Digital Home: Feathering the iNest

While some home builders are turning to Internet auctions to unload inventory at fire-sale prices, others are generating incremental sales at their price, on their terms, using that very same Internet. There are 1,300 of them, to be exact.

These builders are using iNest.com, a 10-year old nearly national real estate brokerage that has been owned by Barry Diller’s IAC/InterActiveCorp. since 2004 (Diller who established the Fox Broadcasting Network, ran Paramount Pictures, and now runs the companies that own the QVC shopping network as well as Expedia.com). A corporate sibling of RealEstate.com, iNest looks a lot like a so-called “virtual realtor,” but it is not. “We are actually a licensed brokerage with brokers and field agents in our markets,” says Vince Halama, vice president of sales for iNest Realty.

William Gloede iNest only deals with new homes in 30 states, which happen to be those with the most new-home building activity. iNest has a patented hook to boot. It charges builders the usual real estate commission–3 percent–but sometimes less, and kicks 1 percent of the purchase price back to the home buyer.

“That really locks the deal in,” says Sheldon Moore, who, as director of communications for Chicago-based Kimball Hill Homes, is charged with handling the company’s Internet sales efforts. Moore, who is based in Kimball Hill’s Houston office adds, “The cancellation rate is very low on an iNest deal. The value is there.”

Results, Please

Moore reports that he closed 26 home sales, representing more than $7 million in revenue, directly through iNest last year, and sold another 66 in which the buyer came through the iNest.com Web site to Kimball Hill’s. Now that’s not going to replace the sales center (Kimbill Hill closed about 4,000 home sales last year), but it’s not bad when you think in terms of incremental sales.

In April, Moore said, iNest sent 2,059 visitors to the company Web site. By way of comparison, his second-largest deliverer of visitors was Move.com, at 976. “When things were booming, they were giving us five or six thousand per month,” he reports. And, he says that despite market conditions, “the numbers are up now, although I haven’t done tallies as yet this year.”

Chart: Courtesy Inest.com The beauty part is that the builder pays nothing until the sale is booked, says Christopher Shaxted, executive vice president at Lakewood Homes, based in Hoffman Estates, Ill., outside Chicago. Lakewood is considerably smaller than Kimbill Hill, with 850 closings, all in the Chicago area, in 2006. Shaxted says 56 of those closings, worth about $15 million in revenue, were sold through iNest. Lakewood has been working with iNest for about 7 years, which makes it one of the company’s charter customers. “We’re guinea pigs, I guess,” says Shaxted.

“Besides Google, they’re my No. 1 source of Internet traffic,” he says. “The conversion rate is higher because of that 1 percent,” he explains. Beyond the direct sales, Shaxted says he has learned much from iNest. “I’m kind of using them as my model in optimizing my Web site,” he explains. “When you Google certain terms, they are in your face.”

iNest’s Halama says the company has done business with many if not most of the big public builders, but only on a divisional basis with some of them. “Our core audience is the top 15 or so production builders in each market.”

The Big Idea

The company, with 50 full-time employees, is based in Bloomingdale, Ill. Since its inception 10 years ago, it has sold 16,000 homes for a total of $3.8 billion in sales volume.

“I wish I had started that business,” muses Shaxted. “I’d just have it in my basement and collect the checks every month.”

As it is, iNest was founded by Andy Wolf, a Notre Dame graduate and Northwestern University MBA who was COO of Morningstar, Inc., the rater of mutual fund performance, before he started iNest. Thus, there were no Napsters or sock puppets–or basements–here.