UB Insider #52: Feeling at Home while Disrupting an Industry
About this episode:
As anyone who’s bought a home knows, the real estate industry is complicated and highly regulated. For Homie, those qualities make it ripe for disruption. In this episode of UB Insider, Johnny Hanna, CEO of Homie, talks about how the tech startup is disrupting the real estate industry, the blowback they’ve faced, and how to stay on top of the game now that they’ve changed the rules. Subscribe to our podcast or download this episode on Apple Podcasts, Stitcher or Google Play.
Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. As anyone who has ever bought or sold a home knows, the real estate industry is one that could stand a little disruption. Salt Lake based Homie has done just that. Johnny Hanna, CEO of Homie is here to talk about what it’s like to innovate in a complicated industry and how to navigate the choppy waters of disruption. Welcome.
Johnny Hanna: Thank you. Thanks for having me.
Lisa Christensen: So you have talked about the six-degrees of disruption. Tell me just briefly about that in a general sense.
Johnny Hanna: I think if you look at all the big startup companies that have now become huge like Uber, Airbnb, Zenefits can be included in there, a lot of those types of companies that have taken on an old, heavily regulated industry. There’s what we thought was six steps.
Number one is building a better mouse trap. Number two, the industry ignores you. Number three, your brand recognition grows. Number four, you get bullied and number five, the industry adapts. Number six, the consumers win. So we’ve applied those kind of six steps to those companies and we feel we’re kind of living in that same path right now.
Lisa Christensen: So tell me step-by-step how Homie went through that cycle. So how did you build a better mouse trap?
Johnny Hanna: So for buying and selling a home it’s a little bit different on each side of the transaction. But we listed out every single step that you go through. Today it’s a lot different than it was even five years ago, ten years ago. Today, most of us do the majority of the work. Whether you hire an agent or you use Homie, you end up at the end thinking man, I did all the work and I ended up paying thousands of dollars in commissions once you see that it closed. For us when we listed it out on the buy side we realized most people find their own home. We don’t have to drive you around to go find your own home these days. And nobody really liked that, I think, back in the day. It’s just so much more convenient now to pull it up on Zillow or on KSL on the different sites out there. And once you find your home, you can tour your home through Homie.
You can use our software to make an offer on that home. And we have real estate attorneys that hold your hand. They’re lawyers. They guide you through the whole process to make sure you understand the paperwork. If you don’t want to understand it, that’s fine. They take care of that for you as well. And then we have a list of professionals that are lined up to help you all the way to close. So you’re not doing this on your own. It’s just that you’re saving about $10,000 on average. So that’s the buy side.
The sell side is very similar. What we looked at was the yard signs, and I don’t know if you’ve seen… All the yard signs, they typically have the national brand of the realtor company. And then they have the local brand. And then they have the name of the agent. And then they have a photo. And then they have a QR code and three phone numbers and three websites all on about a 2’x2’ sign. You know, so we thought number one those signs need to go. We need to switch that out.
You know, marketing is a big part of what we do. We give you a beautiful yard sign. We list you on the MLS, we list you on all of those major websites I just mentioned: KSL, Zillow, Trulia. We give you professional photography. If you compare what we do and what you see out there, most people do just take cell phone photos, but we send out a professional photographer. And again we give you real estate lawyers. Lawyers to help you with the paperwork. Professionals to guide you all the way to close, and we don’t charge commission on the sale side either. So there’s just so much savings on both sides.
Lisa Christensen: So with the second step, how did the industry ignore you in the early years?
Johnny Hanna: So immediately we got a lot of fake reviews. If you go to our Facebook page, you cannot take down fake reviews. So if you look at our reviews page, there’s about 85, 86 five star reviews from actual clients. And there’s a few four star reviews that tell us there’s a little bit of improvement we can make, which is clear. We’re a startup. There are zero three star reviews which is kind of interesting. It typically trickles down to one star if you’re a good company, but ours has a weird curve that you never see. So ours has a couple two stars and then like fifty one stars. And if you scroll over any of those individuals you can see their profession is that they’re a realtor. So they haven’t had actual experience with us, but they post these negative reviews. It brings down our score, but I think it actually benefits us in that people can see that and see that we’re disrupting the industry and that we’re causing waves. So I think they thought they could ignore us quickly by posting a fake review or two and then be done with us.
Lisa Christensen: So how did you make your brand recognition grow despite that kind of obstacle, that kind of push back?
Johnny Hanna: Yeah, I actually want to give them credit because every Facebook post we have will get blasted by agents. And again, the majority of agents are actually really good and work with us, but there are a select few that just hammer us. And those guys don’t realize that they have 800 friends on Facebook that now have learned about Homie thanks to their post or their like. So we love those guys. The other thing that they’ve done is they’ve put up billboards against us. I don’t know if you’ve seen these in I-15.
