California-based home equity investment firm Splitero recently launched its own real estate brokerage, Splitero Homes. This new brokerage is available in four states – California, Colorado, Oregon, and Washington – and aims to help homeowners sell their properties for a higher price.
Splitero, founded in 2021, primarily focuses on home equity investments (HEI), which differ from home equity lines of credit (HELOC). The company’s unique business model allows homeowners to access upfront cash payments of up to $500,000 without income or credit score requirements or monthly payments. In return, customers agree to share the appreciation of their homes when they are sold within a 30-year term, while still retaining a minimum stake of 20%.
Splitero Homes will cater primarily to sellers who are already clients of Splitero Funding, the home equity investment business. Michael Gifford, a representative of Splitero, explained that the brokerage’s value proposition is its investment in the property alongside homeowners. This means that Splitero Homes has the same interest as the homeowner in maximizing the property’s value during the selling process, setting it apart from traditional agents.
While the company’s approach seems promising, some experts have expressed concerns. Phillip Cantrell, the founder of Tennessee-based real estate brokerage Benchmark Realty LLC, believes that Splitero’s business model relies on a reasonably quick sale at an increased price, assuming that home prices will always go up. Cantrell points out that the West, where Splitero operates, is experiencing both rapid price increases and declines, and leveraging real estate brokerage may be an attempt to control these fluctuations. He also noted that real estate brokerage differs significantly from financial technology (Fintech).
Despite these concerns, the market for home equity is substantial, estimated to be worth around $30 trillion. Since Splitero’s launch, the company has experienced overwhelming demand and has temporarily halted new applications from homeowners. In January, Splitero raised $12 million in a Series A funding round led by Fiat Ventures.
Overall, the launch of Splitero Homes represents an innovative approach to the real estate market, combining home equity investments with real estate brokerage services. With its unique value proposition and focus on maximizing property values, Splitero aims to make a mark in the industry. However, the company will need to navigate potential vulnerabilities and adapt to the ever-changing real estate market to succeed in the long run.