Tushar Garg, CEO and co-founder of Flyhomes, came into real estate the way many agents and brokers do — in a round-about way. It’s just his “round about” took him on a path to a PropTech startup to make the real estate transaction easier for home buyers and sellers.
After six years at Microsoft (when he left, he was the chief of staff), Garg decided to pursue his MBA at Northwestern University’s Kellogg School of Business. “As part of a class project, I wanted to save energy in every house, but quickly realized that people don’t upgrade energy in their homes because the capital investment didn’t [make financial sense],” says Garg. Rather than give up on housing, he switched gears. “How do we make the housing market more transparent and give the process more certainty?”
So, Garg got his license and tagged along with his former Microsoft boss who was buying a house. “He took a chance with me and co-founder Stephen Lane. At the time, in 2015, Garg was taking time off from business school to work on a machine-learning startup. “I thought, why not help five or six families buy homes so I can understand what data people actually care about? I didn’t know how to find customers, so I would stand in front of open houses and ask people if they would be willing to buy a home using me,” he says.
That experience opened his eyes. He was helping a family in Seattle that had lost multiple bids on homes over the past two years. “I called the other agent of a home they bid on and asked, ‘What do your sellers really care about?'” That agent helped him understand what it took to make a competitive bid on the home. “She had nine offers on the table. My client’s was the fifth highest offer. I was jumping up and down when it was accepted,” he says.
Thus, the concept for Flyhomes, headquartered in Seattle, was born. “I took a step back and realized that if every home buyer could present a cash offer, it would take the uncertainty out of the transaction for the seller,” he says. The company has offices in San Francisco, Portland, Boston and Southern California. “The idea of all buyers being cash buyers was an epiphany for me. It was a complete no-brainer. If we look at the history of real estate, the sellers and buyers take all the risks. Based on market conditions, one side can dominate the other side. These two parties have no way to understand the actual risk, so they act on fear. I can remove the fear,” says Garg.
Not an iBuyer
Unlike Knock and Ribbon, Flyhomes is a real estate brokerage with salaried agents. “They are salaried but also make money per-deal based on performance, so it’s a base pay but it’s variable,” he notes. Its cornerstone program, Flyhomes Cash Offer, fronts the funds to a homebuyer so they can become a cash buyer. “They can use this bridge loan and then refinance it out into their long-term loan. For a seller, it’s even better than a cash offer, because with a cash offer, there’s no guarantee that it will close,” says Garg.
They also offer Buy Before You Sell, which allows buyers to buy and move into a new home before selling their old one. Flyhomes offers a short-term loan to the buyers, and the company get the old home ready to sell and, shortly after, list it.
Flyhomes has already received three rounds of funding (in addition to seed funding in 2017). The latest, Series C funding for $150 million was in June 2021 and was co-led by Norwest Venture Partners and Battery Ventures. The company is part of a wave of venture-backed real estate brokerages with alternative financing models. The Flyhomes family of companies includes Flyhomes Brokerage, Flyhomes Mortgage, and Flyhomes Closing.
Unlike a brokerage with independent contractors, because FlyHomes has salaried agents, they follow a process dictated by Flyhomes. “Each agent is following an exact process, but bringing their personality and experience to the mix. We have specialized teams — a research team, a team that does home tours, a pricing team, title and escrow. We have all these umbrellas, so anyone [consumer] using FlyHomes has the same onboarding, they’ll know exactly what the next steps are, and they’ll get underwritten right way.” All agents are licensed under one state license. “But, that doesn’t mean we don’t have a local presence,” says Garg.
“We’re designing an end-to-end service that is completely transparent across brokerage, mortgage, title and escrow, and even more services, because home buying is not just brokerage. It’s fundamentally all of those things, plus financial products. The next piece of this is actually digitizing the whole journey,” says Garg.
Flyhomes is also offering a service called Flyhomes for Agents, “because on every transaction we’re working with an individual agent from the other side. Not only can we bring the best offer to them for their listing, but we can help their customers as well,” he says. However, notes Garg, the bulk of their business is direct to consumers. “We don’t make money off the cash offer. We make money as a brokerage. We do charge interest to the mortgage; that’s just a pass-through for us. It’s not how we book our revenue. We make money because we are the broker and you used our services, mortgage, title and escrow,” says Garg.
As for growth, Garg says it’s early days. “We want to keep building the world’s best home buying experience and truly put the customer a the heart of it.” To do that, he says, “we can go deeper in the market and keep building market share. The other part is growing the Flyhomes for Agents partnership.” Right now, Garg says, they are launching in several new markets, which will soon be announced. Also, says Garg, they are in talks to partner with a few brokers, although, he notes, they are active conversations and not finalized.
Garg says they are choosing new markets based on size and speed of sales. But, he is clear that the Flyhomes model can work in any market. “It works in all kinds of market conditions, because cash is king. I believe that every consumer should have the power of the cash offer. There should be no more contingent offers. Every single consumer, the process should be democratized,” he says.