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Real Estate & Housing

An Update from our CEO

Jonathan Asmis | 7 Jul 2022

At Landed, we believe in being as transparent with you as possible. Given the changing shape of the housing market, we feel it's important to be open about how these conditions are impacting our products and the ways we support our incredible community.

What customers need to know

Our priority remains helping essential professionals buy homes even in an uncertain market. We anticipate that with interest rates increasing, even more people will need down payment support, and our long-term goal is to ensure that option remains available to as many people as possible.

Based on this market backdrop, we are making two updates to our down payment program for new and renewing customers, effective July 7, 2022:

  1. Until the housing market stabilizes, we may not be able to accommodate all requests for down payment support. We will be implementing a waitlist process in select metro areas.  
  2. Landed has historically shared in 2.5% of the appreciation/depreciation of the home value for every 1% contributed to a down payment. Effective immediately, the equity share will be updated to 3.3% for every 1% we contribute. 

What this means

Down Payment Program Approval

If you are buying a house in a metro area where we have reached our maximum investment limit, you may be placed on a waitlist. Being added to our waitlist in no way obligates you to work with Landed, but it will ensure that we keep you up to date as down payment assistance funds become available in your area. Our goal is to get everyone off the waitlist as quickly as possible, but please note that if you enter into a contract on a home while waitlisted, you will not be eligible for down payment support.

Landed’s Equity Appreciation Share

In an example situation where Landed and a homebuyer each contribute 10% to reach a 20% down payment (a 50/50 split), Landed will now share in 33% of the home’s gain or decline in value at the end of the agreement, while the homebuyer will keep 67%. We believe this increase fairly reflects the increased risk of the investment in today’s uncertain real estate market, while still allowing homebuyers to benefit. It also provides them greater protection in the event that they have to sell at a lower price. (Note: These changes apply to new inquiries, as well as customers whose welcome letters have expired and are requesting a renewal.)

We do not make these adjustments lightly—we understand the impact of these changes and wish to provide assurance that:

  • We will honor existing terms for all of our customers with an unexpired welcome letter. All new and renewal welcome letters will be issued at the new terms.
  • For customers who are still in the homebuying process, we will help them understand their options so they can make the right decision for them.
  • We recognize that the market will continue to evolve, and we are committed to adapting our business to reflect what’s fair based on current and future conditions, through the ups and downs of the market. 

Why we are doing this

Over the past few months, the housing market has been more volatile than it has been in decades. The result is that everyone who interacts with the real estate market —banks, investors, and homebuyers —is feeling cautious. And this directly impacts our down payment program. 

Co-investing in houses with our customers requires capital, so we partner with impact and real estate investors to secure the funds we need. These investors (some of which include our own customers via their retirement funds) require a reasonable return for the risk they are taking. For our down payment program, that return takes the form of the expected appreciation of the home price and the equity share at the end of our agreement. With higher interest rates and projections that home prices may fall, potentially dramatically in some metro areas, our investors are now taking on significantly more risk than they were just a few months ago. 

Find What’s Fair

This wasn’t an easy choice, but one of our core values at Landed is “Find What’s Fair,” and this value has helped guide our decision.

In 2017, we published a blog post explaining why equity sharing is fair. In this article, we noted that the appropriate equity share will ultimately be decided by the market, and that we expected it would likely need to change over time. This is one of those times. We keep that post up as a reminder that finding what’s fair includes both remembering where you came from and making hard, but necessary, adjustments to keep moving forward. 

At the time that blog post was written, Landed was supporting one homeowner every other month and hoping to invest in $5MM worth of homes.  Today, we plan to support essential workers in purchasing $1B of homes each year.  As we scale, it is more important than ever that we’re able to respond to market dynamics. 

Summary

The market may be uncertain, but we’re not—we’re still just as committed to supporting essential professionals on their homeownership journey. While we’re currently updating our program terms, we’re also focused on finding the best way forward for each homebuyer we work with and continuing to help uphold those who uphold us. Thank you for continuing on this journey with us and trusting us to be your partner in finding your dream home.

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Frequently asked questions (FAQs)

Q:   Why was this pricing change made?

A:   The volatility of the financial markets, including mortgage rates and home prices, means that investors in our down payment program are taking on more risk than they were even a few months ago. As a result, they require a higher return to help offset that risk. We knew from the beginning that market dynamics would likely require changes to our equity share over time, and this is one of those times. It is our intent to always maintain our ability to offer valuable products and services to homebuyers, which means that terms may be subject to change at various times. Our goal is to make these changes as transparent and customer-friendly as possible, while also honoring our commitments to our customers and investors.

 

Q:   Will Landed make any exceptions?

A:   Unfortunately, we can only make exceptions in rare circumstances. You may request an exception from your Relationship Manager or Homebuying Programs Lead, but it is unlikely to be approved. We understand this could complicate your homebuying process. Please don't hesitate to reach out us—we are here to help you think through your options.

 

Q:   Will pricing on the down payment program change in the future?

A:   The down payment program, like other financial products, is sensitive to market dynamics. It is our intent to always provide the most fair pricing we can to our homebuyers and investors, so we should all anticipate that pricing will need to change at various times. Our goal is to make these changes as transparent and customer-friendly as possible.

 

Q:   Can my Landed equity share change once I've signed a home purchase contract?

A:   If you go under contract on a home before your Landed Welcome Letter expires, then we will honor the agreed-upon terms for as long as it takes to close on that home. However, if you fall out of contract on that home for any reason and require a new Welcome Letter, your pricing would be based on Landed's new program terms.

