Have you ever wondered why it costs six percent to sell your home? That's no small number. For a $600,000 home, that equates to $36,000 - more than the U.S. median individual income.
If it seems like home sellers are being ripped off, it's because they are.
The Antitrust Division at the U.S. Department of Justice recently reported on this issue with the real estate brokerage industry:
"In other areas of the economy, the Internet has dramatically altered the competitive landscape by driving down costs and enabling innovative and more efficient ways of conducting business.
Traditional middlemen-such as travel agents and stockbrokers-face more intense competition that has propelled them to change, bringing consumers significant benefits.
The real estate brokerage industry has been slower to change, with the result that consumers are paying higher commissions and fees than they would under a more competitive system."
That's right. It doesn't actually cost 6% to sell a home anymore, but the archaic real estate brokerage industry has refused to pass these savings on to consumers.
Houwzer, a modern real estate agency, is offering consumers a better alternative by saving home sellers an average of $15,000 and providing home buyers a pressure-free experience with their full service, salaried agents.
Mike Maher, Houwzer's Co-Founder and CEO, had grown tired of seeing the traditional brokerage model consistently fail home buyers and sellers - something he experienced firsthand when he and his wife started flipping homes.
So Maher did what any smart entrepreneur would do - he created a better, faster, and cheaper alternative for the customer.
In a typical real estate transaction, the seller pays a steep 6% of their home's selling price in commissions - 3% to their listing agent and 3% to the buyer's agent. When you sell with Houwzer, you only pay their full service listing agents a flat $5,000 fee plus 2.5% to the buyer's agent at closing. That's a savings of $16,500 on a $600,000 home.
Maher is adamant that Houwzer doesn't skimp on the quality of their service to cut costs, a claim their clients heartily support.
"Candidly it boggles the mind why everyone isn't listing with Houwzer - they will Uberize the brokerage business," Tom, who sold with them, said. "You have no concern of 'getting less' from their listing model. The money we saved with Houwzer is still hard to fathom."
In their first three years of business, Houwzer saved home sellers in the Philadelphia and DC metros over $7.5 million in unnecessary fees. After serving over 1,000 clients, they've created a raving customer base with over 500 reviews averaging 4.9 out of 5 stars.
So how are they doing it? Maher spilled the details in this recent Q&A. Answers have been edited for clarity and length.
What made you believe the traditional model needed to change?
My wife and I started flipping houses and became frustrated by the hefty 6% commission we were asked to pay as sellers. I discovered that over 90% of people now start their home search online. There was no reason for such high fees when websites like Zillow had greatly reduced the amount of time and money listing agents spent marketing properties. The problem was that even though the Internet was saving them money, the industry hadn't passed on the savings to consumers because it benefited them. A shake-up was long overdue.
How is Houwzer different than traditional brokerages?
It isn't just our model that sets us apart - it's also the motivation behind it. We sought to create a new kind of brokerage that is good for our clients, our agents, and our communities. So when it comes to what sets us apart, there are three main differences. First, we provide full service listings for a flat $5,000 fee plus 2.5% to the buyer's agent. This saves our home sellers an average of $15,000 compared to the standard 3% listing fee plus 3% buyer agent fee. Second, unlike traditional brokerages who hire agents as independent contractors, Houwzer pays its agents a salary with benefits so they can focus on customer service, not commissions. And third, we're the nation's first and only B Corporation brokerage, committed to social responsibility in the communities we serve.
Is Houwzer full service?
Absolutely - our team is beside you every step of the way, from the initial consultation to the closing table. Sellers still get a lockbox, sign, virtual tour, HD pictures and video, open houses, access to Houwzer's listing dashboard, and are listed on all major platforms including the MLS, Zillow, and Realtor.com. Those are fixed costs that do not cost more than $5,000. Rather than holding on to the steep traditional rate, Houwzer passes those savings on to the client.
How does Houwzer charge so little and still make money?
It's true that we aren't raking in the dough from our listing clients. We make the bulk of our money by assisting buyers.
In exchange for passing on savings to our home sellers, we ask them to consider buying their next home with us or refer friends who are buying. Many sellers are so satisfied with their experience they buy their next home with us and refer their friends and family. Houwzer's customer advocacy and organic growth has been amazing to watch.
We also offer our sellers the Houwzer Assist, a $2,500 transferrable home buyer rebate. Houwzer sellers can redeem their rebate anytime in the future or gift the rebate to a friend or family member to buy with us.
What kind of training does a Houwzer Agent receive?
Every one of our agents are highly trained, licensed REALTORS who only represent one side of the transaction. While our buyer agents focus exclusively on home buyers, our listing agents give their full attention to selling homes. This specialization helps our agents hone their skills far more quickly than a "jack-of-all-trades" agent who is trying to manage the home selling and buying process. Focusing our agents scope of work and equipping them with a support team has enabled our listing agents to close an average of 70 deals per year - that's almost 6x the industry average. Our listing agents' level of expertise is unparalleled.
How does Houwzer's team approach benefit sellers?
Providing an exceptional customer experience will always be the most important thing to us. With Houwzer, you get a team of specialists instead of one person who is forced to manage everything. Because of how traditional brokerages work, traditional agents are essentially juggling a small business. That doesn't just weigh on the agents, but it can cause the customer experience to suffer. Our agents can focus 100% on their clients because they have a support team who handles everything else - from marketing and administration to accounting and operations. Simply put, we take care of our agents so that they can take care of you.