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Fintech

Startup plans to allow consumers to purchase homes without a mortgage

Innovative, or risky?

One new Los Angeles-based investor-backed startup is claiming it will get Americans into homes without requiring a mortgage.

Fleq will launch next month in Pittsburgh, and instead of originating mortgages, its plan is to simply buy the home a purchaser wants and sell it back to them, bit by bit, in shares. The buyer can choose the length of time that they want to pay for the home.

“We didn’t think that [mortgages] were the appropriate and fair approach to homeownership, and we didn’t think it resonated with Millennials and Gen Zers, who saw their parents wiped out by the financial crisis,” said founder and CEO Todd Sherer, whose background is in real estate finance.

How does it actually work? Fleq charges rent to the homebuyers. The company says once the buyer has paid for 100% of the home, it will hand over the title – cutting any mortgage down payment or interest rates out of the process. But if the buyer wants to move before paying for the home completely, they would simply split the profits with Fleq based on how much of the home hey have paid off.

“We often refer to mortgages as a tool, which can look like a backhoe or trowel,” Sherer said. “We think of our alliance as a Swiss Army knife. We can do everything a mortgage can and can provide benefits you can’t get with a mortgage.”

And Fleq has big plans for its future, saying it intends to be a national financing option by 2021.

But many questions remain unanswered. How much of a premium will Fleq charge for rent? What will the risk profile of its buyers be? Has the company overestimated the demand from Millennials for an alternative mortgage solution?

“A mortgage, while mostly ubiquitous, is not the best way to buy a home any longer,” Sherer said.

One thing is certain – from startups to mortgage giants, many in the industry are revolutionizing the way we look at mortgages. Thinking outside the box is no longer good enough, many companies are taking a whole new approach.

In fact, HousingWire’s Tech100 award recognizes companies that do just that. And this year, for the first time ever, we are recognizing 100 real estate and 100 mortgage companies. The award recognizes the most innovative technology companies serving the mortgage and real estate industries.

Sound like your company? Nominate them before the deadline December 20, 2019. The winners will be featured online and in HousingWire Magazine’s March issue. Show us how your tech is revolutionizing housing.

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