Homes.com has announced layoffs of 40 percent of its employees, about 150 people. In a simultaneous announcement, Homes & Land Magazine says it is severing ties with Homes.com and launching a new Web strategy. This is quite a divorce and deserves special attention, because the actions of these two companies affect a lot of real estate agents.

You read it here first that all was not well between Homes.com and its sister company Homes & Land Magazine, and that Homes.com was in serious trouble for not paying its partners.

Here's what happened, according to sources. Homes.com is the Web site/lead generation tool for real estate agents that former CEO Bob Prince spun off from his other company's holding, Homes and Land Magazine. At its inception, the idea was promising. Venture capital flowed like honey, and dot-coms were the rage. Prince thought he could take this precious asset from Homes and Land, and spin it off into an IPO, but a combination of conditions including a market downturn, lack of venture capital, multiple lawsuits, product glitches and a deteriorating relationship with its sister company have all but put the company out of business instead.

While waiting for its second round of financing to come through, Homes.com was also fending off lawsuits from competitors such as Homeseekers.com, who sued the company for libel, and suits from Homes and Land associate publishers (APs)who felt that Homes.com was a value proposition taken right from under their noses.

This is the heart of the problem, say some APs, who are the franchisees, owners and publishers of the local Homes & Land publications. Their revenues are advertising-driven and dependent on the good will of real estate agents and brokers.

According to some APs, Web site sales were part of the value package which made buying and operating a franchise attractive because Web sites offered more value to customers. Who are the customers? Real estate agents who buy ads in the homes magazines.

AP Todd Stigall told Agent News that he felt Homes.com had been stolen by Prince out from under the APs. Other APs refused to comment because they are embroiled in lawsuits over the issue. Others, such as Lary Coppola, says that because of broken promises made to him by Prince, including failure to pay commissions on Homes.com Web sites sold to real estate agents in his territory, that he chose to sell his franchises.

"I was the chair of the APAC (AP advisory council) when Bob Prince agreed to make Homes.com a franchise addendum and to 50 percent revenue sharing with the APs - something he later reneged upon," said Coppola. "We felt betrayed."

Ill will began to fester until last month when some APs swore they were going to file a class action suit against the dot-com. Homes.com president Tom Orsi swore that the payments would be caught up, and then asked the APs to a meeting which was abruptly canceled, said Stigall. The money was a no-show, too.

"Homes.com was the first real estate site on the Web, with the best salespeople, and the best relationships with brokers," laments Coppola. "It could have been the biggest and best Web site, but they wouldn't listen to the APs."

Homes and Land to the rescue?

One way or the other, Homes & Land is determined to restore the value proposition of Web sites for agents to the APs and their advertisers. Now they are going into competition against Homes.com.

Homes & Land CEO Francie Lowe, said in a prepared statement, "We have nearly 250 magazines in our publishing system with the need for a strong Web presence to compete in today’s marketplace. Homes & Land Publishing Ltd. has made this decision in response to the needs of our Associate Publishers”

Lowe also said, that while Homes.com is a strong national site, "we have only been a small piece of their offering, one that does not fully meet the expectations of our Associate Publishers nor their advertisers.” The new site, said Ms. Lowe, will "provide greater exposure for our advertisers, and for the magazines and franchisees as well, allowing consumers to order magazines over the Internet and receive other buying, selling, renting, and relocation information and services."

According to vice president of franchise operations Brian Delaney, the decision to cut its ties with Homes.com and create the new Homes & Land new Web strategy was a painful decision.

"This had created such consternation among our APs," disclosed Delaney, who admitted that Homes.com also owes Homes & Land unpaid monies. "There is a short-term agreement that the listings will continue to show up on Homes.com."

In anticipation of the launch and as a fail-safe for agents who have already purchased Homes.com Web sites, Homes & Land has also beefed up customer support should the situation get worse. Why? The company wants to be ready in case customer support issues become a problem and do not wish to be tarred by the same brush if agents are unhappy with Homes.com.

The Homes.com layoffs have afforded Homes & Land the opportunity to beef up customer support, as many employees have transferred to the magazine. "We are working to get a new Web site up, it will be up in 60 to 90 days, it will more about the magazine rather than a secondary offering. It will be a Homes and Land site and we hope it will offer the same kind of services but it will be more related to the magazines.

Delaney vows that the company will look out for agent advertisers at all costs. "If Homes.com crashes, we will find a way to take care of those people so they don't lose their investment," says Delaney. "They remain the backbone of this company closely followed by APs."

"This move is really on a large scale an effort to return our focus back to the core business of real estate publishing and be able to provide a value added service that they can in turn give to their advertisers," says Delaney. "This is a refocus."

Meanwhile, Homes.com isn't worried by the new competition. According to Ricky Del Santro, vice president of sales for Homes.com, the Homes & Land listings only amounted to about 150,000 and only about 30,000 were active at any one time. "If they want to start a new site, that's fine," said Del Santro. "It isn't easy."

Del Santro says that the Homes.com management team has been almost completely replaced and the company plans to move forward with new products and continued customer support for agents. "We had an aggressive growth plan, and when it became apparent that the funding situation wasn't getting better, we could either run through existing capital, and be left with no money or cut back on the growth plan and preserve capital," explains Del Santro. "The good news is we get to continue to add customers and the better news is we will be profitable. Once you're profitable, you don't have to raise funds to stay in business."

Sums one unappeased AP, "If they had shared with the APs in the beginning, Homes.com would be the premier homebuying Web site. They lost it through sheer greed and ineptitude."