Managers for Chicago-based Iggys House Inc., a company that offers free multiple listing service exposure for home sellers and deep discounts for buyers through its BuySide Realty subsidiary, are planning to take the business public.
In a report filed last month with the U.S. Securities and Exchange Commission, Iggys House announced plans to list its stock on the NASDAQ under the symbol “IGGY,” with a maximum total offering price of $15 million.
The company also operates California-based BuySide Mortgage Corp. and Loan Concepts Inc., and has announced plans to enter the title insurance business and to offer flat-fee and referral real estate services.
This is not the first IPO for brothers Joseph and Avi Fox, the founders of BuySide Realty and Iggys House. In 1996 the duo created online stock brokerage company Web Street Securities, took that company public in 1999 and sold it to E-Trade two years later.
ZipRealty, a real estate brokerage company launched in 1999 that offers discounted services to sellers and rebates to buyers, in November 2004 became the latest U.S. real estate brokerage company to successfully conclude a public offering.
The real estate market was booming in those days, but times have changed — and fast. ZipRealty’s stock closed its first day of trading at $16.30 per share on Nov. 10, 2004. Early last month the share price had dipped as low as $6.01. Other public real estate companies have also experienced stock declines during this slumping real estate market, including Realtor.com operator Move Inc., real estate marketing company HouseValues Inc. and numerous home builders.
Home sales are down in most markets across the country, sale prices are stagnant or dropping in many markets, and foreclosures have been rising. The subprime mortgage meltdown has spilled into other sectors of the mortgage market — affecting Alt-A and jumbo loans, for example, and creating a general credit crunch across the country.
Despite this housing-market malaise, Iggys House has aggressive short-term expansion plans.
According to its SEC filing in preparation for an IPO, the company plans to expand its mortgage brokerage services into at least 21 states by the end of next year, to launch a real estate agent referral service in at least 35 states by the end of this year, to launch flat-fee brokerage services this year in all of the states served by BuySide Realty, a sister service to the IggysHouse.com free MLS listings that offers 75 percent of the buy-side commission to buyers, and to offer title insurance services.
“We expect to provide ‘one-stop’ shopping for the real estate consumer,” the SEC filing states.
As of July 31 the company offered MLS listings in 36 MLSs in 25 states. While the company does not earn any money from offering free MLS listings to home sellers, the goal is to attract sellers to the company’s BuySide Realty services, to earn referral revenue for consumers referred to full-service real estate companies, and to profit from mortgage and title services and Web site advertising.
So far, though, the company has not turned a profit.
“Since our inception in 2005, we have a limited operating history and a history of losses from our start-up operations. As of March 31, 2007, we had an accumulated deficit of $7.6 million,” the company reported in its preliminary prospectus filed with the SEC.
If it successfully concludes an IPO, the company noted that it expects “significant future expenditures related to the development and expansion of our business,” and “we will have to generate even more revenue to become profitable.”
Competitors to the company’s real estate brokerage operations include such major national players as Prudential, RE/MAX and Realogy, as well as nontraditional companies that offer rebates such as ZipRealty, iNest Realty and Redfin Corp., Iggys House reported in the SEC filing.
Joseph Fox, who couldn’t discuss the company’s IPO plans, said that Iggys House has about 47 employees, including about 20 who are real estate licensees. BuySide operates in six states, with the goal to add Texas by the end of the year, he said. The free MLS listing service is available in 20 states, and sellers can post property information at the Web site for homes in all 50 states.
The company’s real estate and loan agents receive a salary and are not paid a commission. They are eligible for bonuses based on how they serve customers, Fox said. “I believe we have the opportunity to become the single biggest aggregator of sellers. We are giving them free service in order to educate them.”
On Aug. 21 Iggys House announced that home sellers have used the free MLS listing service for about 3,100 properties since launching in March.
Derek Eisenberg, a flat-fee real estate broker in Hackensack, N.J., who operates the MultipleListingSystem.com Web site, said it appears that “the mood is back again for companies to go public.” He said he’s surprised to hear that a real estate company is pursuing a public offering given troubles in that market. “I’m really shocked it’s coming back into favor.” Eisenberg said he spoke with Joseph Fox prior to the launch of Iggys House about the possibility of working out an arrangement to share property listings content, though ultimately there was no agreement.
Eisenberg, who created a flat-fee MLS-listing network that now spans 11 states, said his own company is profitable, adding, “If (Iggys House) could get money showing that kind of loss I think (it has) the right connections.”
Flat-fee real estate brokers Scott and Mike Berg of Berg Properties in Oak Park, Ill., said they have been watching Iggys House and believe that the company’s IPO could be a positive step for alternative business models.
“There is still plenty of room in this arena for us to survive with or without Iggys House,” said Scott Berg. The IPO may be tough given the extent of the real estate slowdown, though, he said: “This may have flown in the high-flying tech years,” adding that he wonders whether the free listings business model can make money and survive.
The discount segment of the real estate brokerage market does seem to be growing in market share, he said, though traditional real estate companies still handle the bulk of the business.
The announced entry of Iggys House into flat-fee real estate services would add competition to that segment of the market and it could bring more consumer attention to flat-fee real estate services, Berg said. “If Iggys enters the flat-fee market it may help us. One of the hardest things we have going for us is the ability to get the word out that this kind of business model exists.” A national flat-fee company could help spread the word, he said.
