Iggys House CEO reports 'restructuring'
Web sites are down; former brokers report cuts
By Glenn Roberts Jr., Wednesday, July 2, 2008.Bookmarking Sites
Iggys House, a company that has offered low-cost and no-cost real estate services, is undergoing a "restructuring" that includes the departure of some brokers, the company's CEO said Monday.
The company's Web sites, at IggysHouse.com and BuySideInc.com, were not functioning on Monday, and Joseph Fox, CEO for Iggys House, told Inman News that the company "is in the middle of restructuring" and is "expected to be back online in the next week or so."
He said that some brokers "are no longer with us," and that he could not discuss more details about the restructuring at this time.
Fox founded BuySide Realty, a buyer-focused discount company that was the predecessor to Iggys House, with brother Avi. The duo had earlier created online stock brokerage company Web Street Securities and took that company public in 1999 before selling to E-Trade in 2001.
There were plans to take Iggys House public as well, though its initial public offering plans failed to materialize amid a slumping real estate market.
Rumors about the state of Iggys House, which also has offered mortgage services through California-based BuySide Mortgage Corp. and Loan Concepts Inc., have circulated on the Internet amid the company's non-operational Web sites.
Gavin St. Louis, who formerly served as broker for BuySide Realty Inc. in Round Rock, Texas, said he worked as a broker for Buyside Realty, an Iggys House company that offers a 75 percent commission rebate to buyers, for over six months.
Asked about the company, St. Louis said it is his understanding that "they are closing their doors," adding that he plans to continue to work with former clients of the company, either as an independent real estate broker or with another company.
St. Louis said that he believes the business model for the company is sound. "I think the model definitely works," he said, though he said he believes the company's IPO plans may not have helped the company.
And Gayle Urick, a San Diego, Calif., broker who left the company on May 2, said she also understood, like St. Louis, that "the company has shut down."
Urick said that she joined BuySide, which launched in April 2006, in its formative stage. She said the efforts to bring the company public may not have served the company well. "Based on the stock market and some of the other things -- it may have not been quite the right time for that (IPO plan)," she said.
Also, she said that "brokers, especially there in the beginning, really believed in the BuySide model," and she plans to offer a similar discounted service for buyers on her own through her new company, Serenity Properties.
Iggys House has offered to post properties for free in some multiple listing services, with hopes that consumers would use its other services. The company also had announced that it planned to expand its offerings to include flat-fee real estate brokerage services, referral services and title services.
In financial filings related to its IPO plan, Iggys House reported that consumers had used the company's free MLS listing services for about 4,000 properties valued at about $1.4 billion, and that the company had closed about 215 buy-side transactions in six states from April 2006 through Oct. 3, 2007.
Also, the company reported that it had a net loss of $9.45 million through June 30, 2007, including a $3.15 million net loss for the first half of 2007. The IPO sought to raise about $14.2 million.
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Submitted by Anthony Longo on July 2, 2008 - 4:49am.
Interesting...where did all the capital go?
Anthony Longo
Founder & CEO, CondoDomain.com
Visit the all new http://Boston.CondoDomain.com
Submitted by Anthony Longo on July 2, 2008 - 4:50am.
This will give Redfin a big leg up on the Chicago market...
Anthony Longo
Founder & CEO, CondoDomain.com
Visit the all new http://Boston.CondoDomain.com
Submitted by Jay Thompson on July 2, 2008 - 6:35am.
OK, so we have:
"...he believes the business model for the company is sound. "I think the model definitely works"
and;
"the company reported that it had a net loss of $9.45 million through June 30, 2007, including a $3.15 million net loss for the first half of 2007."
I don't have an MBA, but I did take a couple of graduate level finance courses. I know it's been awhile, but it would seem that "model definitely works" and "multi-million net losses" don't quite belong in the same conversation.
I'm just sayin'. . .
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Peter Tremulis on July 2, 2008 - 6:55am.
On-line brokerage services have a long way to go. In concept, they sound neat, but real people need real help. A website approach can't provide the hand holding needed for most buyers or sellers during the purchase and sale of thier most important asset. A cheap fee and no service equate to a poor business model. Most people see through this business model and choose a full service brokerage for a variety of real world reasons.
Submitted by Joe Dahleen on July 2, 2008 - 7:56am.
I agree with Peter. There is a high level of customer hand holding that has to happen. First time home buyers need the personal touch and insight so they can reduce their fear of purchasing a home. From inspections to financing they need help.
Joe Dahleen
www.goliveloans.com
Submitted by Derek Eisenberg on July 2, 2008 - 9:05am.
The real message is one about loss leaders. Free incentives with the thought that they will stimulate business in other areas is usually a ticket to failure.
Derek Eisenberg
http://www.mls2u.com
Submitted by Tim O'Keefe on July 2, 2008 - 9:17am.
Another cut rate model bites the dust.
Ditto Jay.
I think the problem with most of these models is they think that the low cost is the marketing. Build it and they will come mentality.
It doesnt work in retail and it certainly does not work in real estate.
Thinking the low cost will cause a tribe or cult around the business model isnt going to happen. There has to be more to get people invested in you.Something... a cause, or an ideal..something to gather around Something to invest in. Nothing invested no committment.
Its tough to turn a profit on free.You can cerainly flip it around and get the money on the other side sort of like how Mr. Long Tail Chris Anderson describes in a recent Wired article. But I suspect there are more failures than successes in these attempts.
In the end it is marketing slight of hand and in the end the Mr. Market demands that the marketer gets paid or Mr.Market won't let him play anymore. Unfortunately I think most who try this magical act gets bit by their own trickery.
