Microsoft, Home Lenders in Web Venture
Microsoft Corp. and several major lenders announced a joint venture Thursday that they hope will streamline the approval of mortgage loans and shave thousands of dollars off the cost of buying a home.
Microsoft will fold its current HomeAdvisor.com Web site into a new venture called HomeAdvisor Technologies Inc.
The joint venture will include some of the nation’s leading lenders, including Freddie Mac, Chase Manhattan, Norwest Mortgage, Bank of America and GMAC-Residential Funding. Combined, these home-financing companies conduct 50% of the nation’s annual home mortgage transactions.
Microsoft will be the major shareholder of the venture, which is expected to go public within six to nine months. The HomeAdvisor Technologies loan software package will debut on the Web in the coming weeks.
The new venture promises to shake up a real estate industry that has been slow to adapt to e-commerce and spark a fierce battle with online competitors such as Homestore.com, based in Thousand Oaks.
This week Homestore.com announced its own effort to develop a software transaction package in partnership with the National Assn. of Realtors.
Homestore.com’s Web site already outpaces Microsoft’s and is the nation’s largest online real estate listings service.
“We’re absolutely planning to fight in this arena and we’re planning to win,” said Stuart Wolff, the company’s chief executive.
The challenge for Microsoft and Homestore.com is to integrate their rival technologies into the back-end underwriting and reporting systems of leading banks and link them with the real estate community, said Nick Karris, a real estate analyst for Gomez Advisors.
If one of them succeeds and gets the industry to adopt its software platform as the standard, Karris said, then the winner could “revolutionize the online mortgage industry and save consumers huge amounts of money” by speeding up the loan transaction process and reducing brokers’ commissions.
HomeAdvisor Technologies hopes that by using Microsoft’s new software package, it will provide an edge in automating more real estate and mortgage transactions for consumers and real estate professionals. It hopes to speed up credit checks, reduce or eliminate real estate appraisal fees, lock in interest rates and save the average home buyer more than $2,000 while shortening the closing process to 10 days from more than one month, officials say.
Microsoft also plans to sell software tools to others in the real estate industry, and it’s counting on fees generated from real estate transactions.
“We want to streamline the complexity and cost out of the mortgage process and pass it on as savings to the consumers,” said Microsoft Chief Executive Steve Ballmer.
This is also part of Microsoft’s broader strategy to diversify outside PC software and offer more Internet-based services. “There is a huge opportunity to use the Internet to reinvent how businesses will interact with each other,” Ballmer said.
The real estate industry represents $1.5 trillion of the U.S. gross domestic product, making it the single largest market sector. The transactions from these real estate deals generate $90 billion in fees annually.
So far the real estate industry has been slow to embrace e-commerce. Only a third of agents use e-mail and less than 2% of mortgages originate online, analysts say. Many of the 1 million real estate agents fear the Internet will eventually force them out of business.
“The Internet fundamentally changes the way they do business and they are trying to resist it,” Karris said. “You have a lot of brokers trying to hold on to control.”
But other online real estate competitors vow to compete with Microsoft aggressively.
Last year Homestore.com’s revenue more than doubled, to $62.6 million, though it has yet to make a profit. The company has 1,100 employees, and even with its stock at about one-third its record high, Homestore.com has a market capitalization of $3.7 billion.
Other rivals are IProperties.com, a firm based in Salt Lake City that recently launched a test Web site that soon will offer a similar transaction system. And EzClose.com, in Mountain View, Calif., is already offering escrow services online.
