What do you do after playing cat and mouse with pirates on the high seas during three naval tours of duty in the Persian Gulf and Southeast Asia, and returning home with only a vague notion that you want to be an entrepreneur?
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If you’re Mike Maher, the 35-year-old recently named the Chamber of Commerce’s Young Entrepreneur of the Year, you come back to Philly and open co-working space Benjamin’s Desk in 2012—not just because you see it as the future of work, but also because it can serve as a kind of personal incubator as you figure out how you’re going to change the world.
“I had no idea what a startup was, what venture capital was,” Maher recalls now, inside a conference room on the seventh floor of 1701 Walnut—the site of the first Benjamin’s Desk co-working space. “Uber was our first client and here’s Chris Fralic from First Round Capital handing me his business card.”
Watching Uber in its Philadelphia infancy, Maher said to himself: “I want to do that.” He’d flipped some houses, and wondered: “How come Uber is able to disintermediate the taxi industry, and no one’s done the same for the real estate industry?”
So began a year-long odyssey with Kevin Baird, a real estate developer who was tired of paying hefty real estate commissions at closings. Ultimately, the result of their deep dive into the antiquated ways of home buying was Houwzer, which is upending the traditional home buying model—or, to hear other agents tell it, has made Maher and Baird the Darth Vaders of the real estate brokerage industry.
Houwzer launched in 2015, posted $670,000 in revenue in 2016, is on its way to north of $1.5 million this year, and recently raised over $2 million in venture capital funding to seed further growth. The company has 50 full-time employees, with offices in Philly, Haddonfield, Conshohocken, West Chester, and is soon to expand to Washington, D.C.
On a $500,000 sale, Houwzer saves the seller $15,000. Therein lies the anger towards Maher in the brokerage community; some whom I’ve talked to grumble about his “undercutting” ways.
Essentially, the Houwzer story is comprised of three central and connected innovations. First, Houwzer differentiates itself in the marketplace by eliminating the 3 percent seller commission fee—cutting closing costs in half—and replacing it with a $995 flat fee to cover the costs of marketing the listing, which the seller pays only upon a sale.
It is able to do this thanks to its second innovation: Rather than working on commission, Houwzer’s agents are salaried, full-time employees. Finally, Maher has inculcated into his business a social impact culture—Houwzer is the only real estate brokerage B Corporation in the nation—that he says not only aligns with his and his client’s values, but has helped fuel his company’s bottom line growth.
First came Maher’s realization that the traditional home buying model was ripe for disruption, which he breathlessly runs through; like his company, Maher is a man in a hurry, and to converse with him is to try and keep up with a string of run-on sentences. Who has time for punctuation?
“What other business says to the customer, ‘Hey, I want your business. Let me sell your home. But in exchange for that, I want to put a sign outside your house that talks about me, I want to man your open house with my agents, who can turn the unrepresented buyers who show up into clients for me, I’m going to put your listing online with my face next to it, so people will inquire about it—to me,’” he says.
Maher came to see that “listings are the gift that keeps on giving” to real estate agents, at the same time that the cost for an agent to market a home for you—the customer—has been drastically reduced. “The sign, the lockbox, the video, the targeted Facebook ads—these things don’t cost more than $1,000,” he says. So, on a $500,000 sale, Houwzer saves the seller $15,000. Therein lies the anger towards Maher in the brokerage community; some whom I’ve talked to grumble about his “undercutting” ways.
But, to Maher, it’s all in service of the client. Why should his loyalty be to competitors who haven’t changed with the times? “Zillow and the Internet have done a great job of connecting buyers to listings, but the pricing hasn’t changed,” he says. “Most agents have to do very little today to market a home. Maybe they take some photos, and for that they charge the seller 3 percent. Our idea was let’s be upfront with the seller about our fixed cost to market your home. But most sellers are also buyers, so let’s bet on them having such a good experience with us on the sales side that they’ll buy with us, or at least tell friends and family to buy with us. And now we’re the fastest growing brokerage in the state.”
