Divvy Homes Is On A Mission To Make Homeownership More Accessible – With high eviction rates, substandard properties and shady legal practices, the rental house business is one of the darkest corners of the real estate world. Financially disadvantaged people looking for a piece of the American dream are often robbed for money and property improvements, then thrown onto the street.

Divvy Homes, founded three years ago and backed by high-profile Silicon Valley investors, says it is targeting all these changes.

Divvy Homes Is On A Mission To Make Homeownership More Accessible

Instead of offering buyers a small selection of vacant homes to choose from, Divvy allows them to select properties on the open market. The sale price is locked in at the start of the lease, and they can get a discount to get started. And the service is offered to homeowners to help them get the mortgage they need, while Divvy keeps the extra money they set aside each month for a down payment.

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Already, some cautious buyers have been convinced. “We did some research on this because we were suspicious and concerned that we might be scammed,” said Nash Alexander, who foreclosed on his home earlier this year.

Now Divvy is entering an important year. The first phase of this three-year lease will end soon, and this buyer will have to decide whether to buy or get out. Some buyers, such as Mr. Nash, closing on their home ahead of schedule, and Divvy saw the promise of offering a new path to home ownership as a blessing.

But Divvy also features some famous industry battles. Some customers complain about high costs and maintenance problems. In one area, Divvy is likely to be sold to overseas buyers such as renters who have chosen a home. And the company has been involved in several dozen eviction cases, though most were eventually settled or delayed due to eviction restrictions due to the coronavirus pandemic.

The pain and progress that Divvy has achieved is told through the experiences of two teachers in two cities.

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Mr. Alexander, a teacher in Atlanta, couldn’t be happier. He and his wife, Pam, closed on their home for $172,000, 15 months ahead of schedule. Higher costs in recent years mean they need more time to collect the down payment, and by buying at the start of their lease, they get a $10,000 discount.

“We went in expecting we wouldn’t have to lease from them for three years,” he said.

But Thomas Weaver, a private school teacher who lives in the Cleveland suburb of South Euclid and filed for bankruptcy in 2017, has nothing but complaints: The $1,430 monthly payment is too high, the company is dragging its feet. Do it and make it cheap. Problems with leaks and rats, and the whole experience was not worth the trouble, even though he got a lot of money back for the purchase.

“We will pay about $55,000 in rent over three years,” Mr. Weaver said. As he left the house, he added, “We have nothing to show for it,” he said.

Divvy Homes Is On A Mission To Remake Homebuying

Since it was founded in 2017, Divvy has been hailed as a leading member of companies aimed at those who have moved away from traditional lending. Backed by investors such as Silicon Valley venture capital firms Andreessen Horowitz and Caffeine Capital, as well as Singapore’s sovereign wealth fund, Dewey has grown rapidly, now leasing more than 1,500 homes in nine markets, including Atlanta. , Cleveland, Cincinnati. , Memphis and Phoenix. The company expects to convert about half of its tenants to homeowners by the end of the first lease term.

Frank Ford, a senior policy adviser with the Western Reserve Land Conservancy who has focused on housing issues in the Cleveland area, said this would be a significant achievement, given that Divvy’s customers often do not have good credit histories. And, Mr. Ford said, Divvy avoided the “worst abuse” of the industry that has grown in popularity since the 2008 financial crisis.

Thomas Weaver, a private school teacher in Cleveland Township, South Euclid, who filed for bankruptcy in 2017, has nothing but complaints about Divvy.Credit … Da’Shounae Marisa for The New York Times

Rent-to-own companies fill a niche in low-income communities, where so-called small-dollar mortgages are hard to come by. But they often market the homes at a bargain price, and the worst companies – some of which have been fined and sanctioned by the attorney general – are quick to evict tenants and take advantage of improvements made by hopeful buyers.

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Divvy describes itself as the good guy in the industry, one of the company’s founders, Adina Hefts, admitted to having a “bad reputation.”

“I thought it was going to be the end of the world,” Ms. Hefts, 33, said of the collapse in home prices and mass foreclosures that didn’t materialize. “Right now, we’re doing more volume than ever before. It’s crazy.”

Ms Hefts, who is also Divvy’s chief executive, said the company was essentially a “savings mechanism” for its customers. They pay above-market rent, with premiums going toward maintenance costs and paying off at the end. If the tenant buys the property, Divvy makes a profit from the sale on top of the rent it collects. If the renter decides not to buy — or still doesn’t qualify for a mortgage — Divvy returns the extra cash the renter paid for the equity, minus a 2 percent “surrender fee” from the original purchase price.

For renters like Jens Scott, high payments are an incentive. Ms. Scott, 27, was born in Lithonia, Ga., in June. He bought his house for $133,000, just five months after he started making monthly rent payments. These payments total $1,520: $1,220 for rent and maintenance, and $300 for equity.

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“Financially, it doesn’t make sense to pay that much,” said Ms. Scott, a Verizon sales executive with a 6-year-old daughter. Her new monthly payment – on a 2.75 percent mortgage, plus the cost of insurance – is just $895.

But Divvy doesn’t always expect tenants, and at least one local official, even if it charges extra money to protect customers.

Dewey allowed tenants to move into Ohio homes without correcting half a dozen property code violations, said Sally Martin, South Euclid’s housing director. The wiring in the basement and the drainage and ventilation problems in the bathroom took a year to fix, he said. The final inspection is scheduled for next month.

“Davy, by their own admission, did not do a good job on this deal and was behind the eight ball when it came to code,” Ms. Martin said in an email. He said Davy’s decision to buy a house that needed significant work seemed at odds with the company’s business model – which “only works if the house is in good condition.”

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Ms. Hefts, Divvy’s chief executive, said the company guarantees real estate security and affordability and allows renters to choose housing only within the price range they believe they can afford. It also takes other steps to help customers, he said, including paying for credit counseling and reporting rent payments on time to credit bureaus to help strengthen tenants’ credit scores.

Dewey’s desire to help, Ms. Hefts said, increased during the outbreak. “We monitor our customers’ ability to pay, and try to support them through rental assistance programs, be flexible in scheduling, and try to reduce rental obligations where we can,” he said.

But the vast majority of companies only stretch so far. Divvy had launched dozens of eviction proceedings before various nationwide bans were implemented. Ms Hefts said the company had little choice after the tenant failed to respond to the notice.

Ms. Hefts said the company can take unpaid rent from a tenant’s accumulated equity, but it doesn’t pay additional penalties if an eviction occurs.

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“Our intention is to be fair and help customers where it doesn’t fit,” he said.

The company declined to say how many homes it has sold to customers or how many customers it has turned away, but not every tenant has their lease up, whether by choice or not.

The company has purchased about 200 homes in the Cleveland area. There were 16 resales at the end of September, but about half went to buyers who had not previously rented a home, according to interviews with several buyers and a review of local real estate records. This is the most likely sign that the tenant has decided not to buy the house, or has been evicted.

The fate of tenants whose leases expire next year will provide a test of whether Divvy really creates a user-friendly alternative to buying a traditional home. And Mr. Ford, of the Western Reserve Land Conservancy, said the company’s goodwill ultimately rested on the mercy of its businessmen.

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“It’s almost like they’re trying to fulfill a nonprofit mission through a nonprofit business,” he said. he said.

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