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Houwzer, ‘0% listing commission’ real estate brokerage, raises $2M

Come-ons from hybrid brokerages often seem too good to be true, but Houwzer’s may take the cake.

“Pay 0% commission for listing and selling your home with Houwzer,” the Philadelphia-based brokerage proclaims boldly on its website. “Just pay the buyer’s agent and you’re good. Sound Revolutionary? Well, it is.”

Read the site a little further, and you’ll learn that homeowners who sell with the startup must pay a $495 fee on closing. But that is still shockingly low, considering that the company appears to provide the full range of traditional brokerage services — and is not just a glorified for-sale-by-owner (FSBO) platform. By providing a commission discount, Houwzer thinks it can convert a high number of its seller clients into buyer clients and tap them for boatloads of referrals.

This business model, along with a promising track record in Philadelphia, helps explain why the startup recently raised $2 million in convertible debt. The company will presumably use the cash to scale its operations in the greater Philadelphia area and southern New Jersey.

Houwzer also plans to expand to at least one additional metro area in the next 12 months, said Houwzer CEO Mike Maher.

Source: houwzer.com

Houwzer’s revenue model is predicated on reciprocity.

In exchange for selling a person’s home for a rock-bottom fee, the brokerage says on its website, “we ask for social currency: referrals, testimonials, social media shout-outs, and the opportunity for buyer representation, now or in the future.”

Houwzer identifies as a high-tech “full service agency” and advertises listings across several marketing channels.

The company’s listing offering features a comparative market analysis (CMA), MLS listing and “film HD virtual tour,” along with 25 high-resolution listing photos, flyers, featured placement on major listing portals, “automated showing management,” multiple open houses, contract review and “full-service representation from offer to closing.”

Houwzer sellers are required to offer a typical commission to buyer’s brokers, meaning Houwzer seller clients would likely pay a total commission of 3 percent, plus Houwzer’s $495 listing fee.

Like some other hybrid brokerages, Houwzer pays its agents salaries and bonuses based on customer satisfaction, not commissions — arguing that, unlike commissions, this compensation model incentivizes buyer’s agents to negotiate the lowest price for their clients.

Houwzer makes the vast majority of its revenue by representing buyers, collecting the full commission paid by listing brokers for bringing a buyer to a sale.

The company is betting that it can convert enough seller clients into buyer clients — and also tap them for referrals — to achieve profitability.

In 2016, Houwzer closed 150 deals “split almost evenly between list and buy,” and it’s on track to triple that number in 2017, Maher said. Highlighting its focus on social impact and transparency, the company is a Certified B Corporation.

Houwzer’s funding round was led by Jay Minkoff, co-founder of Homebuilder.com. Ben Franklin Technology Partners and the Startup PHL Angel Fund also participated in the round, Maher said.

Email Teke Wiggin.