EXHIBIT 10.7

CoStar Realty Information, Inc.
2 Bethesda Metro Center
Bethesda, MD 20814

DATE:      January 2, 2003

TO:           Michael Arabe
FROM:     Andrew Florance

RE:           Senior Vice-President of Sales & Customer Service Position

     I am pleased to present the following offer to you with CoStar Realty
Information, Inc. (“CoStar”) per our discussions recently:

      Position Title:   Senior Vice-President of Sales & Customer Service  
Location:   Bethesda, Maryland   Effective Date:   January 2, 2003   Salary:  
$124,800     Incentive Stock Options:   Management will recommend you for 25,000
stock options (the “Options”) in CoStar Group, Inc., vesting one fourth on the
first anniversary of the Effective Date, one fourth on the second anniversary of
the Effective Date, one fourth on the third anniversary, and one fourth on the
fourth anniversary of the Effective Date. The availability of these Options is
subject to Board approval. The exercise price for the Options shall be the fair
market value of the CoStar Group common stock on the Effective Date.   Bonus
Potential Amount:   You shall be entitled to earn a potential bonus of up to
three times your base salary, payable quarterly as determined by the Chief
Executive Officer of CoStar and based on any goals set by the Chief Executive
Officer.   Previous Bonus Plan(s):   This bonus plan will replace your previous
incentive plan(s), effective with the 2003 calendar year. Your bonus plan
currently in effect shall continue for calendar year 2002.   Eligibility:   You
must be employed on the last day of the period in which the bonus is earned in
order to receive the bonus payout. If you should leave CoStar or no longer be
eligible for this bonus plan due to a position change, no pro-rated payments
will be available.

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      Continuation of At-Will Employment Status:   Please note that this letter,
and the Terms and Conditions of Employment contain all of the terms, promises,
representations and understandings between you and CoStar with respect to your
employment with CoStar (or any of its affiliates or their respective successors,
assigns and predecessors) and supercede any employment agreements or
arrangements (other than any indemnification agreements, if applicable) in
effect between you and CoStar (or any of its affiliates and their respective
successors, assigns and predecessors). Your employment with CoStar remains
at-will, and your employment with CoStar is not for any specified duration of
time.   Acceptance:   Please sign this letter indicating your acceptance and
return the original copy to me.

     Thank you for your hard work so far and for your continued excellence and
leadership in the future.

     Agreed to and accepted by:

       /s/

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     Michael Arabe

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