Page 76 - Bloomberg Businessweek July 2018

◼ FINANCE Bloomberg Businessweek July 2, 2018

days in Seattle in May, according to brokerage Then again, buying lots of homes is risky, even
Redfin Corp. Things move even faster in Denver. with someone else’s money. “To me a lot of these
“The inventory problem is not going away over- business models are highly dependent on a hot mar-
night,” says Stephen Lane, co-founder and chief ket where it’s easy to sell,” says Daren Blomquist,
executive officer of FlyHomes. “Either we can senior vice president at Attom Data Solutions. In a
ignore it, or we can provide a level playing field.” less frothy market, buyers “wouldn’t need someone
After the Great Recession, the proportion of to help submit a cash offer on one end. On the other
homes bought with cash climbed steeply, in large side of the equation, if you did end up with inven-
part because deep-pocketed institutional inves- tory, it would be harder to unload it.”
tors began snapping up single-family homes they Even if home values fall, Lane says, FlyHomes
planned to rent. While that activity has cooled, cash has a buffer for losses because of the deposit it
buying is still a major part of the market. Through requires and the fee it charges. Nor is it holding
March of this year, it accounted for about 30 per- inventory for long. The company hopes that if
cent of transactions tracked by Redfin. That’s com- prices cool, customers will appreciate the ways it
pared with less than 20 percent during the height tries to make buying easier—not just the ability to
of the last housing boom. flash cash. �Noah Buhayar and Patrick Clark
FlyHomes’ ability to turn clients into cash buyers
exploits a quirk in the capital markets that’s arisen THE BOTTOM LINE It’s not always easy for consumers to get a
mortgage quickly, but money is abundant for startups that want to
since the housing meltdown: Consumers are being step into the homebuying process.
put through more rigorous standards when they
apply for a mortgage. Meanwhile, it’s comparatively
easy for companies—even those with new, barely
tested ideas—to get buckets of money from banks,
venture capitalists, and other institutional investors. Billionaires Rescue Harvard
The VCs at Andreessen Horowitz led a $17 mil-
lion funding round for FlyHomes in May. Two other From Poor Returns

companies—Ribbon and Knock—are pursuing sim- 25
ilar models elsewhere in the U.S. Meanwhile,
startups Opendoor and Offerpad LLC have raised ● The richest endowment in higher education lags the
imposing war chests to buy homes in cash and list Ivy League average, but the school is a fundraising powerhouse
them for sale. These companies charge a fee in
return for the convenience of a fast transaction,
but have nonetheless proved popular. Opendoor, Three years ago, hedge fund billionaire John Paulson
which has raised $645 million in equity since offered his alma mater, Harvard Business School,
launching in 2014, is buying homes at a rate of an enormous gift. Nitin Nohria, the school’s dean,
$2.5 billion a year across 10 metro areas. Zillow responded in a way that would shock most other
and Redfin are experimenting with similar models. charitable organizations: Thanks, but we don’t
In addition to bringing its financial resources to need it. Instead, Nohria suggested Paulson direct
ILLUSTRATION: NICHOLE SHINN; PHOTOGRAPH: DAVID L. RYAN/THE BOSTON GLOBE/GETTY IMAGES
the table, FlyHomes is trying to make homebuying the money toward Harvard’s engineering school,
more efficient by dividing up the various parts of the according to people familiar with the exchange. So
process and hiring specialists for each step, from in 2015, Paulson did just that, giving $400 million, a
negotiators to people who give home tours, Lane gift the university called its largest ever.
says. Garg, the co-founder, has often stepped in at This embarrassment of riches helped Harvard
the end and put his name on the sale to the buyer, University raise more than $9 billion in its most
which is why he catapulted to the top of the bro- recent fundraising campaign. That record haul
ker list in the Northwest. The company also offers represents a key achievement for Drew Faust, who
its services in the Bay Area, Boston, and Chicago steps down on June 30 as Harvard’s 28th president
and plans to expand to Portland, Ore., this summer. after an 11-year tenure. Among other bequests, she
Redfin CEO Glenn Kelman says these new ven- secured $150 million from Ken Griffin, founder of
tures are part of a shift in how homes will be bought hedge fund Citadel Advisors, largely for finan- ● Faust
and sold. “There is just money coming out of every cial aid. An additional $50 million for biomed-
possible part of the world, and it isn’t going toward ical research came from the family foundation
the consumer,” he says. “It’s going toward real of industrialist and investor Len Blavatnik. The
estate businesses who charge the consumer for foundation of Glenn Hutchins, co-founder of pri-
access to that money.” vate equity firm Silver Lake, gave $30 million