Many proptech startups that were born and funded during the heyday of low interest rates are in the throes of struggling. As investment in U.S. real estate startups fell from $11.1 billion in 2021 to $3.7 billion last year, some companies are selling themselves while others are closing, PitchBook data shows.

Two recent examples are the latest victims of a challenging interest rate environment and a multi-year slowdown in real estate fintech financing.

Rent-to-own real estate technology startup Divvy Homes is being acquired at a fire sale by Charleston, South Carolina-based Maymont Homes, Fast Company reported last week. Maymont is a division of Brookfield Properties.

As NPR reported last month, EasyKnock suddenly shut down. The move comes after the real estate tech company was hit with several lawsuits and the Federal Trade Commission issued a consumer warning about its controversial sale-leaseback model, which involves purchasing a home from the owner while leasing it back to them.

While 9-year-old Divvy declined to comment, a source familiar with the matter confirmed to TechCrunch that Divvy is in conversations with Brookfield and "is about to sign a purchase agreement." This person questioned the acquisition as a fire sale. However, neither the company nor the sources have revealed how much Brookfield will pay for Divvy, so it's unclear whether the price is a bargain or a bargain.

Whether it's a hit or not, its sales aren't entirely shocking. In 2022, Divvy began to show signs of trouble, and the company began laying off employees. By November 2023, Divvy had made its third layoff in a year.

The once buzzy startup has raised more than $700 million in debt and equity from high-profile investors including Tiger Global Management, GGV Capital and Andreessen Horowitz (a16z). Divvy's last known financing occurred in August 2021, a $200 million Series D round led by Tiger Global Management and Caffeulated Capital, with a valuation of $2 billion. The Series D round was announced six months after a $110 million Series C round. Divvy Homes' last known valuation was $2.3 billion in 2021, according to PitchBook data.

EasyKnock, a startup that bills itself as the first technology-enabled residential sale-leaseback provider, was founded in 2016 and has raised money from backers including Blumberg Capital, QED Investors and Northwestern Mutual’s corporate venture arm, according to PitchBook raised US$455 million. data. About $200 million of that funding is in the form of debt, allowing the company to purchase the homes, according to a person familiar with the startup.

So what went wrong?

In its heyday, Divvy Homes claimed to be different from other real estate tech companies because it worked with renters who wanted to become homeowners, buying the homes they wanted and then renting them back to them for three years while they accumulated "ownership Savings needed for own house”. itself," it said.

But the Federal Reserve began raising interest rates in 2022 to curb inflation. For companies like Divvy Homes that purchase homes as part of their business model, high interest rates are devastating, limiting their ability to purchase homes and make money from them.

EasyKnock's business model also involves buying and renting homes. But its arrangement appeals to homeowners with poor credit scores because it gives them quick access to cash with the option to repurchase the home at a future date.

Sources familiar with the company told TechCrunch that high interest rates have also hurt it, as the company borrows money to fund its operations. But EasyKnock has other problems. EasyKnocks has been hit with more than two dozen lawsuits, with Michigan's attorney general accusing the company of engaging in "deceptive practices" of buying homes from financially disadvantaged people at low prices and then charging them high rents.

According to our sources, EasyKnock was already insolvent and overburdened with debt when it closed.

As interest rates remain relatively high and financing remains difficult, we expect to see more news of this kind from the real estate fintech space in the coming months and throughout 2025.

Do you know a proptech startup that’s in trouble? Please contact Mary Ann at maryann@techcrunch.com or Signal (408.204.3036) or Marina.temkin (techcrunch.com).