##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2005o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-26659
      Homestore, Inc.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

95-4438337(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)30700 Russell Ranch Road
    Westlake Village, California

91362(Zip Code)(Address of Principal Executive
    Offices)   Registrants telephone number, including area code:
 (805) 557-2300
  Securities Registered Pursuant to Section 12(b) of the
    Act:
 None
  Securities Registered Pursuant to Section 12(g) of the
    Act:
 Common Stock, par value $.001 per share
  Warrants to purchase Common Stock, par value $.001 per
    share
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
  Aggregate market value of voting
    common stock held by non-affiliates of the registrant as of
    June 30, 2005*

$
252,750,921Number of shares of common stock
    outstanding as of February 28, 2006


149,376,914   *
    Based on the closing price of the common stock of $2.03 per
    share on that date, as reported on The NASDAQ National Market
    and, for purposes of this computation only, the assumption that
    all of the registrants directors, executive officers and
    beneficial owners of 10% or more of the registrants common
    stock are affiliates.  DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K,




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##### 



HOMESTORE,
    INC.
  FORM 10-K
 For the
    Fiscal Year Ended December 31, 2005
  INDEX
  PagePART IItem 1.

Business


3Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff
    Comments


22Item 2.

Properties


22Item 3.

Legal
    Proceedings


22Item 4.

Submission of
    Matters to a Vote of Security HoldersPART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases  of Equity Securities


22Item 6.

Selected Financial
    Data


24Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


26Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


46Item 8.

Financial
    Statements and Supplementary Data


47Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


90Item 9A.

Controls and
    Procedures


90Item 9B.

Other
    Information


93PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


93Item 11.

Executive
    Compensation


93Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


93Item 13.

Certain
    Relationships and Related Transactions


93Item 14.

Principal
    Accounting Fees and Services


93PART IVItem 15.

Exhibits and
    Financial Statement Schedules


93SIGNATURES


99EXHIBIT 3.01.1EXHIBIT 3.01.2EXHIBIT 21.01EXHIBIT 23.01EXHIBIT 31.01EXHIBIT 31.02EXHIBIT 32.01EXHIBIT 32.02EXHIBIT 99.01  1




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##### 



This Annual Report on
    Form 10-K
    and the documents incorporated herein by reference contain
    forward-looking statements based on our current expectations,
    estimates and projections about our industry, beliefs, and
    certain assumptions made by us. Words such as
    believes, anticipates,
    estimates, expects,
    projections, may, potential,
    plan, continue and words of similar
    import constitute forward-looking statements. The
    forward-looking statements contained in this report involve
    known and unknown risks, uncertainties and other factors that
    may cause our actual results to be materially different from
    those expressed or implied by these statements. These factors
    include those listed under Risk Factors,
    Business, and elsewhere in this
    Form 10-K,
    and the other documents we file with the Securities and Exchange
    Commission, or SEC, including our reports on
    Form 8-K
    and
    Form 10-Q,
    and any amendments thereto. Other unknown or unpredictable
    factors also could have material adverse effects on our future
    results. The forward-looking statements included in this Annual
    Report on
    Form 10-K
    are made only as of the date of this Annual Report. We cannot
    guarantee future results, levels of activity, performance or
    achievements. Accordingly, you should not place undue reliance
    on these forward-looking statements. Finally, we expressly
    disclaim any intent or obligation to update any forward-looking
    statements to reflect subsequent events or circumstances.
 2




