Seventy million in seed funding is a whopping investment for an unverified tech startup, even if it promises to completely disrupt a relatively low-margin traditional industry like mortgage credit lending… But this is no ordinary mortgage startup. Venture investors including Zillow founder Spencer Raskoff and Trulia Co-founder Pete Flint believes Tomo has the potential to topple a legion of lenders who have increased market share, invested heavily in technology and made record profits in recent years.
Founded by former Zillow executives, Tomo believes that homebuyers need to gain an edge, especially in a market largely driven by limited inventory and fierce bargaining.
“The place where you see the most real estate innovation in the last decade or so is what we call ‘find and find’. Therefore, posting the listings on a portal on the Internet, ”said Carey Armstrong, who co-founded the company with Greg Schwartz and led the premier agent at the tech giant Seattle. “Our job is to help you get your dream home, not just look at pretty pictures.”
To provide this competitive edge, Tomo claims to issue mortgage pre-approvals in hours, not days, and reduces closing times to 21 days (an industry average of 47 days). The startup says it has also partnered with top local real estate agents who understand the markets they serve.
“Millennials and young people are hungry who want to buy homes differently,” Armstrong said in an interview with RealTrends. “They are used to modern experiences with great service and digital experiences. This traditionally was not available to them. [when buying a house]… You work with many different providers that are disconnected from each other and do not coordinate with each other. What we do is provide a home buying service, which is the only stop, and it’s as digital as you want, but there is still someone who can give you advice. “
Tomo claims its platform is different from its competitors, which appear to range from traditional mortgage companies and banks to iBuyer brokerages like Zillow, Redfin. First, it has nothing to do with refinancing mortgages. Tomo will only issue purchase mortgages and is specifically targeting areas with particularly fast-rising house prices and high demand among millennials, who are usually at a disadvantage in today’s housing market.
The company says its digital mortgage product is focused on data, automation, and third-party API integration. Tomo claims to offer the lowest mortgage rates in the industry by matching the rates of competitors. If the assessment is not completed on time or the final documents do not meet the deadline, Tomo executives declare that they will still be closed on time.
Success in the mortgage shopping industry depends largely on the ability to scale the product and develop a reliable channel of communication with real estate agents. Some of America’s top lenders such as Rocket mortgage, United wholesale mortgage as well as credithave spent hundreds of millions of dollars developing technologies to make loans close faster and simplify the home buying process for consumers. Tomo will also have to overtake traditional banks and tech firms such as Better.com, which also has venture capital and says it will be worth $ 7.7 billion after a merger and acquisition later this year.
Tomo has a great opportunity – Freddie Mac expects the number of purchases in 2021 and 2022 to approach $ 3.6 trillion. And not a single mortgage lender has even a 10% market share as a whole (Rocket is the largest), so entering a very fragmented market is possible if it has the means to compete.
And, apparently, Tomo will have the money. The $ 70 million seed round, the third largest in US history, follows the $ 40 million preliminary seed round. Ribbit Capital led the last round, and among other participants DST Global, NFX, SVB Capital as well as Zigg Capital…
Tomo has already launched Tomo in Seattle, Dallas and Houston and plans to expand into other hot markets later this year.
Tomo is a new mortgage platform backed by former Zillow executives Greg Schwartz and Carey Armstrong. The seed money was collected by investors from 10 investment firms to get Tomo from the ground. Which according to Crunchbase, this is the third largest seed round in US history.
Tomo’s idea is to help the buyer get an edge when buying a home.
In an interview with RealTrends, former Zillow CEO Carey Armstrong said buying a home should never be discouraging and stressful.
“The place where you see the most real estate innovation in the last decade or so is what we call ‘find and find’. So place your ads on the Internet on the portal, ”she said. “Our job is to help you get your dream home, not just look at pretty pictures.”
Instead of automated platforms, Armstrong mentioned that Tomo will connect shoppers with the best local agents who understand the markets they serve.
“There is a hunger among millennials and young people who wants to buy houses differently,” she said. “They are used to modern experiences with great service and digital experiences. This traditionally was not available to them. [when buying a house]… You work with many different providers that do not work and do not coordinate with each other. What we do is provide a home buying service, which is the only stop, and it’s as digital as you want, but there is still someone who can give you advice. ”
One of the company’s claims is that it uses data to force home buyers to close three weeks in advance.
In accordance with ValuePenguin, the average closing time is 47 days for all types of loans. Tomo wants to shorten this time.
The goal is to get the buyer’s desired home as soon as possible. Preliminary approval is reportedly carried out within hours, not days, and guarantees the buyer the timely closure of the transaction.
There is a lot of opposition. Perhaps to stand out, the company said there was no refinancing. Instead, it focuses on attracting buyers to new mortgages.
For starters, former Zillow executives Armstrong and Schwartz launched Tomo in Seattle, Dallas and Houston. The plan is to target areas with rising house prices and high demand, which are plaguing millennials and first-time homebuyers.
It is too early. Tomo they have to work in a competitive pool of other trusted mortgage companies.