Lisa Christensen: No. I’ve seen yours but I haven’t seen those.
Johnny Hanna: Typically they’re right across from us or right before or after ours. The local association did it but there was a specific company that put up billboards that said, “Hire a professional, not your homie.” And people signed up with us because of those billboards. They were like oh, this company is afraid. They’re naming their competitor who is a little startup in comparison to this big, massive, old brand. But I think that kind of ties into how I think we’ve made our brand grow.
I don’t know if you can answer what the difference is between a RE/MAX agent, a Century 21 agent, a Berkshire Hathaway agent, but those are all the brands that have been out there for a while. And I’ve never had anybody be able to answer that. They’re old, stale brands and we come up with Homie. You know, it’s a little edgy. Homie, what kind of name is that? Who are these homies? Our director of marketing was the founder of SEO.com and he’s put together another marketing agency within our company. So he’s really done an amazing job of separating us from that kind of old, traditional industry.
Lisa Christensen: So the Facebook posts and the billboards kind of sound like some of the bullying stuff that you mentioned in the cycle of disruption. How and when did the industry finally warm up to you? Or have they?
Johnny Hanna: It hasn’t. It hasn’t warmed up yet in terms of that industry. People are coming to us in droves. The springtime, the summertime has been amazing. Our numbers have just skyrocketed. But the industry itself I think, there has been more backlash in terms of the old industry. We’ve had a number of cease and desists to kind of scare us and threaten us that they’re going to sue us if we don’t stop saving people money. I think there’s a lot of fear and uncertainty around the future of that industry. So naturally if that’s your profession you want to have some backlash and I think that’s a natural reaction. That’s what we’ve seen with Uber and what we’ve seen with Airbnb and that’s what we’ve seen with all these different companies. And the government has typically stepped in and also halted progress with some of those companies. But so far, the government here in Utah has been great to work with us in spite of all of the negative feedback and negative complaints that they get, not from our clients, but from traditional realtors.
Lisa Christensen: It sounds like you’re kind of stuck on that, you’re still working on that step of the cycle.
Johnny Hanna: Yeah. There has been, I would say we’ve seen a lot of people will say I’ll sell your home for free if you hire me to help you buy a home. So we’re seeing a lot of that. That’s where I think the industry is adapting. So I feel like we’re still super new, but it’s fun seeing that six step pattern and seeing us kind of follow that. So for early adopters, the last step is consumers winning. And so far we’ve saved Utahans $7.5 million in commission fees. That’s about $10,000 per family. So that’s a lot of families that have now saved so much money. So they’ve gone through the full cycle.
But yeah, I think agents will always be around. I just think they’re going to have to lower those fees dramatically. They’re not bad people, it’s just the system that’s set up. They have to split that commission with their broker. So they have to work pretty dang hard in order to get that commission. They have to juggle so many different pieces of the process where we’ve broken it out into silos as a typical software company would to where we can respond to our clients within minutes, where the industry average for agents is about 15 hours based on the most recent studies we’ve seen.
Lisa Christensen: Are any of these challenges you guys have faced, that you guys are still facing, similar to the ones that you have faced previously? You were at Entrata before, right?
Johnny Hanna: Right. Yeah. It is very similar. So Entrata was a real estate software company. And we came in disrupting the apartment industry. So we kind of became a one-stop shop for property managers to use our software. The disruption that happened there was there was so many different software companies. You had to have a software company build a website for an apartment, to help you move in. You then had to hire a screening company to do a background check on you and a credit check. You then had to hire an online leasing company to help you apply online. You had to hire a renter’s insurance company. Those are all these different pieces. So we came in and we became each one of those providers. So we disrupted that industry in that you don’t have to have so many different software providers. But it wasn’t a heavily regulated industry like this one is.
There’s 18,000 agents here in Utah that are licensed. You know, there weren’t that many property management companies in the state of Utah. Most of our clients were outside. So I think that was more of a traditional disruption, coming in with a better solution, creating a one-stop shop platform. But we didn’t have any of these regulatory bodies, these lobby groups. We’ve had to hire lobbyists which I’m not used to. That’s definitely different. There were two big companies in my old industry that were kind of the behemoth companies that could bully others around. We did face a lawsuit where it was, the way we viewed it was, “if you can’t innovate, litigate.” That was the saying, the phrase that’s been out there for a while. And one of these companies went around buying all of those ancillary providers. So the renter’s insurance, they bought a renter’s insurance company. They bought a screening company. They bought all these different pieces and tried to piece meal them together, while we just built those ourselves so it was much more streamlined and more clients were coming our way. Our view of it was a lawsuit emerged because of that. So a similar cycle without the government involved.
