Highly Entertaining: Realtors Suing Other Realtors
Michael Arrington
51 comments »
In an interview with 60 Minutes, Redfin CEO Glenn Kelman said that “Real Estate is by far the most screwed up industry in America.” That may or may not be true, but one thing is certain: a lot of people have had negative experiences with realtors and wish there was a better way to buy and sell houses.
And whenever we write about how screwed up that industry is, the realtors come out and start trolling in the comments. The profession seems to attract a fairly outgoing group; individuals that like the sound of their own voice. That may explain the success of Active Rain, a blogging platform for real estate professionals. It launched in June 2006, and by March 2007 had 20,000 bloggers, 12,000 of whom were real estate agents.
Now the service is in litigation with Move.com, a company with a collection of websites (including the official site of the National Association of Realtors). In late 2006 ActiveRain entered into discussions to raise money or be acquired by Move.com. In January 2007 the two companies signed a nondisclosure agreement. Two months later Move.com sent Active Rain a letter of intent to acquire the company for $30 million, although it isn’t clear that either side actually signed the letter and made it binding.
Then things started getting interesting.
According to a lawsuit filed by Active Rain, Move.com kept telling the company the acquisition was on track, and also kept asking them for lots of information about their business. Active Rain said they complied, occupying weeks of the owners’ and officers’ time. Move.com supposedly told Active Rain that the deal had been unanimously approved by Move.com’s board of directors and that the closing was contingent only on the tweaking of a few minor details.
Then the coup de grace: Move.com asked Active Rain for, effectively, a database download, including “highly sensitive information about its members and its network.” On May 3, 2007 Active Rain complied and sent the data.
Within “hours” Move.com notified Active Rain that they were pulling out of the deal. A few days later Move.com announced that they were “rolling out free blogs for realtors” and competing head on with the service. A press release on the new product was issued in August.
The $33 million lawsuit is pending. Move.com filed a answer denying some of the claims and demanding a jury trial.
There isn’t much more to go on at this point. Active Rain look like absolute fools for trusting Move.com with their core customer information before a deal was locked up, and Move.com look like serious jerks. It will be fun to see how this sorts itself out. Meanwhile, the good guys continue to disrupt the whole shady realtor business model. I hope, in the end, they win.
ok ok
real estate is real cool
come on no censorship
on comments
rc
trading tennis blog
a result mainly I believe because real estate is so localized
Dirty! It seems like real estate salesmen are on par to becoming like car salesman.
localized and folks protecting their turf, it seems that in many ways technology is being held back—–and the above mainly pertains to residential real estate—i think commercial real estate is in a similar postion——-there is so much potential in this business
lol - shame on Move.com, but more on Active Rain for their gullibility / lack of due diligence
real estate agents/associations/etc. are sleazy - outside the very few, very professional ones at the top, almost everyone is in RE because they washed out of other jobs/careers/industries. . .
“Real Estate is by far the most screwed up industry in America.”
Not even - health care industry by a long shot.
realtors and lawyers are two professions that have ridiculous financial inefficiencies that could probably be eliminated by some clever web 2.0 company.
I keep on telling a buddy of mine that is a good and honest real state agent that his industry is going the way of most mom&pop business … the way of the internet.
Wow — I can’t believe a real estate oriented company would be as sleazy as a regular company.
I remember way back when — when Microsoft came out with Windows — which looked just like the Apple OS…….
Another shady move.com
I think there former CEO was thrown in the clink for embezzlement.
If you read Active Rain’s lawsuit (and it’s entertaining reading!) it’s hard to see exactly what they did wrong. Were they gullible? Sure. But with an acquisition there is an expectation that you are going to allow the acquiror to dig into the company and do a thorough due diligence and that means disclosing some confidential info (although maybe not the crown jewel of your customer info - that part was dumb). An acquisition is based on good faith between the two parties.
On the other hand, I think it’ll be hard for Active Rain to win this suit. What super valuable information did Move.com get out of this? How to create a blogging system? There’s no rocket science in that. A list of customers? All Move had to do to get this info would have been to have an intern spend a few weeks surfing all of Active Rain’s blogs - the information is right there on each site.
So while I don’t blame Active Rain, I also don’t think they are going to get much money out of this one.
“Shady realtor business model?” Way to smear a whole industry!
If you don’t like the realtor business, find another way to sell your home in a down market.
It’s easy to sell it when things are hot, but when no one wants your dated 50+ year old Silicon Valley 3+2 special for more than you paid for it, you’ll be looking for someone to flog it good and hard!
I can’t believe no one has commented on the acquisition price. $30M for a collection of 20,000 crappy blogs and a website that looks like it was designed by a third grader?? According to both Compete and Quantcast, ActiveRain gets about 300,000 users a month. That’s $100 a user. I know the market is getting inflated, but does anyone else feel like that’s a bit of a crazy amount?
Realtors are good people just most have not updated the BS (MLS) that is ridiculous to use.
Got a huge kick out of Move’s response to Active Rain’s lawsuit. Over and over again they basically repeat either “We didn’t do it” or (and this is rich!) “They don’t know enough about us to say we did it.”