---



##### 



PART I  Item 1.
    Business.    ® ® ® tm ® tm tm ® ® ®
         3




---



##### 




    Consolidating branding under the
    REALTOR.com®,
    Move.comtm
    and Welcome
    Wagon®
    brands to allow us to enhance consumer awareness of our services
    and prevent us from being as dependent on third parties for
    traffic to our sites.
    Introducing vertical search technologies to our new home and
    apartment listing search results to provide consumers with
    substantially more selection.
    Adding community and user-generated content to
    REALTOR.com®
    to provide additional content for consumers, which we believe
    will provide a contextually relevant online venue to introduce
    non-real estate advertisers, and enable
    REALTORS®
    to further differentiate their local market expertise.
    Introducing
    cost-per-click
    (performance-based) advertising to our sites to enable better
    monetization of site activity for ourselves and for a growing
    number of traffic partners.
    Integrating Welcome
    Wagon®
    offerings into
    REALTOR.com®
    in two ways. First, we will enable
    REALTORS®
    to offer a co-branded version of our new mover gift directly to
    consumers earlier in the move cycle. Second, we will integrate
    Welcome
    Wagon®s
    Local Business Directory into new community pages within
    REALTOR.com®
    to increase consumer awareness of special offers available to
    movers through Welcome
    Wagon®.
    Integrating the acquisition of Moving.com, which is discussed
    below, to extend our consumer tools to include access to moving,
    self-storage and truck rental price quotes from qualified
    professionals.      Our
    Operating Segments
    Real Estate Services. ® ® ® tm ® ®
  Move-Related Services. ® ®
 4




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##### 



Key
    Characteristics
    Size
    and Quality of Consumer
    Audience  Traffic
  ® ® ® ® ®
  ®
  Content
  REALTOR.com ® ® ® ®
  HomeBuilder.com®. ® tm
 5




---



##### 



RENTNET®. ® tm
  SeniorHousingNettm.com.
  Homestore.com®. ® ®
  
    Homestore Home Finance.  Our Home Finance
    channel contains information and decision support tools that
    help consumers understand and satisfy their home financing and
    mortgage needs. A variety of content, tools, and interactive
    guides are available to help consumers with mortgages, loans,
    credit, insurance, legal matters and taxes. Additionally,
    consumers have access to our Find a Lender
    directory, which provides access to a variety of lending
    professionals.
    Homestore Moving.  Our Moving channel contains
    content, tools and interactive guides for consumers moving to
    new homes or relocating to another community. We also offer a
    database of self-serve storage locations across the country.
    These resources provide movers with custom moving quotes and
    other resources necessary for making moving decisions, such as
    salary calculators, school reports and neighborhood information.
    Homestore Home & Garden.  Our
    Home & Garden channel is an online resource for
    consumers seeking to make improvements to their existing home,
    including remodeling, home improvement, landscaping and home
    maintenance needs. It provides an online resource for consumers
    seeking decorating ideas and information. The channel includes
    information for planning, budgeting and visualizing options, as
    well as specific advice on a
    room-by-room
    basis. The channel is designed to help consumers locate
    qualified professionals as well as provide them with
    do-it-yourself information.  tm tm ® ® ®
  Industry
    Relationships
  ® ® ®
  National Association of
    REALTORS ®
 6




---



##### 



National Association of HomeBuilders. and/or
  Manufactured Housing Institute.
  Multiple Listing Services. and/or
  Scalable
    Business Models
  cost-per-lead, cost-per-click
  tm cost-per-click tm ® tm cost-per-lead
  Form 10-K
  Products
    and Services
  Real
    Estate Services Segment
     7




---



##### 



® ®
  tm
  Classified Advertising. ® ® ® ® ® ® ® tm
  Display Advertising.
  tm ® ® tm
 8




---



##### 



® tm ® tm ® ®
  Directory Listings. ®
  Web sites. ® set-up tm tm ® ® ®
  Software. ® ® ®
  ® ® ®
  Move-Related
    Services Segment
  Direct Mail. ® ® ® ®
 9




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##### 



® tm
  Retail Advertising.
  Homestore Plans and Publications.
  Competition
    Real
    Estate Services Segment
  ®
  ® ® ®
    ® ® ®
 10




---



##### 



®
  Move-Related
    Services Segment
  ® ®
    Infrastructure
    and Technology
      ® ® ® ® tm ®
  Intellectual
    Property
      
    it may be possible for a third party to copy or otherwise obtain
    and use our proprietary information without authorization or to
    develop similar technology independently;
    NAR could lose the use of the trademark
    REALTOR®
    or we could lose the use of such trademark or the
    REALTOR.com®
    domain name, or be unable to protect the other trademarks or web
    site addresses that are 11




