Anyone who has tried to buy a house in the past couple years can tell you that the housing market is hot – and it doesn’t appear to be cooling down anytime soon.
As millennials look to buy their first homes, they are finding out the hard way that there is inadequate housing stock, and supply chain problems pose difficulties for new housing construction.
To make matters worse, homebuyers also have to compete with a growing number of institutional investors that purchase single-family homes as an asset. Redfin found that investors have spent $77 billion on single-family homes in the first half of 2021, up from $55 billion in the second half of 2020.
Institutional investors often make all-cash offers, which is tough for most people to compete with.
UpEquity is trying to change that.
The Austin-based technology startup has automated the mortgage underwriting process, allowing the company to offer competitive rates with less fees, quicker closing times and the ability to make a cash offer in a heated housing market.
“We’re trying to remove the unnecessary barriers to entry and the unnecessary friction so that more people can access the promise of the American dream,” UpEquity CEO Tim Herman told Built In.
Rapid Growth
UpEquity announced Wednesday that it has raised $50 million in Series A funding, just eight months after receiving $25 million in Series A funding.
The Series B funding included $20 million in equity and $30 million in debt allocated. The round was led by S3 Ventures, with participation from Next Coast Ventures, BP Capital Management, Alumni Ventures, Gaingels, Launchpad Capital and Early Light Ventures.
UpEquity has seen massive growth recently, growing from 15 to 90 employees over the past 10 months, and this funding will help the company continue this trend. Herman plans to double the team’s headcount in the next six to nine months, and then he plans to add another 50 people by the end of 15 months, bringing its headcount to about 230.
To accommodate its growth, UpEquity will be moving in a couple months to a new 25,000-square-foot office space that is triple the size of its current office on South Congress Avenue. The new office is not far from the current office, and is still in south Austin.
UpEquity has seen year-over-year revenue growth of 500 percent and has raised a total of $77 million to date. The company anticipates originating more than $1 billion in mortgages over the next year.
What’s the Catch?
By automating the back-end of the mortgage process, UpEquity is able to cut more than half of the $9,000 to $10,000 it typically costs to create a mortgage. By cutting costs, UpEquity is able to offer “very competitive” rates with no incremental fees, Herman said.
UpEquity’s automated underwriting engine also speeds up mortgage closing times. With legacy mortgage lenders, closing on a house can take up to 50 days. UpEquity claims it can close a mortgage in an average of 18 days. Herman said the company’s top priority is to hire developers and product managers to bring that timetable down to less than 10 days.
Secondly, with the speed and certainty created through automating back-end processes, UpEquity is able to fully underwrite its clients and make a cash offer on their behalf. Herman said cash offers are four times more likely to be accepted than a traditional mortgage.
The company provides cash offers as a free service, Herman said, because of the money saved through technological efficiency in the mortgage process.
