One of the first jobs that Tom Orsi, the new president Homes.com, has is to smooth some angry feelings at sister company, Homes & Land Magazine, where a class action lawsuit is in the torch-waving stage by a mob of angry associate publishers (Homes & Land Magazine franchisees.) Some of these franchisees claim they haven't been paid their commissions from Homes.com Web site sales since June 2000, or in some cases, November 2000. According to some, Orsi has promised that checks would be mailed in the next two weeks.

Or else, say some APs.

The parent that both organizations share is Bob Prince, of Prince Communications, Limited which owns a major interest in Homes & Land Magazine, The Printing House, Century Publishing, and other enterprises. He is also the CEO of Homes.com, an asset he extracted from Homes & Land and built into a separate company.

That's where the bad blood began. Homes.com was part of the value that APs say they had in order to sell advertising to real estate agents. They could tell the agents that their listings would also be posted on Homes.com. Some APs enjoyed the opportunity to sell the Web sites to agents as a value add-on.

Prince's reasoning to separate Homes.com as a separate advertising vehicle for agents was sound at the time. It was 1998, when you could still get investors with a good idea that didn't have to prove revenues for many years to come. Prince knew that he'd never hit a moonshot with magazine publishing. At best, you could sell a print publication for two or three times revenues. But a dotcom IPO? The fickle market could value a new public company as highly as fifty times revenues or more. At the time, Homes.com looked like the only other contender that could take on Homestore and grab the online listings brass ring.

Some APs felt Prince didn't cut them in on the action. Not only did he not cut them in, he cut them out by developing a separate sales force for Homes.com that would compete for Realtors' attention and dollars in the same territories as the APs, prompting lawsuits from at least two APs, Mike Cole (Florida) and Tony Santagati (Hilton Head.)

Associate publisher Mike Cole (Florida) says, "I have been in litigation against Bob Prince and terminated my relationship with him because they (Homes.com) came into my marketplace and signed up 27 Realtors without my knowledge and consent, or any offer of any kind of revenue sharing, which was a breach of my contract."

"It had not been announced at that time that Bob Prince was breaking Homes.com away from Homes & Land. I had exclusive rights to that territory, and Homes.com came in," explains Cole. "We terminated my agreement last November, and then Bob Prince and I reconciled our differences. We came up with a one-year revenue sharing agreement with any sales in my marketplace."

Tony Santagati is currently embroiled in a lawsuit against Homes.com for similar reasons. He says he can not comment because of the pending lawsuit. But the case is a matter of public record in Beaufort County.

"Homes.com salespeople get stock options," said one AP who prefers to remain anonymous. "Why weren't we offered stock options? They get their content and leads from us."

According to some of the franchisees, tension has been building between the organizations for some time, particularly among the franchisees who bought into the Homes & Land Magazine franchise opportunity before Bob Prince bought the company. Many of these dissatisfied franchisees are among the largest and most successful franchisees. The APs who chose to talk on and off the record with Agent News feel that Homes.com was presented to them as a benefit - a reason to become franchisees. Web sites for real estate agents were in their infancy in the mid-90s and were a growth opportunity for franchisees who could sell Web sites along with advertising to real estate agents. Homes.com also presented added value to real estate agents. As advertisers of Homes & Land magazine, their listings would automatically be put on the Web site, giving them more exposure.

When Prince made Homes.com a separate company, all that changed. Selling Web sites is an option. Either Homes.com or the APs can sell them, if they wish, says Bill Needham, director of corporate services.

"The associate publishers have the choice of promoting the Homes.com Web sites," he says. How many? Needham couldn't say. But those who don't wish to promote the Web sites get Homes.com salespeople in their territories whether they like it or not, complain some APs.

Needham says that Homes & Land has about 200 associate publishers, some of whom own multiple publications, about 240 books in total. Each month over five million copies of Homes & Land magazine are produced. Yet, despite this pedigree, Homes.com was not able to go public last year as planned.

In 2000, sentiment turned against dotcoms. Homes.com failed to secure its second round of financing, although company officials say that a second round is pending. Meanwhile, Homes & Land continued to feed the site listings, but then Homes.com salespeople turned more aggressive, prompting one competitor, HomeSeekers to sue the company over allegations that Homes.com salespeople told Homeseekers' customers that Homeseekers was going out of business in order to get sign-ups. The case has yet to be settled. Homes.com salespeople also sold more Web sites in the APs territories. Meanwhile, Prince promised the franchisees a commission from Homes.com Web sites sold in their territories, say the APs.

