Demonstrating once again that it’s about more than just mortgages, Better Holdco Inc. has rolled out a cash offer program to its real estate brokerage clients that it’s already scaled up to 45 markets in 12 states in just two months.
Better is following in the footsteps of companies like Orchard, Flyhomes and Homeward that enable homebuyers to make cash offers to better their odds of winning a bidding war. But company executives are confident in their ability to differentiate their offering.
Better’s vertically integrated business structure — it operates mortgage, real estate brokerage and title subsidiaries — creates efficiencies that allow it to outcompete rivals on price, said Paul Tyger, the Better executive overseeing the cash offer program.
In addition, Better’s massive size — it has more than 8,100 employees, including 600 who work in technology and product development — have allowed it to expand the reach of its cash offer program at a pace smaller competitors may find difficult to match.
After launching a pilot cash offer program in July, Better expanded it to encompass 32 markets in eight states in August — Arizona, Colorado, Florida, Georgia, New Jersey, Pennsylvania, Texas and Washington. With the recent addition of markets in Illinois, North Carolina, Oregon, Virginia and Washington D.C., Better’s brand new cash offer program is already more widely available than some more established rivals.
Markets where Better’s cash offer program are available include Seattle, Phoenix, Denver, Miami, Atlanta, Philadelphia, Pittsburgh, Austin, Dallas and Houston.
Paul Tyger
“In a lot of ways, we’re standing on the shoulders of Better Mortgage and Better Real Estate,” Tyger said of the rapid expansion. “We’re optimizing for simplicity, versus finding the optimal structure for every state.”
Launching cash offer programs in new markets can be complicated by the fact that transfer taxes vary from state to state, and even by county. Companies providing the service typically pay cash to buy a home on behalf of a client, and then transfer ownership to the client once they’ve secured their own financing. Transfer taxes are incurred each time the property changes hands.
Many cash offer providers must partner with other companies to provide services like real estate brokerage, financing or title and closing services. But Better’s vertical integration makes it easier for the company to expand its cash offer service into 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.
“We own everything, so we can break even on 10 transactions, and make money on the 11th,” Tyger said of Better’s ability to provide end-to-end services.
Better, which has also been busy building out its real estate brokerage and title insurance businesses this year, says its cash offer program will bring 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 offer program. They’re also eligible for a 1 percent agent rebate and $2,000 off their closing costs. There’s a 2.5 percent transaction fee for homebuyers who work with a Better Real Estate agent but end up choosing another lender.
For “sell to buy” clients — sellers who want to make a cash offer on a home before selling their existing residence — Better will waive its listing fee if it’s able to connect the seller to a buyer represented by Better Real Estate.
The seller’s home 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, Better’s head of real estate services.
Christian Wallace
“A lot of times selling your home is very stressful,” 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 it’s on the market], it’s a way to eliminate that stress.”
Wallace said the cash offer program has been a hit, because it allows buyers to win the bid and close quickly.
“We’ve run a lot of different programs and pilots, but this has been by far the largest response,” Wallace said. “The cash buyer page is our number one landing page on Better.com other than home page. It’s something people are really interested in.”
The cash offer program has launched as Better moves to finalize its bid to become a public company through a merger with a special purpose acquisition company, Aurora Acquisition Corp.
After Aurora’s March 8 IPO, the boards of directors of Better and Aurora approved a SPAC merger transaction in May that valued Better at $7.7 billion. The deal was expected to close in the fourth quarter of 2021, subject to approval of shareholders of Aurora and the stockholders of Better.
In a Sept. 30 regulatory filing in advance of a shareholder vote, Aurora noted that “almost all” of Better’s revenue comes from its mortgage loan production business, but that the company intends to expand its geographic and product coverage, including its peripheral “Better Plus” services.
“Our customers do not want a real estate agent, a mortgage, or an insurance policy — they want a home,” Better’s backers said. “We expect to grow the suite of products and services we offer through our platform and deliver a one-stop shop for homeownership, empowering consumers to navigate the entire homeownership journey from searching to owning, living, maintaining and selling, all in one place.
“We believe there is a range of products that we will be able to offer our customers during their homeownership journey, including home maintenance services and improvement loans, and a financial network of personal, automobile, and student loans, and life and disability insurance, leveraging the equity customers have in their homes to offer cost-effective consumer finance products at a fraction of the speed given the existing data we capture on the customer financial graph and property graph.”
In the first six months of 2021, Better funded $28.8 billion in loans, up 306 percent from the first half of 2020 and surpassing full-year 2020 originations of $24.2 billion.
Better Mortgage originations, historic and projected
After originating $24 billion in home loans in 2020, Better projects rapid growth in the years ahead. Source: Aurora Acquisition Corp. regulatory filing.
In May, Better projected that it could grow its loan originations to $183 billion by 2023, capturing 5.6 percent market share.
As of Sept. 1, Better was licensed as a mortgage lender in 47 states and Washington, D.C., while Better Real Estate was licensed in 18 states and able to refer brokers in all 50 states through its agent network. Better Settlement Services, which offers title services, was licensed in 24 states, and insurance subsidiary Better Cover was available in 37 states.