The judge can see pretty clearly where this one is going …
Active Rain is a great networking site for agents and potential customers a like. It also acts as a professional referral service. I have my own blog on Active Rain and it helps my website rankings.
As far as what active rain did - you really can’t “spin it” that the bloggers own the content when you were allowing the site to be acquired! If you believe that I’ll sell you a bridge in Brooklyn.
As to the dishonesty in real estate…I’m an agent and I will be the first to tell you that it exists. Although the agents that I run into in th blogging community are generally of the more honest variety.
The problem in real estate lies with the ease with which most States allow agents to be licensed. Many came in for the gold rush of the last 5 years. There were quite a few not-so-honest types. And there is some sleaze that always seems to survive. But sleaze is everywhere. I could tell you some pretty awful stories about clients who used, abused and fleeced me particularly during my early days as an agnet.
Does sleaze exist? Sure does. I’m not going to sugar coat it…but I’ve run into a lot of sleaze on the customer end as well…..Less sleaze from the general public might indeed lead to lower commissions….something to ponder.
After realtors come banks: here’s the first bank collapse. I wonder how the markets will react on Monday.
Active Rain looks like a joke.
Not to split hairs, but this actually isn’t Realtors (r) suing Realtors (r). More accurately, it’s a young Internet startup (Active Rain) suing a giant Internet company (Move.com) affiliated with the National Association of Realtors (NAR).
Active Rain has done a phenomenal job of establishing a popular blogger ecosystem in an industry which is notoriously technologically backward. Thus far it’s been free for participants. Even Craig Newmark eventually had to begin to charge for some things on Craigslist; Active Rain was slowly moving in the same direction.
Like many Internet startups, it couldn’t run on $0 revenue forever, so getting acquired was a natural and sensible strategy. Move.com and NAR, on the other hand, are notoriously good at milking Realtors for every last dime of dues, fees, and outrageous “value-added services.” Most Active Rain participants are probably sighing with relief that the acquisition didn’t go through; more likely than not, Move.com would have instituted some outrageous pricing scheme to bilk the participants.
Move.com’s strategy reminds me a bit of M$ in the 1990’s.
I agree with RedFin’s CEO, and I hope when we launch, we can bring some organization to this industry online.
When you are dealing with one of the largest industries in the economy outside the internet, its only natural those same problems will happen online as well.
mortgage industry is pretty f-ed up too… and i-banking… and vc-ing. greed and perverse incentive systems are “business as usual” in all of them.
You can’t trust ANYBODY . People will try to stick you for your paper !!!!!
You should record your phone calls and keep all your emails, if possible video record the conversations, because 5hit like this always happens especially when Millions are at stake .
Good post on real estate!!
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Where the hell were the lawyers in this deal?!?!
I was going to post a comment wondering how it came to be that Active Rain wasn’t suspicious with a $30 million acquisition price for ~20k users — shouldn’t the ludicrous price have been a tip-off something shady was afoot — but then I remembered, they’re realtors!
The real estate industry is screwed up because it’s had so much government interference. Simple. Government can screw up any indsutry.
If “the good guys” succeed in “fixing the most screwed up industry in America”, their business model will collapse. Redfin’s success depends SOLELY on the real estate industry STAYING the most screwed up industry in America.
Without a co-broker fee of 2-3% to the buyer broker, Redfin will not have anything to refund to their buyers. Using the example on the Redfin home page, if the home is for sale by owner or listed with Redfin for $3000-$4000 flat fee, they have no way to refund the buyer the $10,000 they’re using in their “typical” example.
Go lookup Bloodhound Blog if you want really insightful info on the real estate industry (including how screwed up parts of it really are) and how Redfin’s model falls down. An no, I am not affiliated with Bloodhound in any way - just a loyal reader.
RE: Comment #20, this is not splitting hairs at all. It’s important to note that Active Rain are not Realtors. But neither is Redfin, for that matter. Neither party are Realtors, and none agree to adhere to the NAR Code of Ethics. Neither company are, by definition, professionals, nor do they have a real estate industry standard of professional conduct. Also note that the term REALTOR is a term for a member of the National Association of Realtors, and should always be capitalized.
Used car salesmen
Politicians
IRS agents
Apple Geniuses
Techcrunch Journalist
Terrorist
Realestate Agents
@Marlow, Takes guts for a realtor to stick their nose in this discussion asking that the term be capitalized while being compared to used car salesmen.
marlow: realtor.
realtor. realtor. realtor.
real estate industry is screwed up because it’s had so much government interference. Simple. Government can screw up any indsutry.
Its really funny to read this all over the internet. Wholly crap, the VC laden group here should recognize the “peek and go” as business as usual.
I’m just suprised that with $30M at stake, AR didn’t have someone represent them in the sale… they shouldn’t have done it FSBO they should have called a realtor!
I don’t think real estate is the most screwed up industry, people have many options, FSBO, Flat Fees, etc… wait until you have universal health care, ala Queen Hillary… then you will see what a screwed up industry is really like..
Michael,
“realtor. realtor. realtor.” That is the funniest comment I have read in a while!
