Josh Stech and his Sundae team connect sellers with property investors
For Josh Stech, helping people find a better place to live has never been a job, but a calling.
Stech is the Co-Founder and CEO of Sundae, a California-based firm that specializes in connecting people looking to sell homes that could “use a little love” with property investors looking to buy. His interest in real estate goes far beyond his co-creation of Sundae three years ago, however. Growing up in a real estate family, the industry was always top of mind for him. Stech’s mom was a sales agent and property manager, and his dad was an investor in pre-construction developments and opportunity zones. That’s why it’s not surprising that he applied the Bachelor’s degree in economics he earned at Stanford to real estate, and the ongoing 2008 housing crash in particular.
“I did my honors thesis on the subprime lending crisis—not just what was happening economically to the country, but specifically how that was impacting some of the underserved segments of the population,” Stech said. “Remittance activity back to Latin America and other parts of the world shined a light for me on the distress that the country was seeing, specifically the housing driven distress that was happening at the time (2008 and 2009) and the number of families that were being impacted by it.”
The moment was a formative one for Stech. He became focused on understanding how to revitalize the dilapidated, bank-owned homes that were bringing down neighborhoods’ value. Stech moved to Las Vegas after he finished college and jumped into the real estate business. He began to purchase homes from bank auctions, manage the construction and ultimately sell them. He also provided loans to other property investors who were doing the same.
“I started the business with my dad. We were a small, one-stop shop for quite some time,” Stech said. “It was exciting, challenging and rewarding to improve the condition of these houses and get them back into the hands of homeowners or renters who needed a better place to live.”
After his time as an investor and private lender, Stech set his sights on applying his experience to the venture-backed startup world and became Founding Partner and SVP of Sales for the team that would go on to build LendingHome, an online mortgage bank specializing in short-term residential bridge loans. During his time at LendingHome he helped the company outperform veteran competitors as the company scaled to 350 employees and $150M in venture funding, becoming the largest player in the space.
Building the Perfect Sundae
With more than a decade of experience in the property investing business across acquisitions, renovations, and lending, Stech saw a new focus area that needed attention. He realized there was a big opportunity at the beginning of the fix-and-flip transaction value chain to assist homeowners looking to sell. He saw how often people with a dated or damaged home were dealing with a hardship that required a quick sale. For many sellers, fixing up their home was impossible, leaving them with few options at a desperate time. Stech saw an opportunity to change that. His vision was to help what he perceived to be an underserved segment of the seller market in a way that also benefited the small business owners in the property investing space that he’d grown to know over the years.
“After being in this business for 10 years and getting to know thousands of property investors and real estate agents, I realized that sellers of dated or damaged homes needed a platform, marketplace, and an ally to help them broadcast their property to a wider audience,” Stech said. “They needed someone to package it as an investment, in a way that only property investors would understand, in order to get the most offers, best terms, and highest price.”
The solution would become known as Sundae, which Stech described as “a marketplace for houses that need love.” The company connects home sellers to thousands of qualified buyers who are looking for property investment opportunities. The homes are typically ones that are not ready for the end consumer because they need significant investment before the owner occupant buyer can move into it. Stech says their goal is to serve both sides of the transaction: sellers get competitive offers to ensure the best potential price for their home, while investors get a reliable partner for finding properties to grow their business.
“I wanted something that got everybody the best outcome while creating transparency in what has been historically a pretty opaque market,” said Stech. I wanted to try to help both sides of the transaction and hopefully build a valuable company in the process.”
Sundae’s marketplace makes them unique in the off-market home sales category and different from cash buyers or wholesalers. Once a seller decides to work with Sundae, the company packages and presents the property to thousands of local property investors who bid on the house without having to visit the property. Many of Sundae’s customers receive dozens of offers for their property within just a few days. This gives sellers a competitive set of offers to choose from, and more than would be manageable if the seller had to do the work of calling individual cash buyers themselves. The offer spread in Sundae’s marketplace is $71,000 on average, according to Stech. The seller not only benefits from having Sundae manage a competitive offer process, but there’s no fee to the seller.
