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Sundae CEO Josh Stech discusses recent product launches, market outlooks and plans ahead

A volatile housing market with low supply, high demand and rising interest rates has affected property investors and home sellers in a variety of ways. One trend that has picked up steam in recent years is the purchase and sale of “as-is” property, due to a growing need for inventory and seller’s desire to get cash quick in times of need.

Sundae is addressing this pain point with its marketplace for “as-is” properties, connecting property investors with homeowners that have some urgency to sell their homes.

Earlier this year, the company also launched its lending service, Sundae Funding, to provide these investors with financing solutions. It also most recently launched its premium property investment membership program, Edge, to help investors streamline the auction-based purchase process and scale their businesses.

FinLedger spoke with Josh Stech, co-founder and CEO of Sundae, to talk about the company’s recent product launches, future plans for the marketplace and how he views the current market.

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Josh Stech, Sundae CEO

Q: First off, could you just describe Sundae and the services you offer?

A: Sundae is a marketplace for homes that need love, for homes that need to sell in “as-is” condition, because the homeowner has some urgency, personal urgency and the property needs some level of repair or renovation. And we connect those homeowners and those properties with thousands and thousands of local qualified property investors, who make offers on their properties in an auction format. In order to give them fast price certainty, but also price competition. That’s really the big thing that’s been missing from this category of real estate, fair price competition. Historically, sellers call one or two investors, get one or two offers, and the incentives are very, very misaligned. Then there is Sundae where they’re able to get dozens of offers, in some cases within a few days, and still have the speed and certainty that they need, but not compromising on the price competition and getting a fair price. That’s kind of the core marketplace of Sundae, it’s a matchmaking service between sellers of “as-is” properties with local property investors.

And then beyond that, Sundae provides a lot of the services that property investors need to start and scale their business. Not just access to properties, which is their number one need, but access to financing. Access to a lot of other tools that we’re going to be adding to over time, just to make it easier to come to one place and get their business done.

Q: Why catalyzed you to attack this segment and go after these kinds of properties?

A: I’ll go back on my background a little bit, because it really is important context. I started my career after Stanford grad school by becoming a fix-and-flipper. I moved out to Las Vegas, it was 2009 and I saw an opportunity to purchase homes, renovate them and resell them and in some cases even lease them and hold them. After doing a few hundred homes in the first two years of that portion of my career, I realized that a lot of investors were capital constrained, who were buying and fixing and flipping homes. So I became a lender to those investors and did about 1200 transactions, loans that is, and then that ended up precipitating with me starting a company with some friends called LendingHome [now known as Kiavi]. Five years after becoming the largest institutional lender to property investors at LendingHome. I realized, ‘”Gosh, almost 10 years of experience in this ‘homes that need love’ category has brought me to the big opportunity”, like the Jerry Maguire epiphany as I call it. Now that I’ve told you the context, this is the thing that needed to be done to transform this entire category, it was Sundae.

There was really one experience towards the end of that 10 years that made me realize this, and it was a call I was having with a property investor, who was describing how business is going. He was giving me an example of a deal and he said, “You know, I put the home under contract for $100,000, and a couple days later, I found another investor to buy it for $190,000 and I made $90,000 in a few days.” That’s what’s called wholesaling, so he never bought the property, he just created an option to buy the home, and then found somebody else to pay a lot more. And I said well I’m just curious, tell me about the seller, and it was a widow who had just recently lost her spouse and she was moving into a nursing home and needed it done quickly. It was really dated, she’d been there for 40 years, and I said, “Okay, so she got 100 [thousand], you got 90. Do you think that that was fair? Do you think that what you did there was actually worth $90,000? Do you think maybe she could have used some of that $90,000 to set her up in her next chapter of life?” He seriously was like, “Well all she asked for was $100,000.” I said, “Yeah, I know, but maybe she needed $170,000 and you could have took $20,000. How do you think about that?” And he’s like, “No, that was fair. That’s that’s how I negotiated it and she was okay with that.”

I realized at that moment that there’s this massive need for sellers in this situation, where they’re facing some urgent life event. They have a home that needs some work, and they’re getting absolutely preyed upon by a lot of these investors. And by some of the wrong ones. There’s a lot of right ones, and there’s a lot of wrong ones. It was that conversation that led me to be like, oh my gosh, there needs to be a marketplace that sits in the middle of these two people, and helps investors find properties, which is their number one issue, help sellers get a fair price and does it by standardizing the rules of engagement. That’s really what we’ve done, we standardize the way that offers are made. When buyers are paying the fees there’s no contingencies, and they have all the information they need to bid, sight unseen, on the property. We provide floor plans and walkthrough, matterports, pictures, construction estimates in some cases, and we give both sides what they need to make this a fair process.

Q: You mentioned your lending service that recently launched, Sundae Funding, what drove that and how has that been going?