Maher’s not just waging war on a 3 percent fee; he’s taking on the traditional home buying experience itself. “What we’re really solving is the lack of transparency and trust in this business,” he says. “Real estate agents are distrusted by 70 percent of those 40 or under. Why is that? Because the experience sucks.”
To date, Houwzer’s disruptive pricing model has gotten the media attention, but it misses the bigger point. Maher’s not just waging war on a 3 percent fee; he’s taking on the traditional home buying experience itself. “What we’re really solving is the lack of transparency and trust in this business,” he says. “Real estate agents are distrusted by 70 percent of those 40 or under. Why is that? Because the experience sucks.”
That’s how Maher came to the notion of full-time, salaried agents. “70 percent of real estate agents wash out in a year, and 90 percent in 24 months,” he says. “That’s a systemic issue. As technology has changed so swiftly, agents have had to build their own personal brands and generate their own leads. We have become the lead generators for agents.”
And, critically, Houwzer does that while providing agents with the stability of starting salaries in the $70,000 to $90,000 range for listing agents and $50,000 to $70,000 for buyer agents—both with benefits.
Maher’s emphasis on social impact also stems from his overall critique of the traditional real estate model. “There is so much broken in this business,” he says. “We’re selling brick and mortar, and yet we’re not involved in our communities. Real estate has so many implications—socio-economic, gentrification. Yet we act like we’re doing just another transaction.”
As a result, Houwzer became the nation’s first real estate brokerage B Corporation—acknowledging its fiduciary responsibility to stakeholders like its community, employees and the environment. Internally, all employees are required to perform 50 hours of volunteer service per year, and 5 percent of the company is owned by its workers. The company also donates 2.5 percent of profits to charity annually—recent recipients of Houwzer’s largesse included Coded By Kids and the Center for Family Services.
Maher says that, like his pal Nick Bayer of Saxbys Coffee, helping to pursue solutions in the communities where Houwzer does business is in his company’s DNA. But it also turns out that it’s been beneficial to his bottom line, essentially because, as a 2012 Pew survey made clear, 80 percent of millennials report that they want to do business with companies who share their social values. “25 percent of our clients says they chose us because we’re a B Corp,” says Maher. “We just had a $1 million client because she loved that we’re a B Corp.”
Maher has tried to remake the often stressful environment at closings. Sellers and buyers may typically scowl and snarl at one another, but Houwzer sellers provide buyers at closing with a “Be A Good Neighbor” report, that answers questions like, Who’s Your Block Captain? and Where’s the Nearest Dog Park? Eventually, he’d like to provide each buyer at closing with a local B Corp gift basket, containing discounts from area social impact businesses.
“It’s not exactly Thom’s one-for-one model, but the goal is to change the way people interact and build up a sense of community,” he says.
Houwzer became the nation’s first real estate brokerage B Corporation—acknowledging its fiduciary responsibility to stakeholders like its community, employees and the environment. Internally, all employees are required to perform 50 hours of volunteer service per year, and 5 percent of the company is owned by its workers
To hear Maher tell it, that, in the end, is the true value proposition of Houwzer. To spend any time with him is to run the conversational gamut from local politics to the Eagles to the degree to which military generals in the White House are keeping the country from chaos. He is a citizen of the world, who—knowing little—started a real estate company that sought to set itself apart by caring about community at a time when community is more fractured and frayed than ever.
Turns out, being more than just a middleman between buyer and seller of real estate was good for business, too. And now, as Houwzer expands, challenging the status quo all the while, comes the next bigger picture challenge.
“Real estate in the post World War II era fueled an era of generational wealth,” Maher says, smiling at the thought of making money and solving social problems at the same time. “So many millennials have negative equity today. The problem we want to solve is, can we find a model that gets them into homes?”
Correction: Since this story originally ran, Houwzer’s flat fee for closing charges have changed slightly. It is now $995.Header Photo: Tyler Walton