Austin, Texas-based “power buyer” UpEquity has raised $50 million in a series B funding round that the company says will help it originate more than $1 billion in mortgages over the next 12 months, using technology that enables homebuyers to make all-cash offers and close a mortgage in an average of 18 days.
Co-founded in 2019 by Tim Herman and Louis Wilson, UpEquity is a licensed mortgage company in Texas, Florida, California and Colorado, and has raised a total of $77 million to date. The latest round, which is split between $20 million in equity and $30 million in debt, was led by S3 Ventures.
S3 Ventures Partner Charlie Plauche, who will take a seat on UpEquity’s board of directors, said institutional investors have snapped up $77 billion in single-family homes in the last six months, “with no signs of slowing down.”
UpEquity “allows the average homebuyer to have a shot at competing with the large real estate investment firms of the world in the homebuying process,” Plauche said in a statement. “We are excited to be a part of leveling the playing field in this industry.”
The company has posted about a dozen openings at its Austin headquarters in engineering, human resources, marketing, operations and sales.
UpEquity says its Buy with Cash program is free for homebuyers, and that it charges as little as $500 for its Buy Before You Sell program to cover the cost of inspecting the buyer’s current home. If the buyer’s current home doesn’t sell before their new home closes, UpEquity buys it, and charges 1.95 percent of the resale price.
The company makes its money by earning a commission from brokering or selling the mortgage that buyers take out to buy their home. In states where purchase contracts aren’t assignable, UpEquity buys the home upfront and writes the mortgage afterward.
“By removing cost and inefficiencies from the mortgage process, our customers can make all-cash offers at zero cost to them and still get access to competitive interest rates,” Herman said in a statement. “They get the best of both worlds.”
Like competing power buyers Homeward, Knock and Ribbon, UpEquity is positioning itself as an ally of real estate agents by making a case that their clients are more likely to prevail in a bidding war when they submit a contingency-free offer. But UpEquity is a relative latecomer to the scene.
Homeward, which announced $371 million in new funding in May, counts Norwest Venture Partners, Blackstone, Breyer Capital, Adams Street, Javelin, and LiveOak Venture Partners among its backers.
Ribbon raised $150 million last month in a series C funding round that the company said would help it expand into half of U.S. markets by 2023.
Orchard, another power buyer that employs in-house real estate agents, raised $100 million in a September deal that valued the company at more than $1 billion.
Those power buyer startups are likely to face increasing competition from mortgage lenders who understand the advantage that cash or contingency-free offers provide homebuyers in markets where listings are scarce.
Better Holdco Inc. — a vertically-integrated company with mortgage, real estate brokerage and title subsidiaries — launched a cash offer program in July that it’s scaled up to 45 markets in 12 states.
A Bellevue, Washington-based regional mortgage lender, Evergreen Home Loans, also now has a cash offer product available in 4 states, illustrating the potential for every mortgage lender to act as a power buyer.