A: An investor’s number one need is to find good investment properties. Their number two need is to finance those opportunities. And as we were building into more and more of the value chain that these investors need, it was natural. We were controlling a lot of supply of home, and investors were saying, “Gosh, it’s such a pain that I buy my home from you and then I have to go coordinate with a third party lender, who’s asking for a lot of the information that you already have the platform. You’ve already been in the home, you’ve already done an inspection report. You’ve done the things that now the lender wants to do again, and it’s basically wasting time and money. Why don’t you guys just provide capital?” And so that was a very natural extension of the platform. We’re able to provide investors with very competitively priced capital, but most importantly we save them a ton of time on the coordination of getting capital onto their transactions. Because we’ve already been in the home, we know it really well and we can attach a loan many times faster than a new lender who’s unfamiliar with the property. That was kind of how we were thinking about it. It’s just continuing to serve more of the needs of our property investor customers.

Q: What are some of the biggest challenges when it comes to integrating lending?

A: I think the biggest challenge with starting a lender is really just the capital. It’s a capital-intensive proposition. You have to have to go raise capital to fund the loans, you have to raise warehouse facilities to hold a lot of loans at once, and then you have to build relationships with big loan buyers. Mostly Wall Street firms and big banks, who want to then buy the loan that hold them to term. There’s kind of three pockets of capital that you have to stand up to build an effective lender.

The integration though, into our platform, was really easy, because in order to become an onboard investor with Sundae you have to provide us with a lot of information that is required to get a loan. So we already have that information. A lot of the property information, we already have it because we onboard the property onto our marketplace. The integration was really just finding the capital, and then building the technology experience so that loans can be attached at close in a very seamless way. But I have a lot of experience doing that. This is my third time building a lender, so it was a little easier the third time around.

Q: Let’s talk about your new premium membership program, Edge. Can you talk about what that offers and what drove you to release that?

A: We want to continue adding more and more value to our property investors, and giving them tools that make it easier to do their job. Right now Edge allows you to do a lot of things. One of the hardest parts about being an investor is scaling your business across multiple cities, and we provide inventory now in 23 cities across the country. We’re really the only platform that makes it that easy to go get vetted investment property. Giving our investors access to the nationwide inventory to scale their business, and giving them access to tools that make it easier to just do their job on the go. A mobile application we built as part of our Edge membership allows people to make offers, monitor their offers, and communicate with our team members as they’re winning deals and closing deals, all from their phones. So they can be on the construction site, on the road going to get materials or just spending more time with their family and not being tied to their computer on their desk.

The ease and convenience of buying and financing homes, a big part of the Edge release was the mobile app, and then features like AutoOffer. It’s great to be able to do this on the go, but even on the go requires that you’re monitoring, getting notifications and responding to it. AutoOffer was something we just introduced, and basically it allows you to set your max willingness to pay for a property. It’ll then bid you down, assuming that is more than the current highest bid on the property, it’ll bid you down to be the winning bid. Then it will increase your offer automatically by an increment that you designate, so that you don’t have to keep monitoring it. You also don’t overpay, so if you wanted to pay 300 [thousand], but ultimately after the auction is done, the highest bid winning bid was 290, then you you didn’t overpay by $10,000.

Some of the other features that we were hearing from customers that could be really helpful were in closing transactions. Especially in a market environment like now that’s changing rapidly, waiting for sales to show up in public record, like the amount that the home was sold for, can take weeks in some places. It can take four, five or six weeks for these homes to show up. But when the market is changing quickly, you really want to see as quickly as you can, “What did 123 Main Street sell for?” So that you know when 124 Main Street comes on sale. Historical transactions, facilitating those showing up immediately, and giving our investors members much better information to understand the value of the homes on the platform.

Finally, it’s really hard to go get quality education in terms of going from zero to one, one to 10, or 10 to 100 as a property investor. There are no four-year universities that teach you what you need to know, and there’s no accredited trade school. It’s all this very informal, pretty low-quality education that we believe creates really costly mistakes when investors are just getting into it and trying to scale quickly. Our “Inner Circle”, which is part of the membership program, is going to be just packed with content. Interviews and webinars with experts, and new insights that our internal economics team at Sundae is putting out to help investors make more informed educated decisions about their investment practices. So they can be more successful, because at the end of the day our investors have to be very successful in order for our marketplace to thrive. They can’t be overpaying for homes that wouldn’t work. They also can’t be underpaying because our sellers aren’t getting a fair deal. Really we’re trying to provide as much education and tooling as we can to make the ecosystem sustainable and balanced. That’s really what releasing Edge was all about.

Q: The release mentioned showing offer rankings compared to others, and I wanted to ask if that would drive up prices? What visibility does that offer and what was the decision to give people insights into their rankings compared to others beforehand?

