Rich Barton, CEO of Zillow.com, was lying on a table with needles in his back a few weeks ago, talking to an acupuncturist who mentioned he'd sold his home through Zillow.com. Around the same time, Glenn Kelman, CEO of Redfin, had inadvertently irked his neighbors with a moving sale that turned into a free-for-all. Meantime, Charlie Young, chief operating officer of Coldwell Banker, decided to pull the plug on one of the firm's most cutting-edge Internet strategies.

In the process, each of the three men learned some surprising lessons about the risks and rewards in how the Internet is reshaping the housing industry. Their experiences shed light on the power and potential of the Internet to change how real estate buyers and sellers connect, gather information and communicate in both real and virtual worlds.

Be careful what you wish for

Barton, who had thrown his back out, was getting his first acupuncture treatment in Jim Blair's Seattle office when he started talking about Zillow.com. The company, which Barton co-founded last year, initially provided estimates — dubbed "zestimates" — of home values across the country. Then, earlier this year, Zillow.com started letting people advertise their homes for sale on the site for free. It included a fun feature that let homeowners set their "Make Me Move" price.

"I think I just sold my home on your site," Blair says he told Barton.

Blair had put a $699,000 Make Me Move price on his home on Zillow.com in late spring, thinking he might downsize to a town house. Weeks later, as he was getting ready to put the four-bedroom house on the market through an agent, for $659,000, a woman who'd found his home on Zillow.com sent an e-mail.

"She knew the area, knew the home, liked the area for her children for school," Blair recalls. "She had been looking for quite some time in the area and wanted to see the inside."

She made an offer; they settled on $619,000.

Instead of paying a 6% commission to the agent, Blair — who'd listed his house and found the buyer himself — gave the agent 0.5% of the price, $3,095, to handle the paperwork for the sale, which closed at the end of last month.

He hadn't expected to sell so quickly. He's now living with friends until his custom town home is ready.

During the same period, Barton had also put a Make Me Move price on his family's multimillion house in the Hamptons on Long Island, N.Y. But when a potential buyer, a hedge fund manager in London, contacted Barton to see if he was serious about selling, suddenly Barton wasn't.

"It was a dumb thing to do," Barton said. He had underestimated how much money it would take to make him, and his family wants to sell the home they'd built on the beach. Barton has since jacked up his Make Me Move price by more than 50%.

The power of Craigslist

Kelman has been in the hot seat since he opened his discount real estate brokerage in early 2006. Redfin has defied the traditional business model of charging sellers a 6% commission on a home price.

Instead, Redfin charges sellers a flat fee of $3,000 for listing and marketing a home. For buyers, it collects the 3% commission from the seller's agent and refunds two-thirds of the money to the buyer.

Redfin operates in seven major cities and will open in Chicago and Sacramento next year. In every market, Kelman says, the company has run into resistance from some traditional agents who wouldn't show Redfin's listings or badmouthed Redfin to potential clients.

Redfin has represented a buyer or seller in more than 1,000 transactions this year. That's scant business compared with the national brands, but Kelman says he still received hundreds of threatening and angry phone calls and e-mails from Realtors after Redfin was featured in a program by CBS' 60 Minutes this year about a looming end to the 6% commission.

Asked which websites Redfin agents find are best for listing homes for sale (besides the company's own site) and Kelman has a surprising reply: Craigslist.

The free classified site, which simply lists ads in the order they were posted, isn't geared for real estate searches. Yet Kelman says when his agents put a listing on Craigslist, it brings an average of seven more online visitors to Redfin in search of more details.

But Kelman learned the hard way just how many people who use Craigslist are looking for a steal — on anything. At the end of summer, he and his wife were preparing to move. He placed an ad for "free stuff" on Craigslist, including a Weber grill, an Ikea rug and two beat-up dressers. He also included his home address in the genteel Queen Anne neighborhood of Seattle and went to run errands. He assumed people would send e-mails if they were interested in any of the stuff. Instead, "Hundreds came knocking on the door like locusts," he says. Some knocked on a neighbor's door, looking for the grill.

His neighbors, Kelman says, were "furious."