---



##### 



important to our business, and therefore we would need to devote
    substantial resources toward developing an independent brand
    identity;  
    we could be subject to litigation with respect to our
    intellectual property rights;
    we may be required to license additional technology and
    information from others, which could require substantial
    expenditures by us; and
    legal standards relating to the validity, enforceability and
    scope of protection of proprietary rights in Internet-related
    businesses are uncertain and continue to evolve, and we can give
    no assurance regarding our ability to protect our intellectual
    property and other proprietary rights.    Seasonality
  ® ®
  Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K http://ir.homestore.com (000-26659), 1-800-SEC-0330.
 12




---



##### 



Item 1A.
    Risk
    Factors.  You should consider carefully the following risk factors and
    other information included or incorporated by reference in this
    Form 10-K.
    The risks and uncertainties described below are not the only
    ones we face. Additional risks and uncertainties not presently
    known to us or that we deem to be currently immaterial also may
    impair our business operations. If any of the following risks
    actually occur, our business, financial condition and operating
    results could be materially adversely affected.
  Risks
    Related to our Business
  Changes
    to our product offerings on our new home and apartment web sites
    may not be accepted by our customers.
  ® tm ® ® tm cost-per-click cost-per-click
  tm
  We
    have a history of net losses and could incur net losses in the
    future.
  ® ® tm
  tm ® ® ® ® ® tm cost-per-click
 13




---



##### 



The
    emergence of competitors for our services may adversely impact
    our business.
    We may not be able to continue to obtain
    more listings from Multiple Listing Services and real estate
    brokers than other web site operators
  tm
  We may
    not be able to continue to obtain more listings from Multiple
    Listing Services and real estate brokers than other web site
    operators.
  ® ®
  ® ® ®
  Our
    quarterly financial results are subject to significant
    fluctuations.
  cost-per-click
 14




---



##### 



Form 10-K,
  
    the level at which real estate agents, brokers, homebuilders and
    rental owners renew the arrangements through which they obtain
    our services;
    the amount of advertising sold on our web sites and the timing
    of payments for this advertising; and
    the costs from pending litigation, including the cost of
    settlements.  The
    ongoing investigations by the SEC and the DOJ could require us
    to continue to incur costs and could divert management attention
    from our business operations.
  Form 10-K Form 10-Qs
    Continued
    obligations to Cendant Corporation related our settlement of our
    securities class action lawsuit could have an adverse effect on
    our financial condition.
     15




---



##### 



and/or
  We
    could be required to expend substantial amounts in connection
    with continuing indemnification obligations to a purchaser of
    one of our businesses.
          We are
    and may continue to be involved in litigation and other
    disputes.
  Form 10-K.
   16




---



##### 




    stop selling, incorporating or using services that use the
    challenged intellectual property;
    obtain from the owner of the infringed intellectual property a
    license to the relevant intellectual property, which may require
    us to license our intellectual property to such owner, or may
    not be available on reasonable terms or at all; and
    redesign those services that use technology that is the subject
    of an infringement claim.    We
    rely on intellectual property and proprietary
    rights.
  day-to-day
  ® ® ®
    Our
    recently issued Series B Preferred Stock could make it more
    difficult for us to raise additional capital.
    Our
    relationship with the National Association of
    REALTORS®
    is an important part of our business plan and our business could
    be harmed if we were to lose the benefits of this
    agreement.
  ® ® ®
 17




---



##### 



® ®
    
    we would need to obtain the consent of NAR if we want to acquire
    or develop another service that provides real estate listings on
    an Internet site or through other electronic means; any consent
    from NAR, if obtained, could be conditioned on our agreeing to
    conditions such as paying fees to NAR or limiting the types of
    content or listings on the web sites or service or other terms
    and conditions;
    we are restricted in the type and subject matter of, and the
    manner in which we display, advertisements on the
    REALTOR.com®
    web site;
    NAR has the right to approve how we use its trademarks, and we
    must comply with its quality standards for the use of these
    marks; and
    we must meet performance standards relating to the availability
    time of the
    REALTOR.com®
    web site.    ®
  
    the acquisition of us or RealSelect by another party;
    if traffic on the
    REALTOR.com®
    site falls below 500,000 unique users per month;
    a substantial decrease in the number of property listings on our
    REALTOR.com®
    site; and
    a breach of any of our other obligations under the agreement
    that we do not cure within 30 days of being notified by NAR
    of the breach.  ® ®
  It is
    important to our success that we support our real estate
    professional customers.
    We
    must dedicate significant resources to market our subscription
    products and services to real estate
    professionals.
   18