 

Q:   Why am I on a waitlist?

A:   Right now, we have more demand for our down payment program than our investors can support, particularly in markets that experts believe are likely to experience the most price volatility. We plan to return to business as usual as soon as the markets stabilize and will let you know via email as soon as down payment assistance funds become available in your area.

 

Q:   When will the waitlists end?

A:   Our goal is to get everyone off the waitlist as soon as possible, but we currently do not have an estimated waiting time. It is difficult (if not impossible) to accurately predict how markets will change over time, especially during periods of high uncertainty. We want to be confident in our readiness to provide more down payment funds before we reinstate the program so we can provide uninterrupted service.

 

Q:   If I get on the waitlist, am I obligated to partner with Landed when it's my turn?

A:   No, there is no obligation to use Landed's down payment program, or any other Landed services, at any point in time.

 

Q:   Where can I see which markets are currently paused and which ones are still live?

A:   The active market list for Landed's down payment program is viewable on landed.com/availability.

 

Q:   How will I know that I am taken off of the waitlist and able to move forward with the down payment program?

A:   You will be notified by email when Landed is able to offer you access to our down payment program. We will also update our Availability page when metro areas are entirely removed from the waitlist process.

 

Q:   What happens if I want to put an offer on a house while I'm on the waitlist?

A:   A home purchased while you're on the waitlist would not be eligible for the down payment program. That said, you are free to purchase outside of the down payment program at any time, including while you're on the waitlist.

 

Q:   What if I have an active Welcome Letter? Do I still qualify for down payment program assistance even if I'm in a "waitlist" market?

A:    Your Welcome Letter terms are valid until its expiration date, which is typically 60 days from its issue date. You may access Landed's down payment program as long as the date of the executed purchase agreement for your home is on/before the date that your Welcome Letter expires.

 

Q:   If I buy a home while I'm on the waitlist, can I retroactively co-invest with Landed when I'm off the waitlist?

A:   Unfortunately not. We are not currently able to apply down payment funds toward a refinance and can only apply the down payment program to a new home purchase.

 

Q:   Can I still use a Landed partner agent even if I'm on a waitlist for the DPP?

A:   Yes! If you've already been introduced to a Landed Partner Agent, you may continue to work with them for your home purchase. If you are early in your home search and would like to be introduced to a Landed Partner Agent, email us at customer@landed.com, and we'll connect you with an agent in your area.

 

Q:   Can I still use Landed Home Loans or another participating lender for my mortgage if I'm on the waitlist for the DPP?

A:   Yes! If you've already been introduced to a loan officer at Landed Home Loans or another participating lender, you may continue to work with them for your home purchase. If you are early in your home search and would like to be introduced, email us at customer@landed.com, and we'll introduce you.

 

Q:    Can I still use a Landed home buying coach if I'm on the waitlist?

A:   Customers who are already onboarded will still have access to their coach. Customers who have never received a Welcome Letter will have access to a coach once they are taken off the waitlist and receive a Welcome Letter.

 

Q:   What will happen to existing homeowners? Will this change affect their ability to to exit their partnership with Landed?

A:   Product changes have no effect on homeowners who are currently in partnership with Landed. Those homeowners are still eligible for the same exit options at the same terms outlined in their Landed Option contract.

 

Q:   What will happen to customers in progress of homebuying?

A:   We will honor commitments we have already made, maintaining our existing terms for all customers who have an offer accepted or outstanding, or have an unexpired Welcome Letter. Customers receiving new or renewed Welcome Letters will be subject to the new program terms.

 

Q:   Does Landed intend to eliminate the down payment program?

A:   No. We are committed to supporting essential workers on their homeownership journey, and the down payment program is central to that support. While we don't make changes to our down payment program lightly, we believe that the appropriate down payment program equity share will ultimately be decided by the market, which means it will likely need to change over time, and this is one of those times.

 

Q:   What does a real estate market with high interest rates and low inventory mean for buyers?

A:   Historically, higher interest rates have tended to lead to a reduction in home prices. However, low inventory may challenge that norm in today's housing market. We recommend connecting with your real estate agent to better understand what current market dynamics might mean for you.

 

Q:   Given the volatile market, should I buy a home right now?

A:   Every type of market creates opportunities, and challenges, for different types of buyers, and your decision should be informed by your personal situation. As a result of higher interest rates, home prices are expected to start coming down in many areas for the first time in years. Sellers are now often receiving fewer offers, which may create some opportunities to purchase a home with less competition. If you are financially able to support the higher monthly payments resulting from increased interest rates, Landed partner agents can help you navigate this new housing dynamic and negotiate on your behalf. Additionally, Landed provides homeowners with post-purchase support and provides options to manage your investment, including opportunities to refinance if rates come down.

 

Q:   If I buy a home during this market, how can I manage my purchase in the long run?

A:   If interest rates fall in the future, refinancing could help you save money. And if you have partnered with Landed on your home purchase, we will provide post-purchase support to help keep you informed about the evolving market, so you and your financial advisor can identify and navigate the best opportunities for you.

 

Q:   You say that you'll help me explore my options, what does that mean?

A:   We can connect you with experts who can help you explore your options, including agents and lenders. For example, lenders can run different loan scenarios to help you compare the down payment program with other types of financing to help you identify which option best suits your needs, and our partner real estate agents can help you better understand what is happening in your specific market so you can make the best decision for you.

 

Real Estate & Housing Landed Updates Team Landed

About the Author

Jonathan Asmis

CEO of Landed. Expects more from finance.

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