Flyhomes, a Seattle-based startup, is aiming to change the real estate industry with its buyer-friendly platform. Here’s everything you need to know about the company’s revenue model, recent fundraising round, and biggest competitors.

What Is Flyhomes?

Flyhomes is an end-to-end real estate brokerage platform that aims to help home buyers find the perfect home at the lowest possible price, even with multiple competing offers. It features three core services: tradeup (buy a new home first and guarantee your current home sells), cash offer (allows buyers to purchase a new home without the need for cash on hand), and guaranteed offer (ensures deals are closed and provides certainty for sellers).

Customer Stats

The platform has already proven it can be a major player in the real estate market. Since its launch in 2015, Flyhomes has surpassed $1 billion in homes bought and sold, 1,000 clients, and 2,000 cash offers.

How Is Flyhomes Different Than Traditional Real Estate Agencies?

Although Flyhomes is technically a real estate agency, it is different from traditional agencies for quite a few reasons. For example, Flyhomes puts cash on the line to enable home buyers to complete purchases. Typically, this would be done separately by a bank or other financial institution. It also provides customers the ability to manage mortgage, title & escrow, and home upgrades all from a single platform. In essence, Flyhomes reduces the barriers to purchasing a home by eliminating the need to coordinate with multiple third parties and by streamlining each step of the home buying experience.

Revenue Model

As of 2019, Flyhomes charges a 3% fee for sellers to list a home. It offers commission refunds to buyers (up to 0.75% where allowed). Flyhomes’ real estate agents earn a base salary and do not earn commissions on successful deals.

There are plenty of homes available in Seattle on Flyhomes.

Financing Round and Potential Market Expansion

On August 15, 2019, Flyhomes announced the completion of its most recent financing round (Series B). According to the company’s blog post, this will include

$141 million in new financing, $21 million of which is Series B equity financing led by Canvas Ventures with participation from existing investors Andreessen Horowitz (a16z). $120 million in debt financing comes from multiple lenders, including Genesis Capital, who originates loans on behalf of Goldman Sachs Bank USA.

Previously, Flyhomes had raised only $19 million combined in seed round and Series A funding. Why is this financing round significant? In addition to giving Flyhomes the capital to continue to upgrade its online platform, this round will provide the company with the necessary capital to expand to other markets throughout the United States. It’s noteworthy that Flyhomes’ service (as of August 2019) is only available to homebuyers in the Seattle and San Francisco areas. What’s impressive about Flyhomes is not only the dollar amount of deals closed but also the success rate (68% better closing rate than traditional brokerage firms) and fast growth rate (more than doubled Bay Area sales between the last half of 2018 and the first half of 2019).

The Flyhomes team

Comparing the Competitors

As you might expect, the competition for this new type of real estate brokerage platform is fierce. There are several established players in this space. Opendoor, for example, raised $300 million in March 2019 at a valuation of $3.8 billion. The company has now raised a total of $1.3 billion in equity, with some $3.0 billion in debt financing for buying properties. As of August 2019, Opendoor has surpassed 444,000 offers requested since its launch in 2014. It currently receives a new request every minute on average and is available in 20 US cities. The commission service fee is 6%. There is an additional fee of around 1%, which varies based on the riskiness of a given transaction. In total, this brings Opendoor fees to around 7.1% on average.

Knock, another competitor in this space, raised $400 million in January 2019. Since its launch in 2016, Knock has raised a total of $600 million at an undisclosed valuation. While Knock doesn’t list user stats on its website, one article from earlier in 2019 says about the platform has helped 4,000 people trade in their homes and is available in 5 US cities. Knock charges a 6% fee, with 3% commission going to an agent.

Opendoor has clearly raised the most capital and reached more markets. Still, it’s not clear which of these three can be considered the most successful to date. This is because the user stats provided by each of the companies focus on different metrics, making it difficult to directly compare them.

Opendoor is one of the biggest competitors for Flyhomes in the real estate brokerage tech space.

What Will Happen In The Next Housing Bubble?

Because Flyhomes (founded in 2015), Opendoor (founded in 2014), and Knock (founded in 2016) were all born out of an improving housing market, their focus on attracting home buyers to their respective platforms was a smart strategy. Since it has been theoretically more difficult to find a home in the past few years at a cheap price, the demand for a better real estate agent (i.e. these platforms) has been high. Plus, the fact is that the average real estate brokerage firm charges 5 to 6% on a home purchase. By offering comparable or lower rates and the potential for faster closings, it makes sense that home buyers would try these platforms.

However, as the housing market wains, the challenge becomes how to make sure that home buyers remain on the platform when finding a home and negotiating lower prices. In a housing bubble, the conditions will be more favorable for buyers. Nonetheless, Flyhomes and other emerging giants in this space could still play a crucial role in the real estate market. Examining the services provided, it’s clear that end-to-end brokerage technology is creating more efficient processes that provide convenience and simplicity when buying and selling homes. Regardless of whether it’s a bull market or bear market for real estate, there is still a need for new platforms to provide an improved customer experience that traditional agencies lack.