The full catastrophe

Commentary: NAR and realtor.com, a troubled marriage

Wedding cake image via Shutterstock.Wedding cake image via Shutterstock.

“Zorba, have you ever been married?”

“Am I not a man?” Zorba says. “Of course I’ve been married. Wife, house, kids, everything — the full catastrophe!”

Zorba wasn’t saying marriage or having children was a nightmare. He was reflecting on life, with its sadness, tragedies, trials and tribulations.

When I read the news about NAR and realtor.com amending their marriage agreement, Zorba came to mind.

From a business angle, the history of realtor.com fits the bill of the “full catastrophe.” It’s a narrative of fear, boldness, criminality, insider dealing, greed, success and secrets — and in this case a troubled marriage.

Lately, revisionist history abounds about this epic real estate insider story.

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Here is my take. In the mid-1990s, NAR formed the Realtor Information Network as a major technology initiative to win the minds of the Internet consumer. When all but RIN’s home listing piece fell into financial disarray, a brash, young and smart entrepreneur, Stuart Wolff, took it off the NAR leadership’s hands at a bargain price. But he left NAR with a good chunk of equity and, through a tight operating agreement, some control of the company’s fate.

Oddly, so much of NAR’s efforts in the 1990s were driven by fear that some outsider would command a position with the online consumer without NAR’s blessing and control. Now, some of its very own efforts have enabled that to happen.

The outcome appeared elegant: The NAR brass who hatched RIN saved face, and the powerful trade group helped fuel realtor.com’s success, quickly becoming the dominant force in online real estate, pushing aside heavy hitters like Microsoft.

The stock soared, and realtor.com was the largest online real estate portal. Because shares were doled out to so many, people in and around NAR got rich off the enterprise.

But it was also secretive and to a degree rotten at its core. The executive management team was doing circular deals that generated revenue that the company was later forced to restate. A host of Homestore staffers were indicted and convicted for their roles in engineering circular advertising deals that the company later admitted inflated the company’s revenue by nearly $200 million. A number of them, including CEO Wolff, served time in prison.

Somehow, many other folks around the stink bomb were never sullied by the stench, but it humbled realtor.com and hurt the company for a decade.

Its battered position opened the door for companies like HomeGain and later Zillow and Trulia to soar. (Full disclosure, I was the founder of HomeGain, which I sold in 2005.)

Yesterday, realtor.com freed itself from some of NAR’s shackles and this sordid history, in hopes it can better compete, a battle it is slipping in.

Oddly, so much of NAR’s efforts in the 1990s were driven by fear that some outsider would command a position with the online consumer without NAR’s blessing and control. Now, some of its very own efforts have enabled that to happen.

And so the “full catastrophe” continues.

The lessons are many, but one should not be ignored: Arrogance is not a winning strategy.

Brad Inman is the founder and publisher of Inman News.

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