Real Estate IPO: Iggy's House

Online real estate company Iggy's House (IGGY) is planning to float an IPO this week. The company shares 75% of the commissions received from sellers or listing brokers with home buyers.

All quotations are from the company's most recent S-1 filings with links provided.

IGGY'S HOUSE (IGGY)
Business Overview (from prospectus)

We are an online real estate company that offers innovative services to home buyers and sellers. We share with each buyer 75% of the commission we receive from the seller or listing broker. This gives buyers a large financial incentive to use our services, while we earn significant net revenue per transaction. Our primary target is the 64% of all home buyers who find homes themselves. We also offer home buyers online tools to manage their purchase transactions from search to close. Currently, we generate revenue from our buy-side services and expect to expand into other fee-generating areas, including agent referral, mortgage brokerage, title and online advertising.

Offering: 3.0 million shares at $5.00 - $6.00 per share. Net proceeds of approximately $14,215,000 will be used to repay debt, satisfy operating lease commitments, develop marking programs, invest in technology infrastructure, for working capital and general corporate purposes.

Lead Underwriters: Northland Securities, Bathgate Capital Partners

Financial Highlights:

During the nine-month periods ended September 30, 2006 and 2007, we received gross real estate commissions of $411,221 and $2,366,713, less commissions shared with buyers of $308,416 and $1,779,030, resulting in net real estate commission revenue of $102,805 and $587,683, respectively. During the nine months ended September 30, 2006, we earned commission revenue in connection with 33 real estate purchase transactions with a total transaction value of $15.3 million, as compared to 150 transactions with a total value of $90.4 million in the nine months ended September 30, 2007... Cost of services increased in the first nine months of 2007 [to $1,292,043] versus the comparable 2006 period [$1,054,150], primarily because we incurred a full nine months of compensation and related benefits, MLS fees and licensing costs related to these buy-side service personnel in the 2007 period and due to costs related to processing MLS listing requests since the March 2007 launch of our sell-side services.

Competition:

Some of our competitors in the residential real estate brokerage market are traditional brokerage firms, including large national brokerage firms or franchisors, such as Prudential Financial, Inc. (PRU), RE/MAX International Inc. and Realogy Corporation. Realogy owns the Century 21, Coldwell Banker and ERA franchise brands. Realogy also owns NRT Incorporated, which owns and operates brokerages that are typically affiliated with one of the franchise brands owned by Realogy. We compete with these traditional brokers primarily on price and service. Although our commissions are generally lower than these traditional brokers, consumers may be attracted to traditional brokers because they offer or are perceived to offer higher levels of service.

We also compete with non-traditional real estate brokerage firms including ZipRealty, Inc. (ZIPR), iNest Realty, Inc. (a subsidiary of IAC/Interactive Corp (IACI)) and Redfin Corporation, each of whom pays cash rebates to clients and relies to a large extent on the efficiencies of the Internet. We compete with these non-traditional brokers primarily on price and service. Our commissions are generally lower than these non-traditional brokers. For example, ZipRealty and Redfin rebate about 20% and 66%, respectively, of their commission to home buyers, whereas we share 75% of our commission with buyers. iNest rebates 1% of the home sale price to buyers. In contrast, as of September 12, 2007, the amount we that have shared with buyers on closed transactions since our launch has been, on average, about 1.98% of the home sale price. Consumers may be attracted to some non-traditional brokers, such as ZipRealty, because they offer or are perceived to offer higher levels of service.

In addition, we compete with discount real estate listing services, such as ForSaleByOwner.com and BuyOwner.com. We compete with these discount service providers primarily on price and service. We do not charge anything for our MLS listing service. In contrast, discount service providers typically charge their customers hundreds or thousands of dollars to list a home on an MLS. However, consumers may be attracted to some discount listers because they offer or are perceived to offer higher levels of service.

We compete or may in the future compete with various online services, including Move, Inc. (MOVE), Zillow.com, HouseValues, Inc. (SOLD), HomeGain.com, Yahoo!, Inc. (YHOO), Google Inc.(GOOG) and Trulia, Inc., that also look to attract and monetize home buyers and sellers using the Internet. Move, Inc. operates the Realtor.com website. Move is affiliated with NAR, the National Association of Home Builders, the Manufactured Housing Institute and hundreds of MLSs, which may provide Move, Inc. with preferred access to listing information and other competitive advantages. We compete with these service providers primarily on the information available on our websites, including listings of homes for sale, home valuation and community data. We do not provide home valuation data, and some other sites such as Realtor.com, have more listings and more data about the community.

Additional Resources:

• Company website
• Online road show
• InMoney.com: 'Iggy's House : An IPO joke?'
• Seattlepi.com: 'Redfin competitor Iggy's House files for IPO'
• Chicago Real Estate Daily: 'Start-up Web brokerage plans IPO in tough housing market'

Comments

[Rocktex]

Personally I really don't see a good business plan for Iggy's house. They didn't fully see the marketing niche the cyberspace has brought to us, let alone to catch it.

Their expected performance seems to be mainly based on an assumption: "commission cut" will attract more customers that means to cut its profit expands its market share.

It sounds to give a buyer savings in its perspective, but it looks dumb to me from the other perspective. Why you have to do your job by cutting your profit? As a businessman, I believe that's not the way to do business. In the long run, you can't survive.

Why you don't go out to get more benefits to give to the buyer and, in return, a buyer is willing to give you the commission as well as an extra bonus. That means you will earn more than your deserved "commission"...

I have observed so many web sites, including NAR's site that is the worst program, not so surprised to me. Some websites are really good at coping with new techonolgy and earn its extra profit at no expense of buyers. Some are using new tech to paint a useless fancy web, but lost its commercial application to profit.

Well, hope IGGY a good luck with its plain plan to compete with others.