Emerging company makes offers for first-time home buyers entering the market
A new way to buy a home is getting ready to launch in the Triangle. Ownify is making cash offers on behalf of first-time home buyers to help them compete in this hot housing market.
Glen Clemmons with Umstead & Oak Real Estate Partners has focused on helping first-time home buyers break into the market in the Triangle since becoming a realtor in 2017.
“They have a hard time with the up front due diligence fees, the over-asking,” Clemmons said.
When he heard about Ownify, Clemmons admits he was skeptical at first and thought it was too good to be true.
“It’s not like anything you’ve ever thought of. It’s like a mix between rent to own, renting, and a traditional mortgage,” Clemmons said.
Ownify is targeting first-time home buyers who don't have a lot of cash saved up or who may not qualify for a traditional mortgage. All they need with Ownify is a 2% down payment. Most mortgage lenders require at least 3 to 5%.
“We convert the first-time buyer into a cash buyer, so we make them as powerful in the market to buy the home and win,” said Ownify co-founder Chris Smith.
The co-founders behind the start-up worked in the banking and mortgage industries.
“We’ve rethought the path to ownership to say – well, why do you have to use debt in the first place? Why not buy the home as equity without debt?,” said co-founder Frank Rohde.
They call it fractional ownership. The way it works is a buyer, or “Owni” as the company calls them, owns 2% of the house from day one. Ownify's investors own the rest. The monthly payment provides the investors with rental income, covers costs including repairs and taxes, and buys the Owni a bigger chunk of ownership in the home. Ownify says the average buyer saves $211 a month and $34,060 on a down payment compared to a traditional mortgage.
WRAL Investigates asked Rohde – what’s the catch?
“There really isn’t a catch. There is a trade-off,” responded Rohde.
That's because buyers only earn appreciation on the part of the home they own.
“So, if your house appreciates by, let’s say $100,000 over 10 years, in our model you get 10% of that and the investors that co-invest with you get the other 90%. That’s what you’re leaving on the table,” said Rohde.
Katie Dowell is an attorney at Raleigh Real Estate Law. She encourages buyers who are considering Ownify to ask some questions.
“What do I do if I don’t want to do this any more? What happens if I want to buy it out? What are they going to charge me?” said Dowell.
Dowell says buyers should be aware of any fees. Also, make sure you know how much control you have over the property while you're living in the home, and understand the process to buy the home outright or to terminate the agreement with Ownify.
“Just make sure you know what you’re signing, because that is a very unique relationship for owning real property,” said Dowell. “There is a subset of people that this is going to work really, really well for. It is not going to be for everybody.”
Clemmons sees Ownify as a new way to help his first-time buyers break into the Triangle's competitive housing market. He says he presents it as an option to all of his buyers.
“The more options they have, the more educated they are, the easier it’s going to be for them to see home ownership as achievable,” said Clemmons.
Ownify allows buyers to renew or exit their agreement after 5 years. They can buy out Ownify with a traditional mortgage at any time.
Ownify picked the Triangle to launch its program because of the strong housing market and employment as well as the region’s concentration of college educations people.
“You have folks who have great incomes, great jobs, strong credit scores, but they already have student debt. So stacking a mortgage on top doesn’t work,” said Rohde.
Ownify is working with about 60 real estate agents in the Triangle. The start-up is also looking for local investors. It plans to officially launch in the next few weeks and hopes to get buyers into 50 to 100 homes by the end of the year.
