Homestore Woes Mount

The problems for Homestore just never seem to end, as
witness reports that Cendant Corp. may be alleging that the online real
estate play breached an acquisition agreement when it overstated its
revenues
for the year 2000.

Homestore purchased
Move.com from Cendant in an all-stock deal valued in
October of 2000 at $761 million. However, Homestore gave certain warranties
about the accuracy of its financial statements.

Homestore disclosed the matter but did not elaborate in a filing with the
Securities and Exchange Commission.

Problems developed when after the sale (at $31 a share the day it was
announced), Homestore’s stock began to tank. Now, Cendant apparently wants
to
renegotiate the terms of the deal — after reportedly writing down the sale
proceeds to zero.

The Wall Street Journal, citing souces, said that Cendant wants all of the
restrictions in the acquisition agreement dropped, including clauses
governing when it can sell the Homestore shares it received in the deal, and
where it can place home listings from its residential brokerage brands —
Coldwell Banker, Century 21 and ERA.

Homestore.com’s Realtor.com site got exclusive 40-year access to the
listings
of Cendant’s Century 21, Coldwell Banker and ERA real estate franchises as
part of the deal.

Westlake Village, Calif.-based Homestore, whose stock is still below $1 a
share, managed to cut its
second-2002 loss despite reduced revenues as it continues to restructure
following an accounting scandal over the recording of ad revenues.

Homestore racked up
staggering losses after overstating ad revenue for 2000 and for three
quarters in 2001 and has been rebuilding and restructuring ever since.

The discussions with Cendant come as Homestore also faces a new
lawsuit filed by the California State Teachers’ Retirement System
accusing Homestore of padding revenues through complicated third-party
transactions with America Online .

Homestore’s network of Web sites includes the flagship Realtor.com;
HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home
information resource. Other Homestore advertising divisions are Homestore
Plans & Publications and Welcome Wagon.