- Ex-Zillow exec Greg Schwartz launched homebuying startup Tomo, which offers digital mortgages.
- The company plans to guarantee closing to help regular homebuyers beat competition from investors.
- Tomo raised a $70 million seed round — the largest proptech round ever.
Residential real estate startups are no strangers to innovation — or investor interest.
Online lending startup Better is in the process of finalizing a
deal to go public, Rocket Mortgage started trading on the New York Stock Exchange last summer, and venture capital is pouring money into property-technology companies that have streamlined home sales and taken them online.
Joining the fray is Tomo, which is launching its lending operation today in Seattle, Dallas, and Houston. CEO and founder Greg Schwartz — a member of the “Zillow Mafia” who served as chief business officer and chief revenue officer during his 13 years at the real-estate giant — said that Tomo’s main appeal is that its mortgages will be guaranteed.
That commitment helps regular borrowers compete against investors in a cutthroat housing market.
“By having a closing guarantee, we can give listing agents and sellers the confidence to pick a good human and neighbor that can close on time,” Schwartz said.
Tomo raised a massive $70 million seed round last year from a range of funders, including Ribbit Capital and Zillow co-founder and former CEO Spencer Rascoff (another Mafia member). It is likely the largest-ever seed round in the proptech category, infusing the year-old company with enough capital to hire almost 100 people, become a registered mortgage originator, and build out a tech platform and underwriting process.
Tomo’s guarantee hinges on a promise that the company will not delay any mortgage closing, as long as it has received all of the information it needs from a borrower. Delays often come up when mortgage originators require more information on a property during the appraisal process, Schwartz said. Other providers sometimes give cash back to the borrower when there are delays, but Tomo will lend regardless and sort out the details after the closing.
“If there’s a balk, we will still close the mortgage afterwards,” Schwartz said.
This guarantee is poised to make a big difference during a hot housing market, when delays could mean the difference between buying a new home or losing it, maybe to an investor who can pay cash. Schwartz said that empowering homebuyers against well-capitalized and quick-moving investors is a major goal for the business in order to protect the largest slice of American household wealth.
The company is also launching with an offer to match the interest rates of other mortgage originators, in the hopes of giving homebuyers an opportunity to beat out investors from private-equity firms to short-term rental owners and to inject some “calmness” into the housing market, Schwartz said.
The company’s online mortgage origination process takes about 10 minutes, Schwartz said, and then allows customers to either work with their own broker or a Tomo partner agent. The latter is prepared to talk to sellers and sellers’ agents to reassure them that Tomo is backing the mortgage no matter what.
Schwartz said the company is entirely focused on lending to people trying to buy homes. Unlike competitors, it won’t participate in refinancing.
“We’re not doing any refinancing as a company ever,” Schwartz said. “We think we can only get good at one thing.”