Did you know that the English term “mortgage” originally meant “dead pledge” in French?

Real estate (or property, as the Brits say) almost meant “dead pool” for me. (”Dead pool” is the term that Michael Arrington of TechCrunch uses to characterise failed tech start-ups.) I ran my own real estate business for three years, so I fully appreciate the challenges that small real estate agencies face.

We started out as a franchisee of a well-known Catalan agency, but we soon found out that we were paying 2-3x more to advertise on a weekly basis than if we had called the newspaper and placed our own ads. The extra money was to subsidize the franchise’s expansion, but we never received anything of equal value in return.

We were too dumb at that point to realise that it was larceny.

We asked them why they didn’t improve their website to cut expenses, but they treated us like silly little kids and told that Spaniards don’t use the Internet to look for apartments. That we were being too American.

They were wrong: Most Spaniards initiate their real estate searches online. It’s not an American thing, it’s a common-sense thing.

And the franchisor’s website still sucks.

So we asked them to buy us out of our remaining franchise payments, and they agreed. And so we moved our staff to our independent office.

Things were going better for a while. We had more money to spend on marketing, and we used an approach that included 2 local newspapers and various online sites, including Loquo and Idealista.

We found that sites like Loquo and Idealista generated loads of new clients, but there were key differences in the types of calls that we received.

At first, Loquo was a phenomenon. We were getting at one point 100 calls a week, and maybe 20-30 of them were from Loquo. And best of all, it was free. But at some point, Loquo became too glutted with real estate ads without any effective search or filtering mechanism, and it stopped generating calls.

Other free sites claimed to have hundreds of thousands of monthly visitors, but they never once generated us any leads. They seem to rely on Google ads to make money without offering any real value to their users.

Idealista was also generally quite solid, but not so much as Loquo at first. And, it was a pay service, so that meant that we weren’t quite as enthusiastic about it.

We’d get a solid 15 calls per week from La Vanguardia, a local newspaper, but it was the most expensive single advertising outlet. My agents tended to favor the La Vanguardia clients, because Internet clients tended to be more demanding. They didn’t want any pitch. They don’t want to see 10 other apartments. Their bullshit-detector is on high alert. They just wanted to know if you had the advertised apartment, if it met their criteria and, if it didn’t, they didn’t want to leave their details.

Newspaper clients tend to be more willing to meet up. They are more trusting. They’re not going to do loads of searches on the Internet. They liked it if you did the work for them.

That was our experience, in any case.

And with this combination of marketing outlets, as they sang on the Jeffersons, we were moving on up.

But all of that came to an abrupt end in late 2005, when all of a sudden the market dried up. People were still looking for apartments, but banks weren’t giving out any money given all of the talk (IMF, the Economist, etc.) about a real estate bubble in Spain. They started to ask for double guarantees and to scrutinize mortgage applications more deeply.

But here’s the conundrum: The average Spaniard earns about €1500 a month from what I read in one of the free newspapers. (I say that as a disclaimer.). But the average price for an apartment in Barcelona was about €6000 per metre squared. Assuming that a small apartment in Barcelona is about 40 metres squared, that meant that the buyer would have to pay about €240.000. The Bank of Spain requires that the buyer should have about 20% of the purchase price as a down payment. So that’s €48.000 for a deposit, plus another €24.000 (10% of the purchase price) to cover expenses, meaning that a buyer of a mediocre, small apartment in Barcelona should have about €72.000 in cash to buy a flat — or the equivalent of about 4 years’ salary, assuming that no taxes are paid on the salary and that the buyer has no other expenses (maybe he’s been living at his parents’ home and has no car or social life?). And this means that the apartment should not be in any need of refurbishment and no designer furniture should be contemplated.

And of course, most buyers don’t dream of buying a 40 metres squared apartment. In Spain, they’d rather continue living at home with their folks. Or increasingly, they are moving outside of Barcelona.

For a while banks were offering creative solutions to fix this misalignment of realities, but the Bank of Spain soon got serious and become more vigilant in disallowing lax mortgages. The Spanish economy was at risk.

On top of all of this, a lot of real estate agents are badly trained, accustomed to being able to sell junk to eager buyers — most didn’t have the talent to actually convince someone that a mediocre apartment could be transformed into a dream home.

And, of course, you had all of the clever home owners and investors who refused to accept discounted prices / offers, sure as they were that the prices would continue to grow by an average of 17% per year.

A recipe for disaster, that I must admit, the Spanish government appears to have averted.

The US wasn’t so lucky, because they gave out “no-doc” subprime loans (i.e., you didn’t have to verify the borrower’s income, even though the borrower was a credit risk) and “ninja loans” (i.e., the borrower didn’t have to have income, a job or assets).

But the bottom-line is the same in both countries:

• The real estate market is struggling, meaning that it takes a very long time to sell a home;
• Many real estate agents have had to look for new professions, as commissions are harder to come by; and
• A lot of small agencies have closed, unable to weather the storm.

Real estate is a tough business.

And the key to the whole thing is marketing your portfolio of properties at the cheapest possible price to the widest possible audience. For a variety of reasons, the only options that used to be available in Spain were handmade Xeroed fliers that were placed on cars and expensive but generic ads in local newspapers. And then there are free sites like Loquo, which are cool as long as they don’t become so big and glutted that they lose all value. Or pay sites like Idealista and Fotocasa, which are great values relative to newspapers but not necessarily relative to sites like Loquo (at least from the agency’s point of view).

We are hoping to disrupt those approaches by giving talented real estate agents with a little bit of vision a new opportunity.

For most small agencies, even €300 a month on one portal or on one source that is generating mediocre lists of leads is too much. That’s why our service is free.

We understand that our property search engine will succeed only if we are able to generate real and meaningful leads for real estate agencies and sellers in general, so that we can all avoid the dead pool.

It’s that simple.