A: Beforehand, we weren’t doing that. What we were hearing from our investors was that it was frustrating to spend some time making an offer, and then not winning and then really not understanding how far off they were. Were they in second place? Did they lose by $1,000? That may have informed their decision on how to bid. You see these features on eBay and other auctions, where it gives you a little more visibility so you can make a better choice. That was the idea behind it.

You asked, does that drive price up? We have to you know, everybody has to remember like any marketplace, there are two sides. The only way that a marketplace is sustainable is if both are getting a fair compromise outcome. We do believe that one of the things that we’re helping solve for sellers is getting them a better price than if they only called one or two investors. However, by doing that we bring more inventory to the platform, which makes it easy for investors to do their job. There’s a framework I’ve used, because I was an investor for several years and then a lender for several years. What I noticed was property investors have to do a lot really well in order to be an effective investor.

They have to find deals. I call it the six Fs: they have to Find deals. They have to Figure the deal, which is kind of like underwriting and determining what to pay. They have to Finance the deal. Then they have to Fix it. They have to Fill it if it’s a tenant strategy, and then they have to Flip it. And then there is a seventh F, which is they got to have some Fun hopefully. What we’re trying to do is really say there’s only one part of that whole equation that’s irreducible and that has to be done by the local investor. And that’s it Fix it. Understanding the optimal level of renovations to capture the optimal return on renovation, that is the hardest part of this whole thing. We want to say stop worrying about finding it. Stop spending money in direct mail campaigns that don’t perform, stop spending money on Facebook ads, when you actually need to spend a lot in order for Facebook to be a valuable channel and their marketing budgets are way too small. Stop going down and sitting at the auction for hours on end and not winning a deal. Stop scouring the MLS when there are no investment properties there, come to Sundae. We’re trying to take the finding it and the figuring it out, to give them better tools and information to more accurately underwrite the financing. We’re trying to fix that. So that really they’re just doing fewer and fewer things, and they’re doing it better and better.

Sundae is never going to get in the business of fixing up homes, because that’s a very, very local aspect that requires local insights. What areas of the home should you renovate? What quality materials should you put in the home? Should you build a pool? Should you expand the floor production? Those are all decisions that need to be made by people who really understand the local market. But all those other things around it, you can imagine ultimately we will offer a service to help them resell the renovated home, so that’s the flipping part of the success. So that they don’t even have to worry about that. They don’t have to worry about staging the renovated home and doing showings, let’s learn to handle that too so you can just go back to the marketplace and find the next deal. Do what you do, add value through renovations and improvements and repositioning and then let us do everything else.

Q: Speaking of adding services, is there anything on your mind that you’re looking to integrate and add to the marketplace next?

A: This was a really big lift for us. It was something that was on the roadmap for a long time, so we’re all kind of just basking in the excitement of having released that and now having the ability to help more investors. We’re starting to brainstorm what could be next. There are so many things that investors need I think. I’m a big fan of education. How to underwrite construction more accurately, how to manage contractors more effectively, how to maximize the sale, and the resale of the home when it’s renovated and ready for the market. There’s just so much in there to do as an investor as I alluded to, that there isn’t really a good place to go find that information. So education. You can bet Sundae will be investing heavily in online learning curriculum to make all that stuff easier.

And then, a property insurance is something that’s always top of mind. There really isn’t good purpose built insurance programs for investors. It’s very confusing. Homeowner policies are very different than course-of-construction and vacancy policies. We think we can probably do that better at some point. Also construction materials, and again this isn’t what is next immediately, but gosh, a lot of our investors are going to Home Depot and Lowe’s and paying retail for their materials or getting their pro discount of a few percent. We could aggregate all that demand, and get materials at a much, much better price and create a marketplace for materials.

Construction labor is another thing we think a lot about, very especially in this day and age, it’s very competitive to find construction help. Creating a construction labor marketplace with that built-in RFP process, where as soon as you close on the home, why wouldn’t that home and its scope of work that you’ve decided on as an investor, go out to ten local contractors to compete against each other to do the work. There’s so many extensions in this business, and there’s a lot of features to the auction that can make you more competitive as a paying member that I think we’re still kind of brainstorming a bit. The Sundae roadmap is very long. It’s many, many years out, but very exciting.

Q: You raised funding pretty much every year since launching, are there plans to fundraise more this year?

A: We’re fortunate that we did that raise with Fifth Wall as lead back in the middle of last year, and the business has been doing really, really well. So we are not in a position of needing it. Of course we are looking at the markets and seeing what they’re doing and always making sure. For us the number one priority is to make sure that Sundae is maximizing the family’s health and property investors health, not just this year or next year or the next year. It’s that we build a durable, sustainable company that’s around for decades, because this opportunity is that big and it is going to be a long build to really realize the value. We’re looking at the markets and making sure that our capitalization allows us to have the runway that we need, but so far so good. So no specific plans, but most successful funding opportunities happen when somebody sees the progress, they like what they’re seeing and then they get a competitive process going. So you never know.

