The additional $30 million recently scored by online real estate site Zillow.com not only pushed the Seattle startup to the front of the venture-funding pack but it also resurrected a couple of the more famous notions in the residential sector.

Will the popular site, known for its real estate estimations, seek to become “the lion over the hill” in the residential arena? Will it try to accumulate all possible listings and match for-sale homes with its individual estimates? How deep will Zillow go with its plans for home improvement data and mortgage programs?

It’s been more than a decade since Bill Chee, then the president of the National Association of Realtors, described the confusion and competition over listing services as “a few Chihuahuas fighting over a bone, unaware that a hungry lion is coming over the hill.”

Many observers predicted that the lion would be Microsoft’s Boardwalk, while others believed the lion would simply be technology in general. Microsoft, which curiously debuted its portal shortly after Chee’s remarks, spent three years and millions of dollars developing its next project, HomeAdvisor Technologies, in an effort to dominate online listings and perfect online mortgages.

HomeAdvisor evolved from a home-listing center into an online guide that aided real estate agents and consumers through the home-buying process. It offered services such as neighborhood crime and school statistics with homes, editorial content and expert advice. One of its initial tools — a buy-or-rent-calculator — was immediately popular with consumers attempting to weigh the financial benefits of home ownership.

Microsoft clearly wanted HomeAdvisor to fly high. Even Steve Ballmer was on hand to announce the formation of the new company that would “revolutionize mortgage and real estate transactions.” It was the only press conference in the three years that merited the presence of Ballmer who never got close to a HomeAdvisor announcement before the mortgage component was added.

HomeAdvisor added staff that truly understood the electronic mortgage game. The crucial piece of the puzzle was partnering with Freddie Mac. In a capsule, Microsoft could finally dovetail its technology into Freddie’s underwriting and processing engines, cutting time and costs for loan reps and consumers.

Its mortgage component was significant in terms of streamlining and timesaving, but it did not mean slam-dunk savings. Remember, the best quotable loan — online or offline — is not always the best closeable loan. While HomeAdvisor did consider all borrowers and most loan amounts, it best served those who fit the norm and fell within “plain vanilla” loan qualifications. And, as most online operations were discovering, even those folks were heading to the corner banker to actually complete the mortgage process. Only about 10-12 percent of all mortgages are a result of online loans.

The reluctance of consumers to accept online mortgages has been well-documented — they want their hand held through the process; they question the security; they fear a deluge of other product offerings. But most of all, home-loan borrowers have shown that they like to click around in cyberspace for the best home-loan deal they can find and then walk down to the corner bank to see if their old buddy — perhaps the same individual who set up their checking, savings and home equity account — will match it.

In the end, the HomeAdvisor economic goal was not about listings, but loans. It gave online mortgage banking its best shot for one year and concluded that its resources were better spent elsewhere. A company that measures performance today also requires results today, and Microsoft definitely had other profit centers it could pursue.

Jay Leupp, a San Francisco-based analyst, was not surprised that the giant Redmond, Wash.-based company known for computer software would walk away from the residential loan business.

“The mortgage business is so difficult, and the margins are so thin. I don’t think it gets any easier when it’s wrapped up in a real estate portal,” Leupp said. “The potential was not even a rounding error for Microsoft.”

It will be interesting to see how deep Zillow jumps into mortgages. If Microsoft felt the resistance to online loans at one of the most active and profitable times in mortgage history, what will be Zillow’s experience in these days of intense loan scrutiny and dwindling jumbo-loan dollars?

To get even more valuable advice from Tom, visit his Second Home Center.

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