His lesson proved that on Craigslist at least, one man's junk is another man's treasure: "We later unloaded a 20-year-old bike with a flat tire, an old-fashioned reel lawn mower, a weed eater, used cardboard boxes, a pair of bicycle handlebars, a 2003 Civic car stereo, a biochemistry textbook from a class I took last year, and a Sony VCR with no remote."

Real cash for fake property

If Craigslist is the cheap-o version of Internet marketing, on the luxury end are the "virtual worlds" of Second Life and Entropia Universe, where 3-D graphics provide a rich "infotainment" experience.

A few weeks before Kelman's chaotic giveaway, Coldwell Banker announced that it would become the first national real estate company to market one of its agents' homes for sale on Second Life. A software program was designed to give visitors a "virtual tour" of the $3.1 million home on Mercer Island, Wash., replicated down to the light fixtures.

"Not only does this open up a whole new way of marketing a home, but it also exposes Coldwell Banker to an entirely new pool of potential customers who embrace technology and collaboration," COO Charlie Young said at the time.

As more people join Second Life and other Internet communities, Young says, "It becomes even more crucial for us to have this type of online presence."

In March, Coldwell Banker bought land on Second Life to build a virtual branch office, which has drawn more than 300,000 visits. But this week, Young told USA TODAY, his company is getting out of Second Life.

Though he says Coldwell Banker "had a great experience," he says it was "cost-prohibitive," and "there's not a critical enough mass of people on Second Life."

Instead, the company is investing more in its own site and putting listings on other sites, such as Trulia, Yahoo Classifieds and the new FrontDoor.

It may be too soon to sell an actual home in a virtual world. Yet some real estate speculators are making cold hard cash by buying virtual land. Jon Jacobs, who worked in independent films, refinanced his Miami home in 2005, took $100,000 of his equity and bought an asteroid in Entropia Universe. It came with a shopping mall, apartment towers and a nightclub.

He says 10,000 visitors come to his asteroid every month to hunt animals and mine ore, which they use to make other products for sale, and to relax at his club. The visitors pay an automatic 5.5% tax on what they take from his asteroid, which earns Jacobs $10,000 a month in real dollars, he says.

Entropia Universe "is obviously a fabrication," says Jacobs, 41, who recently moved to Los Angeles and says that managing his virtual real estate investments is a full-time job. "We're all happily participating in a mass delusion because there is a stable, growing economy. I don't think that's much different from real life."

Take luxury products and services.

"You go to a restaurant in L.A. and spend $180 to feed yourself, whereas if you go to the store to buy the food, you will spend $8," he notes. "It's the community experience we're paying for."

VISITOR NUMBERS FLUCTUATE Real estate sites (in thousands of visitors): Unique visitors Nov. Pctg. chg. from 2006 Total Internet audience 182,362 5% All real estate sites 36,123 2% MoveNetwork.com (includes Realtor.com) 6,915 10% Yahoo Real Estate 4,847 84% MSN Real Estate 2,734 15% Rent.com 2,556 2% HomeAgain 1,977 33% Apartments.com 1,972 10% Zillow.com 1,827 16% HPC Interactive 1,688 48% Homes.com 1,640 NA Re/Max International 1,429 21% ForRent.com sites 1,422 14% Trulia 1,419 130% RealtyTrac 1,319 6% ServiceMagic.com 1,303 32% LoopNet sites 1,203 16% AOL Real Estate 1,201 65% HouseValues.com sites 1,065 65% Century 21 International 1,044 7% NCI Interactive 1,002 39% ColdwellBanker.com 1,001 30% Source: ComScore Media Metrix

USA WEEKLY NEWS EASY TO FIND HARD TO LEAVE 

YahooMail HotMailGMail AOLMail MyWayMail CNNWorld IsraelVideoNs INLNs NYTimes WashNs AustStockEx WorldMediaJapanNsAusNs World VideoNs WorldFinance ChinaDaily IndiaNs USADaily BBCEuroNsABCAust WANs NZNews QldNs MelbAge AdelaideNs TasNews ABCTas DarwinNs

STUNTMAN: Jon Templeton will act as Hugh Jackman's stunt double in the film Australia. Picture: MEGAN BRAYLEY

YAHOO REAL ESTATE USA

Search