Product Overview of Divvy Homes
Divvy Homes is a tech-enabled real estate platform designed to facilitate rent-to-own home purchases, bridging the gap between renting and homeownership. Here’s a detailed look at what the product does and its key features:
How it Works
Divvy Homes allows customers to choose and live in a home with the intention of eventually purchasing it. Here’s the step-by-step process:
- Application and Prequalification: Customers apply for prequalification, which involves an evaluation based on employment status, income, and a soft credit check. Divvy requires a minimum FICO score of 550, a minimum monthly household income of $2,500, and available employment history for the last 3 months.
- Home Search: Customers can select almost any home on the market in the 19 metropolitan areas across the 9 states Divvy serves. Homes are typically of a higher standard and better maintained than those available for rent. Customers can use their own real estate agent or one from Divvy’s network of over 36,000 agents.
- Home Purchase: Divvy purchases the selected home with cash, covering all fees, closing costs, taxes, and insurance. The customer makes an initial down payment of 1-2% of the home’s value, which represents their starting home equity. The contract includes a predetermined future price for the home, reflecting expected home price appreciation over three years.
- Customer Move-in and Rental Period: The customer moves in and pays monthly rental payments. Approximately 70-75% of the payment is for the fair market value of rent, while 25-30% goes toward a synthetic equity account. This setup is designed for customers to build up to 10% home equity over the three-year lease period.
Key Features
- Rent-to-Own Program: Divvy’s core offering is a rent-to-own program that allows customers to live in a home while saving for a future down payment. A portion of the monthly rent payments is allocated towards building equity in the home.
- Low Down Payment: Unlike traditional mortgages that require a down payment of at least 5%, Divvy requires only 1-2% of the home’s value as an initial contribution, which is used towards the future down payment.
- Flexible Commitment: Divvy offers annual rent-to-own options, providing flexibility compared to the 30-year commitment of a traditional mortgage. Customers can try out the home before deciding to buy.
- Move-in Ready Homes: Divvy-owned homes, known as “Divvy-Ready” homes, are already vacant and available for immediate move-in. These homes have passed Divvy’s home evaluation process, eliminating the need for inspections or competitive bidding.
- Home Customization: Customers are encouraged to make the home their own by painting, landscaping, and bringing pets, similar to what they would do if they owned the home outright.
- Maintenance and Repairs: Divvy covers all maintenance and repair costs during the lease period, while customers are responsible for utility payments. This arrangement helps customers feel like homeowners and incentivizes them to take better care of the property.
- Future Purchase Option: At the end of the three-year lease, customers can choose to buy the home at the predetermined price or withdraw their savings (minus a relisting fee) if they decide not to purchase the home. If the home’s value has increased beyond the predetermined price, the customer retains the upside.
- Credit Building and Savings: The program is designed to help customers build their credit and save towards a down payment during the lease period. Complimentary homeownership counseling is also available through the National Federation of Credit Counseling.
Benefits
- Exclusive Inventory: Divvy offers exclusive, off-market inventory available only to its applicants, avoiding competitive bidding and complex closing processes.
- Fast Move-in: Customers can move into “Divvy-Ready” homes within 1 to 30 days, and winterized homes can be de-winterized within 2 business days or more.
- Transparent Pricing: Divvy provides transparent pricing with easy lease extensions and no closing process to navigate.
- Guaranteed Move-in Date: Once the move-in date is set, it is guaranteed, providing certainty for the customer.
By combining the benefits of renting with the long-term advantages of homeownership, Divvy Homes offers a unique and accessible path to homeownership for those who may not qualify for traditional mortgages.