Problem solved? Hardly. As Homes.com desperately tried to raise its profitability to attract new investors, it also cut staff, causing customer support to suffer, says some APs. Some salespeople left to take other jobs, leaving Homes & Land APs to field customer support calls from bewildered agents who couldn't understand how to get their new Web sites up and running. "There was a good salesperson in Houston," says Todd Stigall, the fourth largest Homes & Land franchisee (Houston,) "but when she left, she left a mess behind. Agents started calling us to get customer support because they couldn't get help at Homes.com. We just gave them the 1-800 number." "They still think we are the same company," said another AP. "They don't know or care if we're separate."

As customer support problems worsened, the commission payments from Homes.com also stopped, say some APs. Several eligible associate publishers claim not to have been paid since June 2000 and others since November 2000, say the APs. Stigall says he also has not been paid since June.

Meanwhile, APs are rankled by news that Homes.com is heading toward profitability. "It's easy to be profitable when you don't pay your bills," grouses one AP.

According to Giles Cassels, director of site development for Homes.com, the company is indeed on track to be profitable shortly, and is also about to close a second round of financing. He did not disclose who the investor is.

Stigall, meanwhile, wonders how Homes.com got away from the APs in the first place. "When I bought a franchise, Homes.com helped build value to sales people in my territory. Along the way, Bob said the Internet was the big craze."

Before he and the other APs knew what was happening, Stigall says Prince broke off Homes.com in 1999 and made it its own corporation. "How did he do that?" he wonders.

The move seemed to have caught other APs by surprise. Many felt that Homes.com was a loss to them but didn't know how to organize to do anything about it. Others didn't act out of fear of reprisal. "You didn't want your book to come out late because you started making noise," said one AP.

Grumblings continue to grow. The Associate Publishers' Advisory Council (APAC), a forum for the APs was turning into a lynch mob. Complaints began to be so strong that Home & Land president Lou Gonzales disbanded the APAC, said one AP. (Othe APs dispute this and say that it disbanded itself.) To allay rising resentment, Homes & Land management has just toured the country in an attempt to get the most important APs to attend the upcoming Homes & Land AP conference, which is threatened to be boycotted by many of them. "I may go to the conference, but I won't attend anything sponsored by Homes.com," said one AP.

Actually, APAC is alive and well, and has been renamed The Independent Associate Publishers Association(IAPA.) The IAPA has its own secret Web site with a message board, where any of the associate publishers voice their feelings. It is on this Web site that the APs are gathering ranks to take Homes.com to court in a class action suit "if they don't make things right," says one AP.

Current IAPA president Dave McIntosh refused comment on whether the organization or any of its members are behind a possible action against Homes.com. He appeared surprised that some of the organization's officers and other APs had chosen to talk to Agent News. "We want to be careful that nothing comes out that would hurt the APs," he said.

For some, action is premature. Some of the APs are waiting to see if Orsi's promise of back-pay will come to pass. Others feel that the time for action is past. "We were apathetic. We should have stopped him (Prince) when he incorporated Homes.com," said one AP.

Others are fighting back passive-aggressively. According to one AP, the numbers of APs since he first became a franchisee is down 50 percent. One IAPA officer says that Homes & Land used to be 100 percent of his business. Now it is 20 percent. "I just diversified into other things," he said wearily. "If there is a class action suit, I'll join in, but I won't start anything on my own."

Curiously, some Homes.com employees seem unaware that any friction is going on between the two companies, including Cassels. Efferen Hardnett, inside sales coordinator for Homes.com, says that Homes.com and Homes and Land magazine operate like sister companies. "If you have a web site with us, the listings in the magazine will automatically be on your Web site," says Hardnett. "Or, there may also be a direct feed of listings from your MLS if your MLS cooperates with us.

Homes.com Web sites are available for a $269 set-up fee and $59 monthly hosting and maintenance fees. $199 is for basic training and the rest is for buying your domain name, which you own, " says Hardnett.

Hardnett did confirm that Homes.com does indeed pay a commission to Homes & Land associate publishers, and he believes that the commissions are current. "I believe we are current. Homes & Land are sister companies and they have a very good relationship," says Hardnett.

If Homes.com does close its second round, the money will be put to good use, including ramping up customer support services, says Cassels.

Hopefully, some of it will be put toward mending fences.

Says Cole, "I would like to see this thing resolved in a win-win situation. I think we all feel that way."

Published: February 2, 2001

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