Insight Center: News

Real Estate Disruptor: Houwzer Aims to Shake Up the Real Estate Market

A Pepper SEED Success Story

October 2017
Real Estate Disruptor: Houwzer Aims to Shake Up the Real Estate Market

Uber, Lyft, Airbnb. The biggest startups in recent years have been built on one concept — disruption. Each successful startup saw a market where customers were not satisfied — taxis and transportation, hotels — and developed a new way to provide those services while addressing longstanding problems. Pepper SEED client Houwzer is following in these companies’ footsteps as it disrupts the real estate market with its innovative price structure and full-service offerings for buyers and sellers of residential real estate.

The company was co-founded by Philadelphia entrepreneur Mike Maher, who also co-founded the city’s leading co-working space, Benjamin’s Desk. Pepper has a longstanding relationship with Maher and Benjamin’s Desk, in part because Maher’s wife, Jennifer Maher, is a former Pepper associate. (She left the firm in 2016 to focus on Benjamin’s Desk full time and is leading the company through its just-announced merger with global incubator 1776.)

Maher’s impetus for founding Houwzer was real estate pricing practices that are not consumer-friendly and that no longer reflect how the market actually works. In today’s market, where online real estate listings make it easy for sellers to market their properties to buyers, it still costs 6 percent of the property price to sell your home — 3 percent going to the listing agent and 3 percent to the buyer’s agent.

Tyler Walton, director of growth marketing at Houwzer, noted that the work of the listing agent has decreased with technological advances. “That work has changed dramatically with the internet. If a house is priced correctly and the listing includes decent photos, buyers’ agents will find it. It’s all driven by price,” he said.

If the increased reliance on the internet means listing agents have less to do, then why do they still bring in 3 percent of a sale? That was the question Maher sought to address with Houwzer. If a consumer sells a house through Houwzer, the company will charge a flat $495, instead of the 3 percent fee. For Houwzer’s average home selling at $430,000, this saves the seller $13,000. And the savings increase as the home price rises.

Walton noted that this approach is all about the consumer.

“We’re looking to revolutionize the residential real estate market. We’re in the age of the customer right now. You’re seeing a lot of industries getting disrupted by a focus on the customer. Our value proposition is ‘we will sell your house and save you half the cost,’” he said.

The Houwzer model takes into account that most sellers are also buyers, and that homeowners looking to save $13,000 on the sale of their homes will need agents to assist them in buying new properties. When homeowners use Houwzer’s agents to buy a home, the company still collects the 3 percent buyer’s agent fee. Unlike listing agents, buyers’ agents must do considerable legwork to connect their clients with the right properties, necessitating the full fee.

“We’re not a coupon. We’re not a discount. It’s just a better way of doing business,” Walton said.

While Houwzer’s pricing draws the most attention, the company is also changing how a real estate brokerage is structured. It hires qualified agents, with considerable experience, instead of independent contractors. Then it provides those agents with marketing and administrative help so they can focus solely on their clients. This creates a better, more streamlined, customer experience that is unique in the industry.

“Buying a house is the biggest purchase of a consumer’s life, so you can’t take away the human element. We call our agents ‘counselors’ because they do more than just buy and sell properties. They work with our clients every step of the way,” Walton said.

Just as Houwzer supports its clients, Pepper and the SEED Program have been supporting Houwzer as it has moved from concept to full-fledged company. The firm has represented Houwzer in a number of matters, including trademark and business formation work, and recently advised the company on its $2 million fundraising round. With that investment, Houwzer has “graduated” from the SEED Program, but remains a Pepper client.

Maher and Walton note that participation in the SEED Program has helped them lay the groundwork for future success.

“What I love about the SEED Program is that it mirrors the Houwzer promise in many ways,” Maher said. “Just like we make an investment in selling our clients’ homes, Pepper does the same thing with their fee deferral. And just like our agents are trained as counselors instead of keys, Pepper’s attorneys are way more than good lawyers — they’re trustworthy business consultants.”

“It’s hard as a startup to prove yourself with very little money and to garner investor interest,” Walton added. “Pepper’s SEED Program has been very helpful in our early growth. We’re now beginning to see the ROI of that partnership.”

The Houwzer business model was recently put to the test by Pepper associate Noah Robbins. Robbins, who has advised Houwzer through the SEED Program, turned to the company when he was looking to sell his house and buy a new one.

Robbins was drawn in by the potential cost savings, but what impressed him most was the high level of customer service he received. His Houwzer agent provided end-to-end services, from scouting the perfect properties, to advising on issues of city code, to connecting Robbins with contractors for repair work on the property.

This service enabled Robbins to travel for work without worrying that he would delay his home search. “They made it so all I had to do was show up at closing,” he said.

Robbins added, “the cost savings get you in the door, but it’s the service they provide that keeps you. They really deliver on their business model.”

With its recent $2 million investment, Houwzer has growth on the horizon. The company has added dozens of new agents to assist with the fall housing market in Philadelphia, the city’s busiest time of year for buying and selling residential real estate. And next year, Houwzer is eyeing entry into another large metropolitan market.

“We’re moving at warp speed,” Walton noted. “And we’re excited to see what comes next.”

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