Crowd funding's new realm: home buying

Local real estate agent Aaron Mighty was frustrated. The days when clients could purchase a home with reasonable down payments seemed to be gone. Now his clients were competing with hedge funds and cash buyers in David vs. Goliath struggles that seemed extreme to him.

As a creative way to level the field and help his clients achieve their dreams, he has created a crowdsourcing platform like no other. Called HomeFunded.com, Mighty is hoping his new site will help homebuyers raise the deposit they need to compete through leveraging their social networks.

The principle is simple: Interested participants sign up through the website, agree to complete one hour of educational training to prepare them for the fundraising and home buying process, then they list their down-payment goal, the house they are interested in and their personal story on the site to officially launch their campaign.

Then the waiting begins.

Anyone interested in contributing to someone’s home buying dreams can simply log on to the site and contribute a minimum of $10 to the campaigner of their choice.

As incentive, Mighty says he is working with major retailers like Lowe’s, Home Depot and Bed, Bath & Beyond to provide coupons and special savings for those who contribute, in accordance with the amounts they donate.

In the early launch phase now, Mighty says he has signed up more than 100 campaigners for the official launch.

But some professionals in the industry are skeptical of the site’s viability.

“I would have real concerns over how mortgage lenders would look at this money,” said Orlando Realtor Christina Rordam.

To bypass problems with lenders, Mighty said, “If the campaigner is using FHA or VA loans, we will give the money to a beneficiary, like a relative, who can then give the money to the home buyer.”

This should in effect allow them to use the money like any other gift money.

Homebuyers using traditional mortgages should not have a problem using this money as a down payment, Mighty said.

Expressing concern over shortcutting the process, Rordam said “Buyers with no skin in the game, so to speak, concern me, it always means more to them when their own money is on the line. They still have to qualify for the loan, no matter how much down payment they get. If they are not prepared to own a home, things may not go well down the road.”

Mighty was not able to produce the site’s Terms of Service in time for review, but he stated that any campaign that did not result in a home sale would be fully refunded to contributors.

“I can sympathize with people going up against private money in this market,” said UCF economist Sean Snaith. “It is not clear to me that this solves a problem though.”

“The housing market is in a transition period where it is more difficult for buyers, but I am confident that this is not a permanent phase.”

“Hedge funds buying up homes, holding them and renting them out will create an overstock of rental properties that will drive rents down and as that happens this type of investment will lose its appeal and cash buyers will move on and the situation will normalize.”

“This idea does highlight a market reality, but it doesn’t sound like a solution,” Snaith reiterated.