Open Banking or FedNow: Where to Start?
September 14, 2023 | 2 min read
This week we talked to Johnny Hanna, the CEO of a company called Homie.
Homie is changing the way people buy houses by streamlining and digitizing the experience. Users can log in to Homie to get help with the home buying process, advice from attorneys, guidance on determining home value, and so on. A user who buys a $300,000 home with a 30-year mortgage, can end up saving around $15,000 because there's no need for a realtor. The experience is free for buyers.
Johnny Hanna walks us through the details of how it all works. See the transcript below.
What would you say are the primary benefits that your users have seen in their personal lives?
Having control over the whole process of buying or selling your home. With Homie, you're in charge. So you're the one making the decision on who's going to buy your house. Or, when you're out there buying, you're spending the time doing the looking. So you're in the driver's seat with us in terms of negotiating leverage, knowing that you're not bringing an agent along, that the seller is going to have to pay commission. In short, our clients have more negotiating leverage by buying homes through us.
Any user stories that stand out to you?
I was at a conference yesterday and a gentleman came up to me. He's a pretty well known business guy here in Utah and he told me he sold his condo over the weekend. He said, 'I just listed with you and it sold really fast.' He said he sold it for more than any condo in that facility has ever sold for.
So not only did he get the highest price ever, but he was also able to save commissions on both ends. He found a buyer who didn't have an agent through us, so he was able to save the full 6% in addition to selling it for top dollar in a short period of time. And to me that's what's crazy. Not only are we saving people money, but homes are selling for top dollar, and they're selling quickly.
How has the real estate industry reacted to what you're doing?
I think the industry as a whole — in terms of mortgage companies, inspection companies, appraisals, title companies — all those guys that we've had as partners, they've been thrilled.
But our competitors that we've been displacing on the real estate agent side of things... they've been interesting to watch. We've put up billboards, and the local association put up billboards right next to ours — right across from ours, or right in front or right behind. One competitor put our name on their billboard, which clearly is totally validating to our model. We love it! We were going to send them a bouquet of flowers saying thank you for the free billboards.
We aren't anti-agent. We are just pro-technology. The way our service works clearly eliminates the need for commission. But you know, it's a huge market, a huge opportunity. So I think agents are going to be around for a long time to come.
What's the current business model for Homie? Can you walk through some of the specifics?
On the sales side, as soon as you go to sell your home, we give you all the tools you need. We give you a yard sign that automatically ships to you when you sign up online. We automatically connect you to a professional photographer that will call you and schedule a time when you're ready. We also automatically send you a home value report so you know about what you can sell your home for. We give you a phone screening system so you don't have to put your own cell phone number out on your yard sign or out there on all the different websites. We post your home everywhere. We put you in touch with a real estate attorney, and we put you in touch with title companies, everybody you need to go through the whole close. So we charge $199.00 up front for that software and all those services, and then once it goes under contract you pay $699.00, so in total you pay $900.00 with us.
So compare that to a $300,000 home you're selling. 6 percent is $18,000, which is what you would pay with agents, so it's just night and day difference on the price. And then on the buy side the way our business model works, it's actually free, and again if you go to buy a home without an agent you're not forcing that seller to pay your agent fees, so you have more negotiating leverage there. And then with that, the reason we have it free there, is we also have all these other services that we believe are the best services. The lending side, the mortgage piece that I was talking to you about, title and escrow, appraisals, inspections, you need all these different partners and professionals to help you through, and we have a whole list of those partners that you can work with.
What are the future plans for Homie?
I think our future plans are just trying to automate as much of the process as possible, from the beginning all the way to close. So we would like to eventually be a one stop shop, I think that's the direction every industry is going. And we're just in Utah right now. We opened in Vegas, but we haven't officially launched in Vegas. We plan on being in all 50 states as soon as humanly possible. So that's our future.
How do you see Homie affecting the financial industry?
I think our business model is going to have a huge impact. One, it seems that our economy in general hinges around the housing market, and interest rates on homes. And just knowing that when you buy a home, it's typically, that home purchase price includes the price of 6 percent and realtor fees. Again, a $300,000 home, that's $18,000! So when you go to sell your home, you've got to mark it up another 6 percent and if you are moving quickly, and if you think about that just on a massive scale, everybody has to turn around and sell their home for 6 percent more every single day. We believe that's what causes the over inflection of home prices. And with us getting rid of that, we believe we'll be able to keep the financial markets more flat, more stable.
I also cofounded Entrata and our whole focus there was automating the process for people to rent an apartment. So very similar real estate technology. That was for rentals, but in the US we preach pretty hard that if you're not going to be living in a place for more than a year, then you should probably rent. And in some cases, like in New York, knowing the cost of owning a place in New York City, you probably don't want to own a home for years if you're going to be pretty mobile and active in moving around, jumping from job to job. But with what we're doing, with cutting out the fees on the real estate commissions, and cutting out fees for loan officers on mortgages with what we're doing there, we're basically eliminating closing costs and realtor fees to where you could potentially buy a home, turn around and sell it in a month or two, and actually make money on that decision. Versus renting and just throwing your money away. So that's kind of how we see things happening. I don't know how fast we'll get there, but I think those are natural outcomes of what we're doing.
Finally, what do you think is the best hope for traditional financial institutions given the rapid change of technology?
I think the word there that sticks out is traditional. I think this real estate industry is very traditional, and at Entrata we introduced software to the apartment industry that was super traditional and just didn't use a lot of tech. We started collecting rent online. And that changed how financial institutions were collecting money. They were having to process it through checks, money orders, they eventually built scanners. But now everything is online. So if you don't adapt and add tech to your business that is a financial institution, you will not be around much longer. It's just the natural cycle and evolution in business. Now that technology is here you have to adapt.
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