They Couldn’t Get a Mortgage. Divvy Helped—Maybe

Divvy was partly born out of the American dream realized, or so writes Ainsley Harris for Fast Company. Co-founder and CEO Adena Hefets is the daughter of an Israeli immigrant who “lucked into homeownership through seller financing, after being denied a mortgage,” and then was able to help fund Hefets’ Ivy League education with the equity he had built. Five-year-old San Francisco startup Divvy has grown into “one of the top-10 net acquirers of single-family homes in the US,” with thousands of homes in over a dozen markets to its name. Harris explains its approach: a rent-to-own model where would-be homeowners who aren’t able to qualify for a mortgage can opt to have Divvy purchase a home of their choosing (within a specified budget); Divvy is their landlord, and they rent the property while they save for a down payment over a period of up to three years.

By Divvy’s stats, that’s the outcome for half its customers. But “the more that Divvy can charge in rent—and the less it has to spend on maintenance and other expenses—the better it does,” and “others find themselves in over their heads,” writes Harris. That was what happened to Amber Gutierrez and her husband, who moved into a $220,000 Divvy home in San Antonio last December. They paid Divvy a standard 1% down payment, $1,825 in rent (a hair above average), and a $280 monthly payment that would be applied to the purchase price (the money doesn’t accrue interest and can’t be used for emergencies). They could buy the house for $244,755 (within 18 months) or $269,510 (within 36) if they qualified for a mortgage. Then the heat went out, and Gutierrez said it went unfixed for weeks. That was just the first issue. (Read the full story for more on Gutierrez’s situation—she now faces eviction—and those of other unhappy customers.)