“The price an investor is willing to pay for any given house is very subjective and varies from investor to investor. If you look at our average offer spread, it goes to show, if you are a homeowner, just calling an investor or two, means you are leaving money on the table,” he said. “That is what Sundae is all about—helping make sure that does not happen.”
In addition to skipping the hassle of home repairs, cleanings, and showings, Sundae’s value proposition to sellers includes a few other benefits – no closing costs or fees, even a $10,000 cash advance before closing, which many sellers use for moving costs or other expenses. For some sellers, speed is also a factor and Sundae allows for closing in as quickly as 10 days.
Sundae proved to be the perfect solution for homeowner Joy Davis, a former realtor who was looking to relocate from California to Idaho to be closer to family and for a more affordable cost of living. Her Vista, California home was built in the 1970s, outdated and in desperate need of upgrades, which required time, effort, and money. Not wanting to deal with the hassle that comes with selling a home the traditional way, she started to research Sundae. Davis was skeptical at first because she had heard of companies taking advantage of people, but her concerns subsided when she learned how Sundae could ensure a fair price without the troubles that come with putting a house on the market. She was 100% sold on Sundae after she saw how much time and money it would cost her to sell her house the traditional way.
“Sundae came along and made us a good deal,” Davis said. “We could pick when we wanted to leave, and we could leave behind anything we didn’t want to take with us. We got a fair offer without ever having to list the house, without anyone having to be in my home.”
Davis also appreciated the open lines of communication she had with Sundae’s Market Expert. Once the sale was closed, she felt like a weight had been lifted off of her shoulders.
“Sundae made it comfortable for me to sell my home with the quickest process and the least amount of headaches.”
Similarly, Bert, another Sundae customer, was looking to sell his father’s home after his passing with as little hassle as possible. He’d done the multiple listing service (MLS) process in the past, but this time wanted to sell the property “as is” and not have to worry about getting it ready to sell or dealing with showings. Bert recalled a letter he’d received from Sundae a few months prior and connected with the team to get an offer. Within just a couple of days, Sundae prepared his detailed property profile and began marketing the property to hundreds of local, vetted investors on their marketplace. Sundae presented Bert with multiple cash offers for him to review within days—no showings required.
“It was an excellent opportunity for me,” Bert said. “I had gone through a normal agent for a house that I sold on my own, and I just didn’t like that experience at all. It was a lot of work on my part, a lot of money out of my pocket, and at the end of it all, you don’t recover that amount. You just have to subtract all of your time and effort from the process of selling the house. I understood that with Sundae, I didn’t have to go through any of that.”
After selling his father’s home, Bert decided he’d continue to work with Sundae to sell his other properties.
“If you’ve gone through the sale of a house, you know it’s never easy,” he said. “I learned that I actually made more money selling through Sundae than selling independently to an agent.”
A Partner for Property Investors and Real Estate Agents
In addition to helping sellers, Sundae’s two-sided marketplace serves the needs of real estate agents working with those sellers, and investors looking for properties they can buy to grow their business. For investors, Sundae helps with the difficult task of finding these properties and offers an online platform at investor.sundae.com where they can view available properties and make offers. Once an investor signs up to join the marketplace, they’ll have access to the full inventory of properties with detailed information including photos, floor plan, 3D walkthrough, and a third-party inspection report, plus they have access to Sundae’s Investor Advisor team to answer questions and provide support on transactions.
“I know from experience how hard it is to be a property investor. Our goal is to support the investors who’ve joined our marketplace by providing a reliable source of fully vetted deals, as well as advice and insights to help them navigate the complexities of the business,” said Stech.
Sundae also sees a great opportunity to provide realtors with a new arrow in their quiver—a partner that works with them to package and market their seller’s home to qualified property investors when the MLS is not the right place for them.