---



##### 



A
    failure to establish and maintain strategic online relationships
    that generate a significant amount of traffic could limit the
    growth of our business.
    Our
    future success depends largely on our ability to attract, retain
    and motivate personnel.
    Delaware
    law, our certificate of incorporation and bylaws, and other
    agreements contain provisions that could discourage a
    takeover.
  ®
  Confusion
    among consumers about our new name and the related rebranding of
    some of our web sites could adversely affect our
    business.
  tm ® ® ®
 19




---



##### 



Real
    Estate Industry Risks
  Our
    business is dependent on the strength of the real estate
    industry, which is both cyclical and seasonal and is affected by
    general economic conditions.
          We
    have risks associated with changing legislation in the real
    estate industry.
  ®
  Internet
    Industry Risks
  Our
    internal network infrastructure could be disrupted as a result
    of our move to a new data center or other
    problems.
   20




---



##### 



We
    depend on continued improvements to our computer network and the
    infrastructure of the Internet.
      We
    could face liability for information on our web sites and for
    products and services sold over the Internet.
     21




---



##### 



Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties:    Square


LeaseLocation

Feet


ExpirationPrincipal executive and corporate
    office (C)(RS)(MRS)

Westlake Village, CA


137,762



2008Technology
    facility (C)(RS)(MRS)

Thousand Oaks, CA


13,717



2006Technology
    facility (C)(RS)(MRS)

Phoenix, AZ


8,114



2017Operations and customer service
    center (RS)(MRS)

Scottsdale, AZ


36,175



2007Welcome
    Wagon®
    (MRS)

Plainview, NY


48,148



2015Top
    Producer®
    (RS)

Richmond, BC


33,702



2008Homestore Plans and Publication
    (MRS)

St. Paul, MN


24,645



2006Enterprise (RS)

Milwaukee, WI


13,016



2007Moving.com (MRS)

Marlborough, MA


5,580



2009       Item 3.
    Legal
    Proceedings.  Form 10-K, Form 10-K
  Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information
   22




---



##### 



High


Low2004First Quarter

$
5.58


$
3.49Second Quarter


5.95



3.70Third Quarter


4.29



1.81Fourth Quarter


3.31



2.252005First Quarter


3.24



2.09Second Quarter


2.34



1.65Third Quarter


4.64



2.06Fourth Quarter


5.84



3.222006First Quarter (through
    February 28, 2006)


6.56



5.12       Dividends
  Form 10-K
  Recent
    Sales of Unregistered Securities
  Form 10-Q Form 8-K.
  Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Weighted Average


Number of SecuritiesNumber of Securities to


Exercise Price of


Remaining Available Forbe Issued Upon Exercise


Outstanding


Future Issuanceof Outstanding Options,


Options, Warrants


(Excluding SecuritiesWarrants and Rights


and Rights


Reflected in Column (a)Plan Category

(a)


(b)


(c)(In thousands)





(In thousands)Equity compensation plans approved
    by security holders


25,091


$
3.00



3,433Equity compensation plans not
    approved by security holders


7,123


$
2.26



10,531Total


32,214


$
2.84



13,964  23




---



##### 



Equity
    Compensation Plan Information
      Non-Shareholder
    Approved Plans
  4-year 10-year
  1997-1998
  Form 10-K.
  Item 6.
    Selected
    Financial Data    Form 10-K.
 24




---



##### 



Form 10-K.
  Year Ended
    December 31,2005


2004


2003


2002


2001(1)(In thousands, except per share
    amounts)Consolidated Statement of
    Operations Data:Revenue(2)

$
252,622


$
216,860


$
198,227


$
219,867


$
254,103Related party revenue










7,695



31,158



38,346Total revenue


252,622



216,860



205,922



251,025



292,449Cost of revenue(2)


