Amherst Residential, the founder of the single-family rental company Main Street Renewal, is getting into the home flipping business this week with the launch of a new company called Bungalo.
Using much of the same technology infrastructure that Amherst uses to find single-family rental properties, Bungalo will buy, renovate, and sell single-family homes to owner occupants on its online platform. But instead of selling to the highest bidder, Bungalo will sell to the first bidder who is pre-qualified for the list price of the home.
The company hopes that removing a key pain point in the real estate transaction— negotiation and bidding strategy—can attract buyers who don’t want to deal with the hassle and uncertainty of bidding wars, which are increasingly common.
“We’re prioritizing the consumer experience over trying to squeeze out every last dollar out of the transaction,” said Bungalo chief operating officer Greg Stewart.
Does that mean every house they sell will be a deal for the buyer? Not necessarily. The company uses proprietary technology and data to set a list price for each home, which includes the cost of remodeling and agent commissions. If the methodology is accurate, the list price will come close to what the house would sell for on the open market anyway.
Bungalo launched on Tuesday in Dallas and Tampa, with plans to enter more markets down the road. It currently has 150 homes in some stage of the flipping process and roughly 30 homes for sale on its platform, which holds an exclusive listing on the home for a week before it hits other listing services.
The real estate transaction is finally under going a tech disruption thanks to a bevy of startups that leverage data and technology to relieve pain points in the transaction. Pete Flint, the founder of Trulia and a partner at the private equity firm NFX recently told CNBC that the next wave of real estate innovations will be about the transaction.
Opendoor and OfferPad, so called “iBuyers,” buy houses from motivated sellers who don’t want to or can’t wait around to field the highest offer. They renovate the houses and then flip them on the open market. Knock has a similar model, but buys the customer’s new house in an all-cash transaction so they can move quickly, and then puts the old home on the open market. Ribbon turns its customers’ offer into all cash so that a prospective buyer doesn’t lose a house because they need a mortgage.
Even listings services Zillow and Redfin have launched similar programs hoping to grease the wheels of a real estate transaction that is stressful, time-consuming, and costly.
Home flipping, which traditionally has been an antiquated practice conducted by locals, has undergone dramatic changes since the housing bust in 2008. Financing for home slips has been institutionalized by Wall Street players, and with much of America’s housing stock now having aged considerably, the need for renovation is attracting more startups into the space.