DRAPER — Utah’s tech-based real estate disruptor Homie announced a $23 million Series B funding round Tuesday as the 3 1⁄2-year-old effort gets set to expand its markets.
The new cash infusion, which follows a $10 million Series A in 2018, will allow Homie to grow its current bases in Utah and Arizona into new arenas, including Las Vegas, Boise, Idaho, and Colorado Springs, Colorado. A Homie spokesman said the company is also eyeing Seattle, Washington, and Nashville, Tennessee, as potential new markets.
Homie has built a residential real estate transaction system that dispenses with the commission-based approach used by legacy real estate brokers who typically charge a combined 5% to 6% of a home’s sale price. Instead, Homie employs a flat-fee system of $1,500 for sellers and offers rebates on the buyer side of the equation and uses a software system, along with agents and lawyers, to optimize efficiencies for a complex process that, for most people, represents the biggest financial transaction of their lives.
The company has also added Homie Loans, Homie Title and Homie Insurance in an effort to create a one-stop, “end-to-end real estate experience.” Homie says it’s saved clients some $55 million in commission fees so far and had $1 billion in real estate transactions in 2019. The company also reported it grew its revenues by some 150% last year.
Homie co-founder and CEO Johnny Hanna said the key to his company’s continued success is finding the right marriage of technology, services and real-world expertise.
“Buying or selling a home is expensive and time-consuming because of all the different companies you have to work with,” Hanna said in a statement. “Communication becomes a game of telephone because of all the parties involved. We are disrupting the traditional model and saving customers thousands of dollars by combining technology, a team of experts and a one-stop shop for real estate.
“Technology has changed everything except the real estate business model. That time has finally come.”
Six percent of life’s biggest transaction amounts to about $21,000 of the purchase on the current, average-priced home in Utah.
Industry watchers say that, more often than not, the commission typically collected by real estate agents is baked into the final sales price of homes. In Utah, as of the end of 2019, the average home value was hovering around $351,000 according to data gathered by online real estate database Zillow.
That commission — which currently averages between 5% and 6% across the U.S. — is one that’s been around for decades and has, so far, survived the challenges of alternative transaction models for home sales and purchases that have attempted to compete with the National Association of Realtors and its hundreds of subsidiary multiple listing service units across the U.S.
According to the organization, nearly 9 of every 10 residential sales transactions are mediated by its member agents and brokers.
Now, a tide shift may be afoot as the National Association of Realtors comes under scrutiny via a trio of civil lawsuits and a U.S. Department of Justice inquiry — as well as a wave of tech-based disruptors who are helping homebuyers and home sellers complete their transactions for a fraction of the cost of legacy rates.
Curt Roberts, a partner at Kickstart Seed Fund, a Homie financial backer, said he and his team were intrigued early on by Homie’s mission to disrupt a complicated and costly system that has remained virtually unchanged — and unchallenged — for years.
“Our sense when we first met with Homie was the belief that they’d identified a significant consumer challenge in an industry that had been doing things the same way for decades,” Roberts said. “By the time the seller is done, they’ve given up 6-plus percent of the value for what is, for most people, the single most valuable thing they own.
“Homie is now providing an experience that is so much better, and at substantially lower cost, and driven by great technology.”
Roberts recognized that Homie is competing with a powerful and entrenched legacy business model that also spends a lot of lobbying dollars to back public policy friendly to its cause. But, he noted the size of that market and potential upside is as big as the challenge Homie has taken on. And he believes the ultimate arbiter of the future of real estate transaction will be the consumer.
“It could take a very long time to make the (real estate transaction) landscape look materially different than it is today,” Roberts said. “But we think that change is coming and Homie is helping drive it.
“Our belief is, ultimately, if the consumer wins, they will vote with their pocketbook.”
Correction: An earlier version incorrectly stated Homie saved clients $55 million in commissions in 2019. That figure indicates commission savings to date.