Tim O'Keefe
Real Estate SEO and Marketing
http://www.spiderworkz.com
http://www.houseblogger.com
Submitted by bob ondiss on July 2, 2008 - 3:34pm.
One shouldn't have too hard a time finding that "Iggy's" model was to mirror Web Street's model... Web Street got a slew of low-budge stock trader-consumers to boost the business, scared E-Trade into buying the business. This time it was Redfin that was supposed to be scared... but in this case the Fox's (and crew) weren't as lucky. In my eyes, it wasn't about the business and what they offered for consumers... it was (and will always be) how they manipulate the consumer to PERCEIVE the value of their service. White collar ditch digging... with way less value and work-ethic.
Submitted by bob ondiss on July 2, 2008 - 3:41pm.
And where did all the capital go (from A. Longo's post)? Fancy cars? Most definitely. Corporate Welfare for Family Members? No doubt.
Another white collar scam that even most realtors seem to be overlooking.
Submitted by Henry Shao on July 2, 2008 - 6:20pm.
The discount brokerage model has been around for a long time, and in a way time-proven. It is just that it appears some of the new companies are trying to pitch giving too large a discount, to the extend that the business fundamentally cannot be made profitable.
Henry Shao
Movoto Real Estate
Submitted by bob ondiss on July 3, 2008 - 1:07pm.
And not too surprisingly, the IH spin-doctors are still at it to dispel rumors... taken from the OCRegister.com site (let's just wait and see about the "sweetened offer" being a reality):
Iggys House rebuilds
July 3rd, 2008, 10:46 am · Post a Comment · posted by Matt Padilla, Register Reporter and Blogger
Iggys House, a company I wrote about a year ago for trying to change how borrowers get loans online, is retooling its approach, according to an executive and report in Inman News.
Rumors questioned its solvency and whether it is for sale because its web sites are down this week, but those are totally unfounded rumors, said David Cohen, a Lake Forest resident who heads the mortgage unit, which is now Iggyshousehomeloans.com and used to be buysidemortgage.com.
The initial pitch of Iggyshouse.com and one of its related sites was to list homes on the MLS for free and rebate 75% of the seller’s commission in a home sale to the buyer. It keeps the other 25%.
Among its sweetened offers to be revealed next week will be an additional 5% discount if the homebuyer gets a mortgage via the online site, Cohen said. As I wrote last year, part of Iggys House is an online mortgage brokerage, where ‘brokers’ are salaried employees. They do not earn a commission for closing a loan. But they do get money from the lender, known as a yield spread premium, for each loan.
Still, there may be more going on here.
Inman News quotes Joseph Fox, the chief executive of Iggys House, as saying some brokers are no longer with the company and that he could not provide many details on the restructuring.
Fox and his brother Avi founded BuySide Realty, a buyer-focused discount company that was the predecessor to Iggys House. They had previously founded online brokerage Web Street Securities, which they sold to E*Trade in 2001 for $45 million in stock.
Glenn Roberts Jr. of Inman writes that there were plans to take Iggys House public as well, but that didn’t work out.
The company previously reported a loss of $3.15 million for the first half of last year, according to Inman.
Submitted by J Philip Faranda on July 3, 2008 - 3:52pm.
Great companies are made of great agents, not nifty business models. Great agents don't work for cut rate firms because they can't make enough there.
Business models do not sell houses; agents do.
The calibre of agent at discount firms is not high enough to compete in the marketplace, especially when the "business model" is geared toward cheapskates who are in it for the rebate. Mediocre agents can't handle that clientele.
That is why Iggy's house is now on the dead letter list along with Foxtons.
www.jphilip.com
jphilipblog.wordpress.com
Submitted by Sol Sek on July 7, 2008 - 9:01pm.
I see a similarity between the new build it and they will come model and the old "list it and they will come" marketing.
Both models don't work.
And in this market, a lot of agents are not selling a lot of houses. I wonder what the ratio of companies like iggy that fail is in comparison to the traditional approach?
quick reminder if I may. The fact that iggy's model doesn't work doesn't mean the old way is any more effective. Every model is fighting to sustain, and that includes new and old ways of doing things.
Consumers don't have 5-10% equity to pay traditional commission, yet, the iggy like models lack market acceptance.
So who will win? We'll know in 18 months time. Maybe.
Submitted by bob ondiss on July 8, 2008 - 3:01pm.
Check out these unfortunately trusting Iggy's customers left high and dry:
http://rentbits.com/blog/real-estate-news/iggys-house-down-for-the-count
Submitted by bob ondiss on July 9, 2008 - 3:23pm.
Okay... it's been a week since the "restructuring" began... how much longer is the unit of measurement of time of "or so" equal to? A day? A week? When pigs fly?
Submitted by bob ondiss on July 14, 2008 - 10:37am.
We're into the second week of "restructuring". Here's some recent posts from former employees of this fine, upstanding company:
http://www.trulia.com/voices/Home_Selling/What_has_happened_to_Iggy_s_Ho...
Submitted by Jim Norelander on July 25, 2008 - 11:12am.
If you were wondering "Interesting...where did all the capital go?"
It all went to Joe Fox's pockets. Any new venture beware if he is involved, the CFO and the law practice left the company, so don't you think that's a pretty good sign of a "failed dot com?"
Something else to note: they have switched hosting providers for the 3 sites, 3 times.
Also, many of the operational employees have had their lives ruined by this operation. Promises were made on paper and then one day "out of the blue", up heaved. These people all had to go to the labor union to get what they earned, such a sad situation.
I also know someone that had to file suit just to get their 75% rebate check. I agree that this is white collar ditch digging, basically highway robbery.
Be cautious.