The Future of Real Estate Tech: How to Get an Agent to Sell Your Home for Free

Houwzer, a startup brokerage based in Philly, uses the power of online house-hunting to save sellers money. Oh, yeah, it makes money on the deal too - just not from the seller.

The owner of this week's "Trinity Tuesday" featured home has listed it for sale on Houwzer. Thus, instead of shelling out $17,997 in commissions on top of a listing fee when the sale closes, he or she will pay only $8,998.50 - the buyer's agent's commission plus a $495 listing fee, a savings of roughly 50 percent. | TREND Image of 1023 E. Moyamensing Ave. via Houwzer Team

The owner of this week’s “Trinity Tuesday” featured home has listed it for sale on Houwzer. Thus, instead of shelling out $17,997 in commissions on top of a listing fee when the sale closes, he or she will pay only $8,998.50 – the buyer’s agent’s commission plus a $495 listing fee, a savings of roughly 50 percent. | TREND Image of 1023 E. Moyamensing Ave. via Houwzer Team

The internet is transforming the real estate industry much as it has transformed many others, including the news media. Technology has changed the relationship between buyers and sellers, renters and landlords, and builders and marketers.

In early August, a forum at the Benjamin’s Desk co-working space showcased Philadelphia entrepreneurs whose products and services are helping that transformation along. Over the next several weeks, “Property” will introduce you to the people and services that are shaping “The Future of Real Estate Tech,” starting with the online brokerage Houwzer.

Here’s how a homeowner would sell a home in the past:

The owner contacts a real estate brokerage to offer a home for sale. The broker or agent enters an agreement with the seller to market the home for sale in exchange for a percentage of the sale price when the house sells. The agent prints flyers, posts “For Sale” signs, shows the home to potential buyers and lists the home on the local multiple listing services. When the sale closes, the seller’s agent and the buyer’s agent, if there is one, split a 6 percent commission.

Here’s how homes are increasingly sold now:

A buyer gets online and opens up one of the major real estate search engines, such as Zillow, Trulia or Realtor.com. The buyer browses through a raft of online listings describing homes for sale. From the search engine, the buyer contacts the listing agent or an agent of their choice directly. The buyer meets the agent to take a look at the house, and if it passes muster, proceeds to jump through the other hoops required to close a sale. When it closes, the listing agent pockets the whole 6 percent unless the buyer engaged another broker, in which case the commission is split.

Either way, the seller misses out on several thousand dollars of the sale proceeds at least. Now Houwzer, a new online brokerage headquartered in Philadelphia, is putting that money into the seller’s pocket.

How is Houwzer able to do this? “We figured out a little secret that allows us to be as cost-effective as the ‘for sale by owner’ companies yet offer all the services of a full-service broker,” said founder and CEO Mike Maher.

That secret is this: It now costs next to nothing to market a home. “The biggest trick the real estate industry has ever pulled is convincing sellers that listing agents market their homes,” he said. “They may help with pricing and other things, but there’s no marketing any more.”

That function, he said, has been outsourced to the search engines. Some brokerages, such as Seattle-based Redfin, have figured this out and operate exclusively in the online space, serving as a cross between a search engine and a traditional broker. Houwzer has set itself up in this space too but does Redfin one better: Because technology does most of the heavy lifting now, Maher said, it only costs Houwzer $495 to market a home, and that’s all that the seller pays, at closing. There’s no 3 percent commission and no upfront charges.

Since its launch one year ago, Maher said Houwzer has removed more than $1 million in listing commissions from the market.

“There’s this big bullseye on us because people believe we’re removing money from the table that people use to eat,” he said. That presumably would include Houwzer’s own agents, which currently number twelve, up from two when the site launched.

But they don’t have to worry about where their next meal will come from. That’s because they’re salaried, a true departure from industry practice – and because they get fed a constant stream of buyers converted from sales leads.

“Anywhere from one-third to one-half of sellers are also buyers,” Maher said. And buyers are a broker’s real golden goose: “If one-third to one-half the sellers are also buyers, isn’t it a little disingenuous to charge the seller 3 percent when we’re making money off the buyer?”

The salary-based compensation also makes things easy for would-be agents, he said. “Ninety percent of real estate agents wash out in the first 24 months. I had to come to two conclusions why: Either they’re incompetent, and they’re not, or they can’t make the jump to build the business — they lack the training, the skills and the leads to grow their business. We hire our agents and put them on salary, and we build our teams out by supporting the agents with buyers.

“Every one of our agents will outpace their salary in sales in Year One,” he continued. “Our agents are all on track to do 20 deals in their first year. For a while, we were generating so many leads that we didn’t have enough agents to send them to.”

Even though it currently operates only in Philadelphia, Houwzer has already proved it can run with the big dogs: Maher said that while Redfin generated more buyers in the 12 months they both have been in operation, Houwzer handled more listings.

Maher’s goal for Houwzer’s second year is to expand to the Washington market. Local investors have already signaled their willingness to provide $1 million of the $1.5 million it will cost Houwzer to develop the technology needed to expand its Philadelphia business and launch in Washington.

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