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Lifetime idea tries to retain clients
Neal Gendler; Staff Writer

A vision of providing lifetime home-related services _ gaining and retaining real-estate clients _ was outlined Wednesday morning at the first annual meeting of HomeServices.com, parent of Edina Realty. ``We are not a traditional real-estate company and we are not a dot-com company,'' CEO Ron Peltier told stockholders at the Marriott Hotel in downtown Minneapolis. ``We are unique.''

The plan is to change customer expectations as Federal Express and Disney have done in delivery and entertainment, said Chairman David Sokol in an interview after the meeting, which lasted 23 minutes. Peltier and Sokol seek to build on the core real-estate business by adding home-related services to create a ``customer for life.'' HomeServices' vision is becoming ``a seamless one-source provider of home-related products and services over the total homeownership life cycle.''

Peltier described the method as ``aggregating very, very fragmented services.'' They include buying and selling homes; capturing the transactions' title work, financing and insurance; connecting buyers' core services such as utilities, cable TV and newspapers, and providing referral for home repairs. The company also is testing customer private Web pages to maintain their records for sale-time use.

``I think it's a good strategy,'' said Jeffrey Kessler, Lehman Bros. business-service analyst. ``Retaining familiarity and retaining a sense of value-added can get back the 50 percent of customers who . . . use another brokerage firm'' just because the old one hasn't maintained contact.

He called FedEx an example of ``creating an expectation.'' The equivalent is a consumer expectation ``that they can go into a real-estate office and everything can be done for them _ all they need to move into that house and fix up that house. If they can't get that from an independent realty firm, and they know it's out there, they will go to a firm that can.''

He said the second part is retaining customers.``The customers becomes so expectant of a certain level of service that there is no reason for them to leave when it comes to the next transaction.''

Only HomeServices, headquartered in Edina, and New Jersey based NRT, owner of Coldwell Banker Burnet, have the scale to provide significant ``layering'' of services, he said. That increases their density where they operate, so their margins go up, he said. Most traditional real-estate revenues flow right back out in commissions.

HomeServices' commission revenue was 90.3 percent of total 1999 revenues and fees _ a previously reported $393.3 million _ but 69.4 percent of commission revenue went for commission expense. Net income was $7.7 million. HomeServices.com has become the nation's second-largest real-estate brokerage _ after NRT _ since its creation by joining Edina Realty and Des Moines-based Iowa Realty in May 1998. It includes nine brokerages in 12 states, with 6,300 agents. Peltier said its brokerages lead in eight markets and last year had more than 100,000 transactions worth about $14 billion.

Two trademarked HomeServices' layering programs are The Hook Up, which connects buyers to services _ utilities, cable TV, newspaper _ and The Fix Up, online contractor referral. Both are free to consumers, including those not HomeServices clients. ``We basically had only one point of entry before,'' Peltier said. Now there are several, helping the agent and broker keep client contact during the ownership years.

``What Ron is offering customers is something that customers have wanted for years,'' Sokol said. ``We're not trying to sell people things they don't need.'' Peltier said time-starved consumers are ``looking for someone to simplify their lives.'' Sokol said, ``We're looking to be the FedEx of real estate.''

HomeServices plans ``organic growth'' and acquisitions, Peltier said. Growth includes adding mortgage and title businesses at companies that don't have them and increasing those services' customer capture rates. HomeServices sells mortgages to only about 14 percent of its buy-side transaction customers and it sells title services to about 47 percent, Kessler said. He estimated the company should be able to capture 24 percent of the mortgage business by 2001. ``We think they can take [title] to 60 percent by the end of 2001. Ultimately these brokerage businesses should get upwards of 80 percent in title,'' which he called ``the real moneymaker.''

Last year, title services brought in about 6 percent of HomeServices' revenues and mortgage origination 1 percent. Sokol said both should increase as HomeServices adds those businesses at brokerages that lack them.

HomeService's stock price was $9.44 Wednesday, down 37 percent from $15 when 3.25 million shares raised $27 million in October's IPO. Kessler said, ``It's very hard to convince the stock market that you can have a good real-estate business in the presence of rising mortgage-interest rates.'' However, he has rated the stock to ``outperform'' the market.

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