The exit of Homestore CEO Stuart Wolff ends an era, and it also marks the beginning of a new opportunity - for Homestore to let Realtor.com get back on track with its Realtor customers.

NAR's new president Martin Edwards, Jr. is optimistic that Homestore's darkest days are behind it. However, rebuilding the relationship between the NAR and Homestore will depend largely on how the new Homestore management treats Realtor.com and its customers.

So far, new Homestore management is saying the right things, but does it truly understand what's at stake?

"We're encouraged that Homestore's board has appointed a new management team to take control at this critical time. I'm especially delighted that at the top of the new team's agenda, according to an initial statement of the new CEO, W. Michael Long, will be a focus on improving the value proposition between Homestore and the nation's Realtors," says Edwards.

"If the issue is can the Internet be used as a lead generation tool of qualified buyers for builders, brokers, real estate salesmen, and apartment owners the answer I believe is absolutely yes," Long explained to Realty Times. "I think that part of the model has already been proven. So the issue is not to change that model, it is to make it more effective."

The NAR has added an insurance policy that Homestore will indeed keep Realtors front and center - the appointment of Joe Hanauer as Chairman of the Board. "That's good news, "says Edwards. " Joe is a very dedicated Realtor with more than 30 years of experience in the business. Joe has played a significant role in the success of Realtor.com from the very beginning."

A spokesperson for the NAR added, "That will make two Realtors on the board."

Many are rooting for a successful new partnership between the NAR and Homestore. But the new management has more than mea culpas from past management to overcome.

Past Homestore management was often criticized for being more interested in its share values than its customers. In an attempt to grow quickly, Homestore created programs that, in hindsight, were customer-unfriendly. For example, early editions of lead generation packages charged top dollar for third level domains while competitors offered Web sites with top level domains. Allowing the agents' Web sites to be linked only to Realtor.com sounded great to investors, but not so great to agents who found themselves having to buy Web sites from other vendors so they could be found in search engines and on other national listings sites. But it was the listings-centric business model that tickled investors the most. Again reality was a different story - what if an agent only had a few listings, and in limited price ranges? That meant that the millions of viewers that came to Homestore might not ever see his or her listing(s) or Web site.

This is an important point for subscription renewals. You may sell something once, but can you sell it twice if your customer isn't getting leads?

Homestore exacerbated the problem with its investment in a virtual tour company. Again, its pricing policies were geared to please investors while Realtors were penalized for using less costly virtual tours from competitors. When Homestore purchased lead generation companies such as Homefair, agents complained that customers were diverted away from them to other sites and agents.

Online vigilante groups sprang up with the specific purpose of watching Homestore and banding together to get Homestore to alter some of its policies.

Caught in the middle was NAR business development and management. Homestore is the operator of Realtor.com, the NAR's official Web site. As much as 48 percent of Homestore's revenues depended on NAR's brokers and agents to buy Realtor.com lead generation packages, but renewals became more scarce as agents complained that Realtor.com's listings-centric approach to lead generation wasn't generating enough leads to warrant the expense of the Web sites.

Homestore then bought a large body of customers by creating a partnership with Cendant, in which Cendant received Homestore stock for the purchase of its online presence move.com. Cendant then purchased lead generation packages in bulk for its members. Many agents objected to a major competitor owning almost 20 percent of Homestore, and again protests arose.

Homestore's final breach with its customers came to a head last year, when the company put Realtor.com listings on the Bank of America's Homesolutions site without getting permission from the NAR or its MLS members to do so. Bank of America is leading the banking industry in its quest to get the Federal Reserve and Treasury to clarify their definitions of financial activities. A decision in their favor would allow banks to own real estate brokerages and manage property, which the NAR and many others consider a threat to the industry.

NAR insiders such as 2000 president Richard Mendenhall began to publicly distance themselves from Homestore, and put a protective guard around Realtor.com to prepare for the possibility that the trade organization might have to wrest control of Realtor.com from Homestore. Then the worst happened.

During the Christmas holidays, Homestore announced accounting problems and its stock was halted from trading on the NASDAQ. Class action suits are being filed alleging fraud. The company announced that it would have to restate its earnings for 2001 and possibly as far back as 2000. Meanwhile, some employees in finance and business development have been put on administrative leave.

That's a lot of bad blood to overcome. Will the new management be able to do it?

The NAR is betting they will.

Edwards explains, "NAR's representatives on the Homestore Board of Directors had the opportunity to interview all of the new executives. NAR senior staff and association volunteers have been working closely with Realtor.com management to see that they keep Realtor.com on track and focused on the needs of Realtors and consumers. As far as we can tell at this time, none of the accounting problems brought to light by the Homestore audit have anything to do with Realtor.com. We will continue to work together with Realtor.com. This new management team is one of the first fruits of that effort."

Published: January 8, 2002

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.