Start Up Seeks To Change The Traditional Real Estate Brokerage Model

By Erin Arvedlund, Inquirer Staff Writer POSTED: February 23, 2015

Local start-up Houwzer.com is building a real estate brokerage around helping home sellers save money – by selling their houses practically for free.

Yes, the real estate commission for the seller’s agent could be a thing of the past. Home sellers save the 3 percent commission by listing their property with Houwzer.com, says cofounder Michael Maher.

“On a $500,000 transaction, we save the seller $15,000,” Maher said.

Houwzer.com currently has about 60 seller listings on its site, and anticipates 250 listings in 2015, he added. It will compete with sites such as HelpUSell.com, which also cuts into the traditional sales commission. To buy and sell, homeowners normally pay a total of about 6 percent in commissions – 3 percent to the buyer’s agent and 3 percent to the seller’s agent.

“Houwzer takes the 3 percent out of the equation,” said cofounder Kevin Baird, a local real estate developer, attorney, and entrepreneur.

“It’s imperative for us that our first customers have a remarkable experience, selling and buying. As a start-up, that’s our number-one priority,” Maher said on a tour of their offices at 1701 Walnut St.

Houwzer’s 2016 goal would be 500 to 1,000 total transactions.

“Homeowners are changing,” Baird said. “They’re taking over the role of the traditional seller-agent. But there’s been no translation in savings back to them as consumers. This is an entrenched industry, and that’s what we’re looking to change.”

As a developer, Baird became frustrated when sellers’ agents were “essentially taking 3 percent for nothing,” he said.

“Buyers’ agents work hard, doing all the negotiating on contract sales,” Baird said. “They deserve to be compensated. Sellers agents’ commissions aren’t justified anymore.”

Since its founding in October 2013, Houwzer has ramped up to step into the role of the sellers’ agent. The company’s main problem is getting enough listings.

“It’s an easy way for sellers to get listed on MLS with a full-service brokerage, and help them negotiate the inspection process and closing. Everything a traditional seller’s agent does,” Maher said of his service.

The Houwzer.com listing is free. There is an administrative fee of $5,000 for photos, signage, and open houses – paid only if the house sells.

Baird said he and Maher founded Houwzer “to disrupt the real estate brokerage model forever.”

“This model will change everything about residential real estate nationally,” Baird said.

They also want to start a lower-cost title-insurance business.

Houwzer has saved thousands of dollars for the consumers, its founders estimate.

“Sellers’ agents are very combative. They say we can’t service the client. But invariably it doesn’t cost a seller more to sell a $100,000 home vs. a $1 million home. It costs us $300 for pictures, lockbox, a listing, and signage,” Baird said. Once that goes into the MLS (the Multi-Listing Service), “that’s the sum total of a seller’s listing. We undressed the emperor,” he added.

Some local developers say they like the idea – and agree the proof will be in the sales.

“There’s validity in what they’re doing,” said Jim Maransky, developer of Icehouse and other Center City projects. “They just need to bring in sellers.”

“Everyone complains about sellers’ broker commissions,” he said. “Really good agents are worth their weight in gold. Others are on cruise control and it pains you to give them the commission check.”

Philadelphia is “tough already, because there’s a 4 percent transfer tax on top of the 6 percent commissions,” Maransky said. “As a developer, you lose $50,000 [paying commissions] on a $500,000 home right off the bat.”

Some veteran Realtors with traditional agencies contend they would shy away from dealing with a Houwzer.com, saying any listing on MLS without a seller’s agent is a sign of a home seller with unrealistic sales-price expectations.

“If we see something that’s in MLS that’s not through a regular broker, we’re apprehensive about showing it. They’re not educated about the whole selling process,” says Jody Dimitruk with Berkshire Hathaway in Rittenhouse Square.

“I find the sellers who sell on their own are the most unrealistic about the value of their home,” says Dimitruk’s business partner, Johanna Loke. “Buyers think they’re going to get the property for less money, and offer less, because the seller is not paying their half of the commission.”

Peter Economou, a builder and developer with Sparti Construction in Downingtown, said: “Houwzer is great because I can pass along the savings to the customer. That’s important to a developer.”

Economou and Maransky have both listed homes they’ve built for sale on Houwzer.com. Economou said his listing sold in 30 days.

As a start-up, Houwzer isn’t profitable yet. “To date, we’ve self-funded the company with about $100,000 of our personal money,” Maher said. They’re fund-raising with a $500,000 commitment from a private investor and are raising an additional $1 million in debt.

Houwzer’s next targets?

“We’re looking at Pittsburgh, D.C., Boston, Austin, Denver, and San Francisco as early markets to expand,” Maher said.

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215-854-2808 @erinarvedlund

Repost from Philly.com