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Homes by Microsoft
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July 13, 1998: 3:18 p.m. ET
Microsoft enters online housing market but faces stiff Web competition
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NEW YORK (CNNfn) - Sure, Microsoft Corp. was always willing to sell you Windows, but now it's giving you a chance to buy doors as well, along with sinks, roofs and floors.
On Monday, the Redmond, Wash.-based software company had open house for HomeAdvisor, an online real estate service for finding and financing homes.
HomeAdvisor seeks to offer prospective home buyers start to finish service, beginning with lessons on the twists and turns of home buying, listings of available properties and the ability to qualify for a mortgage for free in about 15 minutes.
The incentive for Microsoft (MSFT) to jump into the home-buying marketplace was huge. The housing market accounts for about 15 percent of the United States' gross domestic product.
This tantalizing prize has not gone unnoticed by other big names on the Web. Yahoo! (YHOO), Intuit (INTU) and Netscape (NSCP) are all planning to or have already set up shop offering real estate listings and services online.
However, Microsoft will probably be most focused on Realtor.com. This site, which is the domain of the omnipresent National Association of Realtors, offers 1.2 million home listings, or more than 90 percent of the approximately 1.3 million existing homes for sale in the United States.
RealSelect, which operates the Realtor.com site, said the site racks up 3 million visits per month.
Microsoft's HomeAdvisor, by contrast, will start out with only about 500,000 home listings, although that number should grow over time.
"We are feeling very confident about our prospects," said Michael Keller, vice president of marketing for RealSelect. "Microsoft is entering our space, not vice versa. They have no established track record."
More is better
The number of homes Microsoft will be able to display to consumers will be key. Almost every real estate site offers basic information on home buying basics and mortgage terms, making the informational content of these sites quite similar.
"There will probably be one or two category killers," said Chris Charron, an analyst at Forrester Research, who predicted consumers will want to only go to a site which they can be sure offers every available home. If it lists only half of the homes for sale in a particular area, they might be missing out on their dream home.
For now, HomeAdvisor will have to settle for their listings being mostly a subset of what's already available on Realtor.com and other sites.
However, Bruce Benham, vice president at real estate firm RE/MAX International Inc., said listing with HomeAdvisor can only help create sales.
"Our top priority is getting the broadest exposure for our customers and we believe the innovative approach of HomeAdvisor will help us do an even better job of that," said Benham.
Mortgage choices
Where Microsoft's HomeAdvisor will differ from Realtor.com is in financing. Realtor.com operates essentially as a classified advertising service, listing available homes on its site and channeling the business back to the individual real estate agents, who will guide them through not only the searching but also the financing phase.
HomeAdvisor has teamed up with various lenders, including Principal Residential Mortgage Inc., HomeSide Lending Inc. and American Finance and Investment Inc.
Buyers can compare loans, see if they qualify and take it a step further by applying online. Microsoft will then get lead fees for the loans which originate from its site.
This puts Microsoft in a precarious position, said Forrester's Charron. The company will have to walk a fine line between keeping its lender partners and its site visitors happy.
"When a buyer goes to look at a mortgage, they want a site that will have as many rates and mortgage options as possible," said Charron.
He explained Microsoft may have to choose at some point whether it is more important to get money from a select group of lenders or offer a wider variety of lenders so customers feel they aren't stuck with limited loan firms which may not have the best rates.
Microsoft expects to widen things up soon, however. "We felt these three companies gave us the strongest coverage nationally and offered the best services," said Ian Morris, lead product manager for HomeAdvisor, "but we will be adding more in the near future."
No one should underestimate Microsoft in real estate. The company has proven itself to have a sure hand with commercial sites, including CarPoint (auto buying) and Expedia (travel).
"They have done well in other categories and they have the technology expertise," said Charron. "I would certainly consider them a serious contender."
-- by staff writer Randall J. Schultz
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