Federal Probe Report Dampens HomeStore.com IPO Optimism

Executives at HomeStore.com (Nasdaq: HOMS) are probably shaking their head in agreement with Charles Dickens’ famous “it was the best of times, it was the worst of times,” opening to “A Tale of Two Cities.” Friday, the day after the company saw its share price soar as much as 36 percent in its initial stock sale, the real estate listing company was the subject of a Wall Street Journal report. The report said federal antitrust regulators are looking into the company’s relationship with the National Association of Realtors.

The report said the investigation centers around HomeStore.com’s exclusive listing arrangements with local realty boards, which may lock out other listing services from the online market, sources told the paper. The self-proclaimed leading Internet real estate listing service – with approximately 93 percent of the 1.47 million homes listed on the Web – is backed by the National Association of Realtors, the National Association of Home Builders and Fannie Mae, the largest provider of home mortgage funding. National Organization’s Internet Role Questioned A National Association of Realtors’ spokesman told the E-Commerce Times that the organization “assisted” the Wall Street Journal in preparing the article, but he was unable to say whether the organization was aware of a federal investigation into its role on the Internet, as reported by the paper. The national organization’s Web site at REALTOR.COM is listed as a member of HomeStore’s family of sites. Other sites include HomeBuilder.com, SpringStreet and CommercialSource. On its Web site, the organization cites a Media Metrix survey that says it is the busiest real estate site on the Web, drawing almost 250 percent more traffic than its nearest competitor and as much as the next five sites combined. HomeStore UnderGoes Makeover Known as RealSelect until it changed its name in June, the Thousand Oaks, California-based company expanded on a multi-million, multi-year agreement with AOL in May to provide exclusive listings across its brand of sites. Thursday’s initial stock sale raised $140 million for the company and gave it a market value of $1.84 billion at the high peak of trading. The company lost $28.8 million on revenue of $16.6 million in the first six months of the year. While the report of a federal investigation of the company is cause for concern, so too is a $300 million lawsuit filed against HomeStore.com by Cendant last month. The largest franchiser of Coldwell Banker, ERA and Century 21 brands, Cendant said in its suit that HomeStore reneged on an agreement to give it shares prior to Thursday’s IPO. In a filing with the SEC, HomeStore said it was in the process of responding to the allegations.