homestoreQA022002
Questions and Answers On Homestore
From the National Association of REALTORS®
February 20, 2002
Q. If Homestore does not survive, what services that they or their affiliates are providing now will likely be terminated?
A. This is a question for Homestore to answer. Attached below is a letter from Mike Long, the new CEO of Homestore, that will be sent out via the INS to association presidents and executives, and will run in REALTOR® Magazine to keep our members informed.
Q. What specific management actions have been and are being taken to put Homestore back on sound financial footing?
A. Once again, Homestore is the best source to answer this question. The attached letter from Mike Long addresses that effectively. The most significant factor in this letter is Homestore's projected positive cash flow, which means that some time in 2002 their burn rate will disappear and they will be self-financing.
Q. Associations received notice from Realtor.com that their non-dues revenue was to drop to fifty cents per new listing. Does NAR approve? Can it be reversed?
A. NAR is aware of Homestore's need to reduce the revenue share that they have had historically with data content providers. Homestore made us fully aware of their financial need to take this step upon renewal of their current agreements.
We are, obviously, disappointed at the adverse effect this will have on board and MLS budgets. The need to reduce the revenue on Homestore's part reflects the realities of the marketplace. These reductions comply with the contracts negotiated between RealSelect and the data content providers.
Certainly in the current economic environment we can't see any reason why Homestore would reverse its decision. As you may recall several years ago when there was a Department of Justice (DOJ) review of certain complaints made by competitors in the marketplace about Homestore's activities in this area, the DOJ was satisfied that NAR did not participate in the creation of any of the exclusive relationships between RealSelect and certain data content providers. To indicate now that there might have been an implied guarantee of any part of these revenues could put NAR in an awkward position with the DOJ.
Q. NAR should be communicating directly with association executives and presidents of local boards on at least a weekly basis via e-mail addressing progress or lack thereof in restoring Homestore, any plans to take over Realtor.com and what kind of timetable they are using. Does NAR have any plans for such a line of communications? If not, why not?
A. NAR is communicating promptly to association executives, state and local association elected officers, and to REALTORS® as a whole as we learn of developments. We have not had occasion to have a weekly communication since information is not coming out of Homestore at that rate.
Q. If NAR takes over Realtor.com, where will the operating funds come from?
A. NAR has no plans nor do we have the right to take over REALTOR.com at the moment because Homestore is complying with all of the requirements of our operating agreement. Additionally, REALTOR.com is a highly successful Internet site that has a commanding lead in listings and consumer participation. It is doing the job that it was founded to do extremely well, which is to bring millions of consumers per month to the REALTOR.com site and thus create exposure of our members' listings and leads for agents and brokers.
We do, of course, have every right to move REALTOR.com to another host operating company should Homestore fail in the future to be able to fulfill the terms of our operating agreement. We certainly don't ever expect this to happen, but of course, when dealing with such a significant asset, we have contingency plans from both a technology perspective and a business model perspective to deal with that challenge should it occur.
Our goal is to make sure that REALTOR.com continues to be up 24-hours-a-day and continues to deliver value to members and consumers every day without regard to who operates the site.
Q. Does NAR have any plans to reimburse associations for lost non-dues revenues in 2002 and for the foreseeable future?
A. NAR is not going to be able to reimburse associations for the reduction in their contracted revenue rates with RealSelect for listings. As we indicated, this could put us in a difficult legal position. Although we regret this loss to our associations and MLSs reimbursement is just not a possibility in the reality of the marketplace today. We would much rather be on the positive side of creating new revenue opportunities. Associations and MLSs will have to make independent decisions based upon the circumstances facing their organizations and the needs of their members.
Q. What incentives does NAR perceive to be in place that will encourage local associations to continue to partner with REALTOR.com? They are questionably the "biggest game in town," e.g., Microsoft's HomeAdvisor.com is biting at their heels and it just depends on who you listen to as to which one attracts the most potential homebuyers. If we (associations) are to lose revenue by staying with them and our Brokers/members lose services by staying with them, a lot of incentive goes down the drain.
A. REALTOR.com is without question the biggest game in town. HomeAdvisor is far from our heels and continues to be a less significant participant in the market almost on a weekly basis.
REALTOR.com's overall purpose again is to keep REALTORS® as the first point of contact in the real estate transaction, on the Internet as well as in daily market practice. It has proven to be remarkably successful in doing this and NAR encourages its members to make their decisions on REALTOR.com and the Internet based on success rather than on suspicion or rumor. Unlike any other site, REALTOR.com is owned and controlled by REALTORS®, a guarantee that no other site can make. But at the end of the day, all data content providers have to feel free to make their own decision regarding their relationship with aggregators overall.
In closing, NAR believes that the new management team of Homestore, headed by CEO Mike Long is on the right track and has the focus and experience to correct the accounting problems, and more importantly refocus all of the energies and assets of Homestore on its core business, REALTOR.com and the real estate space.
We believe that the comments in Mike Long's letter below should answer any questions anyone has about their viability. As he states in this letter, Homestore will be able to continue to invest in their business and get it back on a significant growth path this year because it has the cash on hand, valuable assets in its portfolio, and expects a potentially positive cash flow this year.
NAR senior staff and the elected officers will participate as much as possible in not only monitoring our significant asset REALTOR.com, but helping Homestore and REALTOR.com management make positive product development and business model decisions that will make the site even more beneficial to our brokers, agents, and the consumer.
We are focused on ensuring that the next phase of our partnership with Homestore for the operation of REALTOR.com is one of solid performance for REALTORS®. We are also focused on ensuring that our partnership with Homestore is one of solid financial performance as well, so that they have the wherewithal to continue to serve our members' needs.
Click here for Mike Long letter to REALTORS®.
