Washington Business Journal: This real estate startup is expanding to D.C. — and it will pay you to list your house

Posted on Mar 28, 2018

Originally seen on:   Washington Business Journal

By: Andy Medici

Mike Maher, the CEO and founder of Houwzer, a "tech-enabled real estate brokerage", sees D.C. as its make-or-break market.

Philadelphia residential real estate brokerage Houwzer is raising $3 million to expand to Greater Washington — a make-or-break market that could determine the startup's ambitions of growing to eight other U.S. cities.

The company, which bills itself as a tech-enabled real estate brokerage, has most of that already committed, said founder and CEO Mike Maher, who also founded Benjamin's Desk in Philly. That's the co-working outfit that last year bought local incubator and co-working space 1776. He remains on the company's board.

The startup hopes to make inroads in the D.C. market by paying homeowners $1,000 to list their houses with Houwzer — an offer good through the end of May — in a testament to the importance of the seller rep side of the business.

“Your listing is incredibly valuable to your agent,” Maher told me, rattling off ancillary benefits such as free advertising with signage on the property.“ And consumers are unaware of just how valuable."

Here’s how Houwzer works: Homeowners list their houses for a $5,000 flat fee, instead of the traditional 3 percent commission that goes to the sellers' agents. (The homeowners pay a reduced 2.5 percent that goes to the buyers' agents). Houwzer’s agents, like its competitor Redfin, are employees paid traditional salaries with bonuses for good customer service. The homeowners get access to a proprietary dashboard that guides them through the process.

If homeowners use Houwzer to sell their homes, Houwzer will waive the $5,000 listing fee and pay them $1,000, Maher said. The ultimate goal is for Houwzer to generate additional revenue on other services, including its own title insurance operated launched in January and eventually homeowners insurance and mortgage services.

The expansion of Houwzer is just the latest in a series of startups and real estate companies that want to grab a piece of the incredibly lucrative real estate sales and brokerage market, which is estimated at $158 billion in revenue a year within the United States, according to global business intelligence firm IBISWorld.

And for companies that capture even a small percentage of the market, the payoff can be huge, leading to new upstarts such as Tysons-based UpsideDoor, which seeks to cut out real estate agents entirely, more traditional companies like Compass expanding into the market, and even Redfin, which was founded in 2004 in an attempt to disrupt the traditional payment structure. Redfin, which lost $15 million on $370 million in revenue last year, hasn't been profitable since its founding.

But Maher’s ambitions don’t extend to becoming another regional giant like Long & Foster or even among the top handful of companies buying and selling homes in the region. He said he just needs 3 percent market share in each city to build a successful venture.

“I don’t have to be the biggest. We can be a blip on the radar and still be highly disruptive and highly profitable over the long term,” Maher said.

Houwzer launched in the Philadelphia region in 2015 and has subsequently raised more than $2.2 million in funding and has hired about 60 full-time employees. So far he's hired 12 employees locally.

The D.C. region is its first expansion market, and if the company does well here Maher envisions raising a larger funding round and expanding to additional cities such as Denver; Austin, Texas; Nashville, Tennessee; Orlando, Florida; and similar markets. He has no interest in mega markets like New York City.

While Houwzer would normally be considered a “discount” brokerage, Maher pushed back on the notion that his company can't provide the same level of service — or better — when it comes to selling homes quickly and at a fair price. Data from Houwzer from its Philadelphia footprint show its houses spend 36 days on market on the average, compared with 48 average days on market for Coldwell Banker Preferred's Old City office and an average of 54 days across the market.

There is one catch: Houwzer doesn't take every listing. An agent sits down with the homeowner to work out a plan and price for the house. If they can't agree, Houwzer won't take on the property, Maher said. Eventually Maher sees a vetting process on the buyer side too, with a service that allows pre-vetted buyers a chance to see Houwzer homes before they even go on the market.

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