Austin-based UpEquity has raised $25 million in equity and debt funding to expand its business.
Chief executive Tim Herman started the mortgage lending company to take advantage of what he saw as inefficiencies in the $2 trillion U.S. housing market.
Existing financial services and property technology companies treat the symptom and not the cause of market inefficiencies, said Herman.
The company makes free cash offers but charges 2.5% on the loans it makes to homebuyers to give them the cash they need to make an offer before having to go through the traditional process of taking out a home loan through a bank. Then the homeowners can make payments directly to UpEquity to pay off the mortgage on the house.
“Our cash offer works like a guarantee that during the escrow period we will be able to get the mortgage in place,” Herman said.
A U.S. Naval Academy graduate and former fighter pilot, Herman saw real estate as the only avenue to true wealth creation open to him and his family given their years on the road and lack of available investment capital.
After the Navy, Herman went to Harvard Business School and met his co-founder Louis Wilson. It was in Boston while in B-School that the two men started UpEquity.
They since relocated to Austin because of its booming housing market and relatively more relaxed regulatory environment.
Ultimately, the pitch to customers is the ability to make an all-cash offer, which dramatically improves the likelihood of closing on a house. It’s a luxury that roughly 90 percent of Americans can’t afford, Herman said. There’s no downside for selling homeowners, if a purchaser doesn’t end up buying the home then UpEquity owns the house.