Lisa Christensen: It sounds like you are seeing the, “if you can’t innovate, litigate,” or at least the threat of litigation now.
Johnny Hanna: Absolutely, yeah. We haven’t seen any official lawsuits and we’re sure that those are going to come. Early venture capitalists that we met with, one of the first investors in Uber, he actually gave us advice and told us to go get sued. Go get sued that that will prove out your business model. The public will see what you’re doing. So we’re not afraid of a lawsuit coming our way. We’re very transparent in our process. Everything we’re doing is straight forward, it’s legal. It’s just more streamlined, better experience and a whole lot of savings at the end.
Lisa Christensen: What do you see as the future of Homie?
Johnny Hanna: We’re creating a really good blueprint of how to build this type of company and create this type of a market for what we’re doing. So we have a few more months left here in Utah before I think we expand to other markets. I see us as a national player. But beyond that, we want to automate the whole vertical. So we’ve already become a mortgage company. Again, like my old industry where you had to hire all of these different companies, I want to do the same thing in this business.
So instead of having to hire a mortgage company, hire an inspection company, an appraisal firm, a title and escrow company, we’re just automating it. So we’ve already become a mortgage company as of about a month ago. And mortgages, nobody really knows the details of how you make money, how much those actually cost, there’s no transparency. And we’ve already cut half of the commission there of what you would typically get provided as a mortgage provider so that we can offer our clients the lowest home loan rates. And that’s been huge for us.
A lot of our sellers come on board, we let them know that we’re also a mortgage company. A lot of our sellers are also buyers. And then all the buyers that are coming to the sellers homes, the sellers can use our mortgage company to screen out those buyers to make sure that they’re pre-qualified. And using our tool is more of a consistent way to know, okay, this is a buyer I can take an offer from. I can take my house off the market. I trust that they have the funds to buy my home because I just had them go through Homie Loans. So I think we’ll continue to automate that whole vertical. It’s a heavily regulated industry on each one of those pieces that I just mentioned in each individual state. So it takes a little while to open up new areas, making sure we’re abiding by every single rule and regulation that has been created over the last 100 years.
Lisa Christensen: So you guys disrupt the industry. You get accepted by or be tolerated by the real estate industry, you expand nationally. You become a cornerstone of the market. What happens if someone tries to innovate? How do you protect yourselves from being innovated on and how do you keep from becoming a bully yourself?
Johnny Hanna: Yeah, I think the first question about looking at competition, we know we’re going to have competition. And I think that’s going to drive us to continue to innovate. So that occurred in my last business and I was there for 13 years and it’s still growing. It’s over $100 million in revenue and we just kept an eye on the market and saw when new companies were coming up with a really cool idea we made sure to hop on that or partner with them or integrate with them so it kept us on top. We didn’t get lazy and just think, no one is going to disrupt us. And I think that’s the problem.
In this industry there has been, there was a report called the Danger Report by the National Association of Realtors that listed out their ten biggest dangers. Number one, they said that their agents are unethical, untrained and incompetent. A little harsh. That doesn’t make you want to go out and hire an agent, and they said they needed to work on that. And they do. But number ten on the list was that a tech company was going to come in and disrupt the industry. That was published three years ago I believe and they haven’t done anything from my viewpoint to change. They still have to split their commissions with brokers.
If you’re familiar with Freakonomics, the commissions themselves create misaligned incentives. So there hasn’t been much change there. So we’re going to continue to keep our eyes open, to work hard. But on that last part in terms of being bullies, our number one value at our company is humility. And to me, in any company you get anybody who’s kind of a punk, we’re seeing that to a degree with Uber, their people are leaving. They’re out of there. Even though Uber is this amazing company, it’s the management. And I think if we’re not humble we can get a little cocky, we can start to do that ourselves. I think the opposite of that is Tesla in my opinion. Tesla has a patent on their technology. I’m a huge fan. We’re officed right next to them in Draper. They’ve given away their patents. That’s the opposite of bullying. They’re saying come on everybody, let’s rise together. Let’s innovate together. I’m a big fan of that type of business that you work, you execute, you don’t worry about suing others or stopping somebody from copying you. It’s going to happen, we realize that. We’re just accepting of it and we’re going to keep moving forward.
Lisa Christensen: Well thank you so much for coming in today.
Johnny Hanna: Well thank you.
Lisa Christensen: Thank you also to Mike Sasich for production help today. You can download our podcast really wherever you get podcasts. You can also follow us on social media at @utahbusiness and drop us a line at email@example.com. Thanks for listening.