Navy veteran Mike Maher has quite an impressive post military resume, including co-founder and chairman of Philadelphia’s co-working network Benjamin’s Desk, founding director of the Philadelphia chapter of Bunker Labs, and an entrepreneur with an interest in real estate, technology, and merging the two together.
Maher followed the successful launch of the Benjamin’s Desk co-working business, by co-founding the real estate startup Houwzer, through which he is “on a mission to disrupt every angle of real estate. There’s a paradigm shift that’s happening right now, and I’m on the cutting edge of it all.”
Houwzer Reimagines the Real Estate Industry
After turning Benjamin’s Desk into the sought-after co-working space in Philadelphia, which was at one point home to companies such as Uber and Curalate, Maher and his wife began flipping houses. They bought and sold around a half-dozen in the city, but grew frustrated with how much profit they were losing to fees.
“Between Realtor commissions and [Philadelphia and the state’s] real estate transfer tax, we were paying nearly 8%” out of the home’s sales price, Maher said. “I started asking, ‘Why are we paying all these fees?’ … You can’t make any profit that way if you don’t have significant year-over-year appreciation.”
That’s when the idea struck:
What if there were a way to get rid of most of the commission on the sell side?
Advances in technology and the prominent use of websites such as Zillow made it easier for buyers to find homes, reducing the work of listing agents in marketing properties. Maher worked out that it shouldn’t cost more than $500 to market a home today, a fee he thought buyers would be willing to pay.
So Maher, along with former developer Kevin Baird, created Houwzer. Maher’s idea isn’t completely new since discount brokers have been around for a while, usually offering deals like 1% commission as opposed to the usual 3%. (In the majority of transactions, a commission of between 5% and 6% is taken from a home’s sale price and typically split between the buyer’s and seller’s agents.)
But in charging sellers a flat closing administration fee of $495 (technically, Houwzer’s commission is 0%), a payment made only if the sale closes, Maher thought Houwzer could still offer the “full-service” experience, and do so for thousands of dollars less.
Raising Seed Funding
In May of 2017 Houwzer announced that it had secured $2 million in a seed funding round. With $1.6 million already closed, the remainder of the round was scheduled to close on June 1st.
In addition to growing operations at the Philadelphia headquarters, the funds will be used to expand into a second major metro market in 2017. This comes after Houwzer’s 2017 expansion to South Jersey and the suburbs of Philadelphia. The remaining funds will enable Houwzer to launch a technology platform to streamline the current state of chaotic transactions by offering a simplified, consistent transaction experience for both home buyers and sellers.
This investment will continue Houwzer’s recent momentum. In 2016 the company closed more than 150 deals and is on track to increase sales in 2017 by 200-300%. In the past year, the staff has also grown, from 6 full time employees to more than 35, with plans to reach 55 by the end of 2017.
“Technology has saved consumers billions of dollars in other brokerage/agent industries as seen in the major decline of stock brokers and travel agents,” said Dr. Kevin Gillen, Senior Economic Advisor for Houwzer and Senior Research Fellow for the Lindy Institute for Urban Innovation at Drexel University. “Meanwhile, the housing industry is stuck in a cycle of 6% commissions. Houwzer is using technology to modernize the industry, the first model to cut commissions in half while still providing full service representation.”
“There are about 75 million homeowners in America and $75 billion in commissions paid out each year in real estate transactions. Houwzer’s model has the potential to save the masses thousands of dollars of their hard earned equity when they sell their home,” said Mike Maher, Houwzer Co-founder and CEO. “That kind of impact is not a ‘niche’ or representative of a ‘lifestyle brand,’ but one that can do a lot of good for a lot of people. Disruptive models must be both better AND cheaper than the incumbents – that’s the Houwzer promise that we deliver. Our goal is to build a category-leading national brand, and this investment round will take us one step closer.”