56,188



50,829



56,569



73,622



110,377Gross profit


196,434



166,031



149,353



177,403



182,072Operating expenses:Sales and marketing(2)


91,071



88,388



101,122



161,554



239,790Product and web site development(2)


22,059



15,362



17,065



25,497



32,397General and administrative(2)


82,545



68,442



65,333



83,042



168,695Amortization of goodwill and
    intangible assets(3)


3,624



7,894



21,863



34,699



199,291Restructuring charges(2)


(1,331
)


1,316



4,100



12,057



50,234Impairment of long-lived assets










26,999



3,482



925,094Litigation settlement


1,750



2,168



63,600



23,000



Total operating expenses


199,718



183,570



300,082



343,331



1,615,501Loss from operations


(3,284
)


(17,539
)


(150,729
)


(165,928
)


(1,433,429
)Interest income (expense), net


2,351



672



(406
)


2,673



10,490Gain on settlement of distribution
    agreement










104,071







Other income (expense), net


623



2,366



691



(5,694
)


(44,393
)Loss from continuing operations


(310
)


(14,501
)


(46,373
)


(168,949
)


(1,467,332
)Gain on disposition of discontinued
    operations


855



7,294



2,530



11,790



Income (loss) from discontinued
    operations






(679
)


(3,281
)


(6,266
)


1,743Net income (loss)


545



(7,886
)


(47,124
)


(163,425
)


(1,465,589
)Convertible preferred stock dividend


(311
)














Net income (loss) applicable to
    common stockholders

$
234


$
(7,886
)

$
(47,124
)

$
(163,425
)

$
(1,465,589
)Basic income (loss) per share
    applicable to common stockholdersContinuing operations

$
(0.01
)

$
(0.11
)

$
(0.39
)

$
(1.43
)

$
(13.66
)Discontinued operations


0.01



0.05



(0.01
)


0.05



0.02Basic income (loss) per share
    applicable to common stockholders

$
0.00


$
(0.06
)

$
(0.40
)

$
(1.39
)

$
(13.64
)Diluted income (loss) per share
    applicable to common stockholdersContinuing operations

$
(0.00
)

$
(0.11
)

$
(0.39
)

$
(1.43
)

$
(13.66
)Discontinued operations


0.00



0.05



(0.01
)


0.05



0.02Diluted income (loss) per share
    applicable to common stockholders

$
0.00


$
(0.06
)

$
(0.40
)

$
(1.39
)

$
(13.64
)Shares used in calculation of
    income (loss) per shareBasic


147,175



136,518



118,996



117,900



107,433Diluted


182,548



136,518



118,996



117,900



107,433  25




---



##### 



(1)
    
    Acquisitions during the year ended December 31, 2001
    include Internet Pictures Corporation (iPIX),
    Computer for Tracts (CFT), Homewrite, Inc.,
    Homebid.com, Inc., and Move.com Group which includes Welcome
    Wagon International, Inc., and
    RENTNET®.  (2)
    
    The following chart summarizes the stock-based charges that have
    been included in the following captions for the periods
    presented:  Year Ended
    December 31,2005


2004


2003


2002


2001(In thousands)Stock-based Charges:Revenue

$



$



$
1,119


$
1,501


$
2,456Cost of revenue










16



134



383Sales and marketing


291



301



3,795



63,848



71,188Product and web site development










15



127



361General and administrative


824



518



164



1,297



6,237Restructuring charges










2,140







$
1,115


$
819


$
7,249


$
66,907


$
80,625   December 31,2005


2004


2003


2002


2001(In thousands)Consolidated Balance Sheet
    Data:Cash and short-term investments

$
152,322


$
59,859


$
35,517


$
80,463


$
38,272Working capital (deficiency)


95,810



1,059



(70,729
)


(80,763
)


(31,888
)Total assets


249,026



150,504



153,548



379,208



615,037Obligation under capital lease


1,005



2,765



1,904







Series B convertible
    preferred stock


91,349















Total stockholders equity

$
61,924


$
57,393


$
328


$
38,730


$
183,256    (3)
    
