Houwzer, the five-year-old Philadelphia-based real estate brokerage, on Tuesday announced a $9.5 million investment round led by Edison Partners, a Princeton-based private equity firm, and several other funds.
Houwzer will use the money to expand into the Greater Baltimore and Orlando, Fla., regions and offer services including mortgage, title, and insurance divisions.
Edison invested $7 million of the $9.5 million, according to general partner Michael Kopelman. Edison targets high-growth companies with $5 million to $25 million in revenue. Edison Partners manages $1.6 billion in assets.
Existing Houwzer investors such as David Robinson’s Admiral Capital Group and real estate investor Ira Lubert also participated in the latest financing round. Additional new investors include GO Philly Fund and Chestnut Street Ventures. In total, Houwzer has raised $17 million, $7.5 million across two seed rounds and the latest $9.5 million series A round of funding.
“Of all the agency-based business models, travel agents, stocks, real estate, the first two have compressed fees. But not in real estate,” said Kopelman, who grew up familiar with the business because his mother was a real estate agent.
Kopelman declined to say how Houwzer was valued after the latest round of funding.
“Mike [Maher] is on to something — the model where it shouldn’t cost 5% or more to buy and sell a home. But I do think services like my mother’s were really powerful to consumers. You should have a full-service experience and not pay that type of commission. Plus, he has demonstrated profitability,” Kopelman said.
While the internet has greatly reduced costs to advertise homes, real estate brokerages continue to push commission rates as high as 6% of the final sales price of a home. In addition, clients struggle with commission-based agents who often lack the training, coaching, and resources required to consistently deliver exceptional service. This can lead to misaligned financial incentives, Houwzer CEO and cofounder Mike Maher said.
“Consumers continue to prefer human advisers, especially for a transaction this significant; but they also believe that advances in technology should translate into savings and a better experience,” said Maher.
Houwzer charges a flat $5,000 listing fee paid at closing, plus 2.5% for the buyer’s broker.
“We’re really excited to have found the right partner in Edison, who shares our vision and will help us bring a new real estate model to the masses,” Maher said.
With salaried agents, Houwzer said it saves fees across the home buying and selling process. Unlike a traditional agent, salaried agents at Houwzer don’t spend time on business generation, marketing, and other administrative work, he said.
Headquartered in Philadelphia, Houwzer plans to double its workforce over the next 12 months and enter the Orlando market later this year.
As for hiring, “We were at 70 prior to the round. We are 79 staff today, and we are looking to double the workforce over the next 12 months,” Maher said.
“We’re really excited about what Houwzer has built and where the company is headed. I’m incredibly impressed with CEO Mike Maher’s team, the company’s significant growth, and strong customer reviews. I’m confident that Houwzer is positioned nicely to deliver on a differentiated customer service promise with its salaried labor model and tech-enabled platform,” said Kopelman, who will join Houwzer’s board. He is the brother of Josh Kopelman, a Philadelphia venture capitalist and the chairman of the board of The Inquirer.