“Traditionally realtors have had a hard time helping sellers in these situations. We get it—realtors are experts at packaging and marketing homes in good condition to end consumers. Realtors often shy away from homes that need updating because they’re more comfortable selling a house that’s move in-ready,” Stech said. “When a realtor finds a seller with a property that needs love, and the seller needs a fast, quick sale to a property investor, they don’t always know how to handle it. In addition to working directly with homeowners, Sundae partners with agents in this situation to help them find the right type of buyer. We manage the necessary inspection reports, the 3D virtual walkthroughs, the floor plans—all the things we do for sellers. With Sundae, agents now can help sellers they weren’t able to help before.”
A Growth Strategy that Starts with Great People
Sundae is currently in nine markets including Los Angeles, Inland Empire (CA), San Diego, Sacramento, Salt Lake City, Dallas, Jacksonville, Tampa and Atlanta and is rapidly expanding. In most of the California markets where it’s been operating since 2019, Sundae is already the largest player in the off-market home sales category. The company also has its sights set on additional Texas markets including Houston, Austin and San Antonio, as well as the Pacific Northwest, Boise and beyond. The company’s expansion will partly hinge on finding City General Managers to run these markets.
“The City General Manager position requires a strong leader with a unique set of skills, and deep local market knowledge,” Stech said. “As soon as we find the right general manager, we’ll quickly launch our local marketing efforts and begin matching homeowners and property investors.”
So far, Sundae has not had much trouble finding the right people.
Stech co-founded the company with Andrew Swain, former CFO at Airbnb. The two worked together for a number of years before embarking on Sundae together. Their pedigrees and Sundae’s combination of innovation and speed to market have attracted an impressive team.
“Having a great co-founder and a talented network to hire from made all the difference,” Stech said. “The other thing that was helpful was we’d seen what venture capital could do to other fragmented, opaque businesses. I call venture capital ‘optimistic capital’. It’s people who say, ‘Here’s a bunch of money. You’re a smart team and you’re going after a big, exciting problem. I don’t need a financial return for a long time. Just make a big, transformational company that does a lot of good in the world.’
“I saw that at LendingHome; it was the first time I’d seen venture capital in action, allowing us to transform an industry. I wanted to do that again, so I pointed my focus at a massive problem for which I had tremendous passion. Starting Sundae or starting any business, no matter how big or small, comes with its challenges. But with the right people around the table, it’s worth it. It’s been almost three years, and it’s the most rewarding experience of my life by far.”
Handling the Big Demand, Limited Supply Real Estate Issue
The lack of inventory is one of today’s most dramatic real estate trends, according to Stech. The issue is compounded by the fact that with interest rates still below three percent, there’s high demand. The Sundae team has noticed more de-urbanization and movement from highly dense cities to less densely populated suburbs. Sellers want to upgrade or downsize but are stuck in a holding pattern. They can’t sell their home until they know there’s something available for them to buy and move into.
Meanwhile, home price appreciation is increasing, much to homeowners’ and property investors’ delight, said Stech. The other side of that coin is affordability, however. If or when upward pressure on interest rates begins to translate to higher mortgage rates, potentially due to robust employment gains and inflation, double-digit annual appreciation could subside.
Stech believes this is going to be good news for the buyers who are on the sidelines because they have given up after being outbid a dozen times. The concern is, the biggest wave of millennials to reach the median home buying age is yet to come, while a lot of baby boomers prefer to age in place. Meanwhile builders, scarred by the events of the last recession, are proceeding cautiously, so the supply issue isn’t going to ease for a long time, especially when it comes to entry-level homes.
“Every year, fewer and fewer homes under 1,400 square feet are built, the typical entry level size for younger, first-time home buyers,” Stech said. “At the same time younger home buyers prefer newer or renovated like-new, open concept homes with a space for home office. This is an exciting opportunity where Sundae can help out.”
