SAN FRANCISCO–It’s all about innovation. That observation might well sum up the Inman News’ Real Estate Connect 2004 conference held here last week. The conference, apart from one notable exception, lived up to its reputation as a place for online and technology companies to announce and tout their latest innovations for the real estate space.

Innovation matters because companies stagnate and lose their competitive edge if they lack new ideas. Efficiency, effectiveness and profitability depend on innovation and the competent execution of innovative ideas. Innovation is so vital that management guru Peter F. Drucker described it as “the specific instrument of entrepreneurship…the act that endows resources with a new capacity to create wealth.”

Whether the innovations announced at Connect will create wealth remains to be seen. But the innovations themselves nonetheless suggest some intriguing insights.

By far the most audacious innovation announced at Connect this year was Smarter Agent’s First Access for Banks. This service allows banks to display a link on their Web site that leads to a bank-sponsored MLS search function operated and controlled by Smarter Agent. The service is operational on the National Penn Bank Web site.

Real estate brokers helped themselves to a substantial slice of the purchase-money mortgage business while lenders were focused on the mortgage refinancing boom. Lenders now want to recapture their neglected purchase-money business. Smarter Agent’s listings-on-banks-Web-sites service allows banks to utilize realty brokers’ own most valuable data to compete against them in the purchase-money segment.

The service no doubt will feed realty brokers’ paranoia over the banks’ determination to enter the real estate brokerage business. The National Association of Realtors so far has won its battle against the banks, but the banks haven’t quit the field. Smarter Agent’s service is another opportunity for banks to control the point of purchase in the real estate transaction. The collapse of the refinance business means the stakes for lenders are even higher.

Another intriguing innovation announced at Connect was ListMeFree Real Estate, a variation on the one-stop real estate shop that’s now available in parts of Illinois. ListMeFree gives do-it-yourself home sellers a free MLS insertion as a hook to capture the title and escrow business when they sell their home. The model turns a less profitable component of the transaction (the sale-side brokerage business) into a loss-leader to acquire business in two more profitable parts of the transaction, (escrow or closing and title services). The company also offers buyer-side brokerage representation.

ListMeFree will force local listing agents to compete against a zero-cost service and justify their commission to the seller in terms of less hassle and a higher home sales price. Sellers who want a for-sale-by-owner option may be wooed and wowed by ListMeFree while sellers who value realty services may use the freebie to put downward pressure on full-service realty commissions.

A third innovation announced at Connect was Realty Data Trust‘s VaultWare, a virtual leasing office platform. VaultWare lets landlords give prospective tenants the ability to check apartment availability, complete a rental application, pre-qualify for a rental and even reserve an apartment online without the hassle of a return trip to the leasing office. The service is operational on the United Dominion Realty Trust and Home Properties Web sites.

VaultWare is noteworthy because it targets apartment leasing, a sector that has been a veritable backwater in technology innovation and adoption. Apartment leasing technology is so out-dated that many companies seem barely aware of the Internet much less ready for a virtual leasing office along the lines of Realty Data Trust’s new service. A significant number of apartment operators still use DOS-based business software.

One sour note that marred the enthusiasm over innovation at Connect was Homestore CEO Mike Long’s solo speech, in which he summarized a Realtor association’s survey of online home buyer habits, bemoaned Realtors’ lack of responsiveness to e-mail from possible prospects and railed against “preemptors,” who connect buyers and sellers with only limited brokerage services, and “profiteers,” who “intercept” traffic and direct it into their own marketing programs. His speech was bereft of fresh ideas and heavy on inflammatory rhetoric, including a comment that keyword search advertising “could be the crack cocaine of real estate” because prices escalate as more advertisers bid.

Back on a positive note, a tip of the innovation hat goes to HouseValues CEO Ian Morris, the recipient of this year’s Individual Innovator Award, which honors one outstanding person in real estate online or technology innovation. Morris joins the fine company of previous winners Russ Capper, then CEO of eRealty, LendingTree CEO Doug Ledba and E-Loan CEO Chris Larsen.

Marcie Geffner is a real estate reporter in Los Angeles.

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