    We adopted SFAS No. 142 in 2002 and ceased amortizing
    goodwill as required by that standard.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
  Our
    History
  ® ® ®
 26




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##### 



Our
    Business
    ® ® ® tm ® tm tm ® ® ®
  Business
    Trends and Conditions
    
    Market and economic conditions.  In recent
    years, the U.S. economy has experienced low interest rates,
    and volatility in the equities markets. Against this backdrop,
    housing starts have remained strong, while the supply of
    apartment housing has generally exceeded demand. The foregoing
    conditions have meant that homebuilders spent less on
    advertising, given the strong demand for new houses. Conversely,
    apartment owners have not spent as much money on advertising, as
    they have sought to achieve cost savings during the difficult
    market for apartment owners. Both of these trends have impacted
    our ability to grow our business. The impact of the recent rise
    in interest rates on job creation and other economic factors is
    difficult to gauge and creates uncertainty as to whether these
    trends will continue. Some reports have forecasted that interest
    rates will continue to rise and housing sales could slow down in
    2006. This slow down could increase marketing spending on the
    internet and provide us with opportunities for revenue growth.  
    Evolution of Our Product and Service Offerings and Pricing
    Structures.  Real Estate Services segment: ®
    ®
 27




---



##### 



Move-Related Services segment: ®
  
    Investment Strategy:  We have made substantial
    investments in our business in recent years in order to improve
    our ability to bring consumers and advertisers together. As a
    result of our greater understanding of both consumer and
    customer needs, we have concluded that we need to demonstrate
    strong capabilities in four core areas: size and quality of
    consumer audience, dept and breadth of content, enduring
    industry relationships, and scalable business models. We
    recently announced significant changes to our branding, product
    and pricing strategies to better align our solutions with these
    core competencies.  Acquisitions
    and Dispositions
          Year Ended
    December 31,2004


2003Revenue

$
9,137


$
12,788Total expenses


9,816



16,069Loss from discontinued operations

$
(679
)

$
(3,281
)  28




---



##### 



Year Ended
    December 31,2005


2004


2003Gross proceeds from sale

$
855


$
10,981


$
2,300Less:Cash subject to escrow






850



Net assets sold






2,210



Transaction costs






627



Cash and Homestore stock received
    from purchase of iPlace










(230
)Gain on disposition of
    discontinued operations

$
855


$
7,294


$
2,530     Critical
    Accounting Policies, Estimates and Assumptions
        Revenue Recognition
  
    software revenue, which includes software licenses and support
    revenue which includes software maintenance, training,
    consulting and web site hosting revenue; and
    advertising revenue for running online advertising on our web
    sites or offline advertising placed in our publications.       29




---



##### 



Software revenue
  
    on a one-year term basis; and
    on a monthly subscription basis.    SOP 98-9 SOP 97-2,
  
    the execution of a license agreement;
    product delivery;
    fees are fixed or determinable;
    collectibility is reasonably assured; and
    all other significant obligations have been fulfilled.  SOP 98-9.
  Advertising Revenue
  
    impression based;
    fixed fee subscriptions; and
    variable, performance based agreements.    Allowance
    for Doubtful Accounts
   30




---



##### 



Valuation
    of Goodwill, Identified Intangibles and Other Long-lived
    Assets
    
    a significant decline in actual and projected revenue;
    a significant decline in the market value of our common stock;
    a significant decline in performance of certain acquired
    companies relative to their original projection;
    a significant difference between our net book value and our
    market value;
    a significant decline in our operating results relative to our
    operating forecasts;
    a loss of key customer relationships coupled with the
    renegotiation of existing arrangements;
    a significant change in the manner of our use of the acquired
    assets or the strategy for our overall business;
    a significant decrease in the market value of an asset;
    a shift in technology demands and development; and
    a significant turnover in key management or other personnel.  Form 10-K.
  Goodwill and Other
    Intangible Assets,
   31