Marlow, What do you mean when you say “Neither party are Realtors, … Neither company are, by definition, professionals…” Are you saying that one must be a Realtor in order to be considered professional?
Being the CEO of ActiveRain, I am a bit biased, but I believe ActiveRain presents a good step forward for the industry. Our profession is filled with many great agents, and also some not so great. By giving real estate agents a voice through blogging, consumers now have the benefit of selecting an agent using much more relevant, viable criteria (other than just a picture in a home magazine).
Used car sales are shadier than real estate. Evenlevel.com is like the Redfin.com of the used car industry; it brings transparency and efficiency to the sales process, lowering prices and giving a better experience.
Neither ActiveRain nor Redfin are very exciting. Highly entertaining post, with lots of juicy tidbits, but what it boils down to is a squabble between two alley cats.
Redfin made exactly the same mistake as all the other real estate startups, from Trulia to ShackYack to BlueRoof to Terabitz, they totally went bananas over widgetry, and that is why there is no single killer app for real estate, and nor will there be for the foreseeable future.
Actually, there is one startup who do get it - the only competitor we are sort of worried about - but they aren’t getting much coverage either (from the blogs who love widgetry as much as the misguided startups), so I suspect we’ll continue to see a messy situation in the real estate arena for a while yet.
OK I see now that the squabble was between ActiveRain and Move.com not ActiveRain and Redfin. Hey, I tend to get a little dyslexic after about 6 beers. (Past midnight here.) But whatever. Move.com, A/R, Redfin, Trulia, boring boring boring! I’m kinda glad though that it was Redfin and A/R that got the shout-outs, if TechCrunch had featured a really good site, that woulda been a major blow for us, and I’d have to down another six-pack just to feel right. Or maybe a bottle of vodka.
Google Homestore Executive Sentenced.
BTW Homestore Owns Move.com, Realtor.com
Realtor.com is not a REALTOR web site it is a seperate company.
Active Rain is not owned by Realtors. In this case the Realtors are the poor shcmucks that have been giving content to active rain, trulia and zillow and others as these companies give out information about Realtor members and fight amongst themselves. There really is no fight among Realtors in this case.
oops for got to say . . I quite agree the real estate industry is indeed screwed up.
Ah Yer,
BlueRoof.com is not about widgetry, rather it’s about giving consumers a vehicle to search for property. It’s not about a killer app- it’s about the clients and what they want and as difficult as it is for many people to believe- not everyone gives a crap about killer apps. Many just want good help from good people, whether it’s in real estate or landscapers or their doctor.
ActiveRain is a simple blog network for the real estate industry and Move.com is a large corporation who screws anyone they can to get more profit for their investors- just like every other large corporation in the world.
I agree- what is the basis of damage to ActiveRain? Creating a blog network is not that difficult and getting member names is easy for Move.com- they have access to every MLS in the country, which includes every Realtor and thier contact info.
This is not a case or Realtors suing Realtors any more than TechCrunch is a gossip site.
somebody said “….and a website that looks like it was designed by a third grader?? ”
this must have been the same third grader that designed myspace
….feel bad for these guys, they probably partied it up thinking they hit the jackpot.
If what AR charges is true, it’s a shame to see a site get hosed like that.
Serge: You make a blanket statement based on what? Your comment sounds bigoted to me.
Mathew Johnson: You must be related to Serge — full of hate, devoid of facts, prone to unsubstantiated hype — you must be either a repulicrat, or a demublican . . .
Dr Koop: More screwed up than politics? Than public education? Than the banking system? Than foreign aid? Than the legal system? Stop smokin’ that shit Dr Koop and learn the facts before spouting off.
Gilltots: Since you have it all figured out, I eagerly await your Web 2.0 company that will make you a very rich man . . . call me when you’re ready to put your money where your mouth is.
iHero: Apple stole the idea from Xerox . . . Apple is scum . . .
Kevin: Are you the only one posting on this subject who isn’t a crack addict?
Tradewhat: What?
David: Love your sentiment, but you are dead wrong here . . .
Brandon: You are a breath of fresh air!
Great post, and I placed my comments on a blog that I wrote about what I see some of the issues are:
http://activerain.com/blogsvie.....s-Move-Com
Robert (No. 31 above) said:
“@Marlow, Takes guts for a realtor to stick their nose in this discussion asking that the term be capitalized while being compared to used car salesmen.”
You guys have no idea just how telling the whole REALTOR® vs. realtor discussion is. In an industry with major problems and major disruption, the leading trade group and it’s sheep, focus on the trivial and and simply avoid the substantive. See here: http://www.realtorgenius.com/?p=148 for another example.
More generally, Brandon (No. 28) is correct. The best source for what is really going on in the market is: http://www.bloodhoundrealty.com/BloodhoundBlog/
another realtor that just wants to hear/see his own words. i’ll defend some agents as they are just like every other person out there trying to serve customers with a service… but way to go tim jones (above) $30M for a collection of 20,000 crappy blogs and a website that looks like it was designed by a third grader?? $100 per user.. what?… somethings out of whack with the banks and vc’s…
and micheal…that’s always so awesome that you make sure to include the document links.
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