “Well, you know, this is the way we’ve done business for the last 30 years, and doing business in other ways is challenging.”

What markets do you think will be the last to be served by Power Buyers?

I grew up in the state of Nebraska, and a state like Nebraska will probably be one of the last places to receive these products. Not because there’s not a need for them, but because there’s a licensing component — a real cost associated with going to a new state.

The markets that we’re in include California, Texas, Florida, Arizona and Colorado. And in this just simply because we’re like, “How do we get to the biggest markets the fastest way possible?” So the states that have smaller markets are probably a bit towards the latter part of the adoption curve.

I would say this [issue] impacts almost every vertical of real estate — mortgage, real estate brokerage, title and escrow.

The interesting thing to note is, I think the Power Buying is a little bit different than iBuying, because it seemed that the iBuyers really benefit from a homogenous housing inventory. If you’re buying a home in Tempe, Arizona, every single home on the block looks alike and is roughly the same. It’s gonna be roughly valued roughly the same so that the valuation models in an area like, you know, the greater Phoenix area are — it’s a much easier evaluation equation.

Our products work really well in the state of California, which has, you know, very heterogeneous, very kind of bespoke inventory. And the reason we started in California with our products, and the reason our products have these natural buffers in terms of protecting HomeLights balance sheet, in terms of the price of the home, is we’re not making bets on the price of the home. The products are created to facilitate a transaction in a modern, convenient and certain way.

So our products are also, by the way, the perfect products for a company to have in a recession, because in a kind of declining home price environment there’s naturally a buffer there.

Email Matt Carter

Hear more from Drew Uher in person — Aug. 3-5 at Inman Connect Las Vegas! Join us.

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