California-based home equity investment firm Splitero launched its own real estate brokerage, Splitero Homes, this week. It is available in four states, California, Colorado, Oregon and Washington and will help homeowners “sell for a higher price,” the company said.
Launched in 2021, Splitero’s main focus is on home equity investments (HEI), which differs from home equity lines of credit (HELOC).
Splitero’s business model allows homeowners to tap into up to $500,000 in upfront cash payments without income and credit score requirements or monthly payments. In exchange, customers cede a share of the home’s appreciation when it sells anytime within a 30-year term. Clients must retain a stake of at least 20% in their homes.
Hence, Splitero Homes will primarily serve sellers of homes that are already clients of Splitero Funding, the home equity investment business.
“Our brokerage is unique,” Michael Gifford told HousingWire. “It’s our unique value proposition: we are a brokerage, but we’re also invested in the property with the homeowner, we’re not your typical agent. And that is our concentration, working with homeowners that we’ve already made a home equity investment with, not your traditional brokerage going out there trying to find buyers and sellers.”
He also added: “We have the same interest as the homeowner in maximizing the value of that property when they go to sell it since we’re invested alongside them. So that’s a major differentiator from us and other agents.”
Phillip Cantrell, founder of Benchmark Realty LLC, a Tennessee-based real estate brokerage, sees one possible vulnerability in Splitero’s business model. He observes that the company is betting on a reasonably quick sale, at an increased price, drawing from the “ever rising market” theory. However, having lived through 2008 to 2012, Cantrell is leery about the notion that home prices always go up.
“In the recent price run-up, the areas where this company operates saw the most rapid price increases and feeding frenzy when a home did go on market. In that environment, the model makes some sense,” Cantrell said. “However, the West is also the area that is declining the fastest. Since this model is dependent on selling the home quickly, their move into real estate brokerage is an attempt to control that. I will say that real estate brokerage is a far cry from Fintech.”
The market for home equity is juicy
The market for home equity is big, worth about $30 trillion, according to Gifford. Since Splitero launched in 2021, the company has been experiencing “overwhelming demand,” the Splitero website reads. Therefore, the company has temporarily stopped taking new applications from homeowners.
“At this time, our primary focus is on funding homeowners who have already completed an application,” the company shared on its website.
Last January, the company raised about $12 million in a Series A funding round of $11.7 million led by Fiat Ventures.