Additionally, Stech has noticed a lot of innovation within the residential real estate space from Internet buyers (iBuyers) like Opendoor and Zillow to trade-in models like Knock and Nested. Housing options include rent-to-own models, sale leaseback models, and fractional home equity models such as Point and Unison.
“Those are all good companies, and they serve the 87 percent of homes that sell every year in good condition to an owner occupant,” Stech said. “They are houses that are in good shape, and owners with good options for selling who now are being given even more options for how to sell. That’s really exciting to see.”
That of course leaves 13 percent of the housing market that trades off-market to investors, the segment innovation has not touched. That’s where Sundae has found its footing within the residential real estate market.
“That’s really where Sundae stepped in. With the technology advances, and the access to data that we’ve seen proliferating in the last 10 years, someone needed to step in and make this a better experience,” Stech said. “We’re focusing on the 13 percent of homes that need love—a meaningful segment of the market made up of people in tough circumstances who deserve a fair shake.”
Sundae—the Real Estate Company for All Seasons
One of Sundae’s biggest advantages is that it offers a necessary service in any environment. It doesn’t matter if home prices are accelerating quickly, there’s an acute shock like the 2008 financial crisis or an acute cyclical issue like the fourth quarter of 2018 that Stech deemed, “a weird quarter.”
“I think the reality is there will always be a number of homeowners looking to sell a home that needs love as-is,” he said. “There are always property investors who are saying, ‘any market, up or down, I’m going to find a way to make money.’ As the market changes, we make sure that we’re finding homeowners in need. COVID is a good example—we certainly hadn’t predicted that out of state landlords would really need help due to the eviction moratoriums.”
Some of the landlords Sundae helps include those who are experiencing tenant turnover in their property, have property that a tenant damaged, or have a property in need of repairs like a new air conditioning system or roof. The Sundae team has found a lot of these landlords are apprehensive about those moments because of the foreclosure and eviction moratoriums.
“You have landlords saying, ‘If my tenants stop paying, I’m going to be in a bad spot,’” Stech said. “We started to see that sub-segment of our customer base needing more help than normal.
We try to find sellers that need help given what’s happening in the market. We cultivate this robust database of active property investors who can buy any home in any condition in any market cycle.”
Sundae is also happy to play an advisory role for its customers when needed. The company recognizes that at times when homeowners are experiencing financial distress, there’s a chance a property investor might leverage their desperation to try to purchase the home at a low price. In other cases circumstances might be well suited for a more traditional sales process. Sundae’s Customer Advisor team spends time with sellers up front to understand their circumstances and walk through all of their options even beyond Sundae to make sure they get the best outcome.
“One thing that we’re always counselling sellers on is no matter how urgent your circumstances, no matter how bad things have gotten or how much work your home needs, you deserve to get a fair price,” Stech said. “Every homeowner deserves a competitive and transparent process when selling their home. You need to get the property in front of hundreds of investors; please don’t call one or two because you’re not going to get the best price unless you expose the property to a wide range of potential buyers.
“How we think about the seller side of it is, no matter what’s going on, give us a shot because there’s no obligation or fee to the seller, and no one else has the reach of potential buyers we do. This is what we do, day in and day out. We can help you.”
Sundae’s tremendous growth means they’re becoming a go-to resource for investors to find a steady stream of well vetted deals. The firm focuses on making sure any property they bring to their marketplace is a qualified investment opportunity that’s ready to go. For investors, it’s all about saving them time and money. Sundae eliminates the hard work and cost of finding deals and takes the burden of things like direct mail and search engine marketing off of their shoulders, allowing them to put their money to work as soon as possible.
“There are parts of what (investors) do that are really specialized, and they should continue working hard at that,” Stech said. “(Things like) doing new construction and reselling the home. But there are pieces of it where a platform partner like Sundae can really help. Let us find the properties for you, let us help you with other services like financing, and even resale brokerage and escrow, so that you can focus on the value add that you bring to the table.”