Q: You’re building for the long-term, but we are in a very interesting housing market. What have you seen in the market as it relates to Sundae, and what are your thoughts on how it’s going to move forward?

A: It’s the supply and demand guessing game. I mean, clearly higher interest rates means lower demand in general, especially the extent to which we’ve seen increase in interest rates. But one of the questions is, how much demand was out there, and if you take some percent off of that demand, is there still enough relative to how much supply is available? Because we know there was way more demand and supply was available. The question is, what are those ratios looking like now that interest rates have gone up? One thing that we know for sure is there has been no rush of inventory onto the market, which makes sense. Until you start seeing things like significant job loss, credit defaults on the company on the corporate side, which typically precipitates job loss, there’s really not going to be the force need to move.

There’s also not a lot of inventory coming from new home builders, because the supply chains have been just crushed. You look at the difference between home starts and home completions, and it’s just widening and widening and widening. Sure, plenty of homes are being started, but not a lot are being completed. We just don’t see supply coming in an amount that’s going to somehow outstrip the marginally depressed demand as a result of the higher interest rates anytime soon. If you look at the indices, like Freddie Mac‘s home price appreciation index, if you look at John Burns or look at Zillow, which we can all argue if that’s accurate at all based on recent events. But as of mid April, not too long ago, these indexes have increased their forecast over the prior quarter for what they expected to happen in 2022. The average HPA that they’re expecting for this year, is somewhere between 10% and 12%, and that’s even after the interest rates have done what they’ve done. I think again, that’s because nobody sees supply coming in a way that’s going to change the ratio too dramatically and cause prices to soften. We don’t see a lot of supply coming. I think we see probably some housing market strength for at least the next couple quarters. It’s a little hard with the rest of what’s going on to predict beyond that, like geopolitical environment certainly changes in terms of presidential runnings and things over the next couple years. In the near term, we think and most of the indexes think that this is going to be pretty, pretty sustained in terms of housing price strength.

Q: That’s all I really have for you, is there anything else you think I should know about Sundae or your journey in general?

A: We just announced a really exciting partnership with Dr. Phil. When you look at real estate, especially this category of real estate, it’s based a lot on trust. We noticed in our categories, there just isn’t really any one brand that screams trustworthiness when it comes time to sell a house “as-is” quickly. There isn’t like a common brand built around. buying your house for cash fast and quick, all these things but never at the highest price. That’s the dynamic we’re trying to change. Let’s get these homeowners a fair and competitive price, and also still create a very viable outcome for investors where they’re making money. These things have to be balanced.

As we think about building brand and a category that requires a lot of trust, we look at you know brand partnerships and people who’ve spent decades building credibility and brands with our customers that we can then sort of borrow. That’s what we did with Dr. Phil. It was a long time in the making. Talking to him about what we’re trying to do at Sundae, how our mission of helping people sell their home and their time of need really aligns with his mission, which has always been about helping people in their time of need, whatever that may be. We found a really good partnership, and just went live on to Dr. Phil TV shows. One where Sundae customers joined us and talked about their experience, and then one where we came in as a subject matter expert for a couple that was really struggling. The two had a lot of belongings in their home, and they were feeling stuck because they were being turned down consistently by realtors who said I can’t sell this house “as-is”. It’s not ready for the market. He brought us on in that segment to talk them through the platform, and it was very emotional and they realized there was a really good option for them to still get a fair price and quickly. We’re really excited about that partnership and just what it means for Sundae. You know somebody like Dr. Phil is not going to put his neck on the line and put his name behind the company that isn’t doing things the right way. I think that’s exciting and bodes very well for our property investors, because it means we’re going to reach a lot more sellers with a lot more credibility and there’s going to be a lot more inventory for investors to choose from.

Q: What are the hardest parts of dealing with distressed properties compared to standard sales?

A: It’s preparing the listing in a way that allows these investors to bid confidently and bid strongly, without visiting the home. It’s getting inspection reports, with third-party inspectors who are telling our property investors what they’re seeing about the property so that the investor doesn’t have to go to it themselves. It’s getting the disclosures, it’s getting the title reports, it’s doing the 3D walkthroughs of the property. It’s taking sufficient pictures so they feel they have a holistic view of what’s happening.

And then it’s certainly managing. They’re often going through a lot of things that require patience, and that require empathy and consideration. It’s kind of managing that seller, along with their property that is often very hard to get into, access and survey. It’s managing the seller, and then it’s providing adequate information to the investors about the property so they can make a strong bid. Those things are tough.


In other recent proptech news, Ukio raised $2.7 million in debt funding for its flexible living solution. 1Sharpe Ventures also closed a $90 million inaugural proptech fund focused on early-stage companies.

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