---



##### 



Legal
    Contingencies
  Form 10-K.
  Results
    of Operations
    
    execute our business model, including the recently announced
    changes to that model;
    respond to highly competitive developments;
    attract, retain and motivate qualified personnel;
    implement and successfully execute our marketing plans;
    continue to upgrade our technologies;
    develop new distribution channels; and
    improve our operational and financial systems.   32




---



##### 



Year Ended
    December 31,2005


2004


2003(In thousands)Consolidated Statement of
    Operations Data:Revenue(1)

$
252,622


$
216,860


$
198,227Related party revenue










7,695Total revenue


252,622



216,860



205,922Cost of revenue(1)


56,188



50,829



56,569Gross profit


196,434



166,031



149,353Operating expenses:Sales and marketing(1)


91,071



88,388



101,122Product and web site development(1)


22,059



15,362



17,065General and administrative(1)


82,545



68,442



65,333Amortization of intangible
    assets(1)


3,624



7,894



21,863Restructuring charges(1)


(1,331
)


1,316



4,100Impairment of long-lived assets










26,999Litigation settlement


1,750



2,168



63,600Total operating expenses


199,718



183,570



300,082Loss from operations


(3,284
)


(17,539
)


(150,729
)Interest income (expense), net


2,351



672



(406
)Gain on settlement of distribution
    agreement










104,071Other income, net


623



2,366



691Loss from continuing operations


(310
)


(14,501
)


(46,373
)Gain on disposition of
    discontinued operations


855



7,294



2,530Loss from discontinued operations






(679
)


(3,281
)Net income (loss)


545



(7,886
)


(47,124
)Convertible preferred stock
    dividend


(311
)






Net income (loss) applicable to
    common stockholders

$
234


$
(7,886
)

$
(47,124
)     (1)
    
    The following chart summarizes the stock-based charges that have
    been included in the following captions for the periods
    presented:  Year Ended
    December 31,2005


2004


2003(In thousands)Revenue

$



$



$
1,119Cost of revenue










16Sales and marketing


291



301



3,795Product and web site development










15General and administrative


824



518



164Restructuring charges










2,140$
1,115


$
819


$
7,249   33




---



##### 



Year Ended
    December 31,2005


2004


2003(In thousands)As a Percentage of
    Revenue:Revenue


100
%


100
%


96
%Related party revenue










4Total revenue


100



100



100Cost of revenue


22



23



27Gross profit


78



77



73Operating expenses:Sales and marketing


36



41



49Product and web site development


9



7



8General and administrative


33



32



32Amortization of intangible assets


1



4



11Restructuring charges


(1
)






2Impairment of long-lived assets










13Litigation settlement


1



1



31Total operating expenses


79



85



146Loss from operations


(1
)


(8
)


(73
)Interest income (expense), net


1







Gain on settlement of distribution
    agreement










50Other income, net






1



Loss from continuing operations






(7
)


(23
)Gain on disposition of
    discontinued operations






3



1Loss from discontinued operations










(1
)Net income (loss)






(4
)


(23
)Convertible preferred stock
    dividend










Net income (loss) applicable to
    common stockholders



%


(4
) %


(23
)%  34




---



##### 



For the
    Years Ended December 31, 2005 and 2004
  Revenue
    and Related Party Revenue
    Cost
    of Revenue
      Operating
    Expenses
    Sales and Marketing.
  Product and Web site Development. ® ® ® ®
  General and Administrative. Form 10-K,
 35




---



##### 



Amortization of Intangible
    Assets.
  Restructuring Charges.
    Litigation Settlement. Form 10-K.
  Stock-based Charges.
  Year EndedDecember 31,2005


2004Sales and marketing

$
291


$
301General and administrative


824



518$
1,115


$
819     Interest
    Income, Net
    Other
    Income, Net
    Gain
    on Disposition of Discontinued Operations and Loss from
    Discontinued Operations
   36




---



##### 



Income
    Taxes
    Segment
    Information
        Year Ended December 31,
    2005


Year Ended December 31,
    2004Real Estate


Move-Related








Real Estate


Move-RelatedServices


Services


Unallocated


Total


Services


Services


Unallocated


TotalRevenue

$
181,324


$
71,298


$



$
252,622


$
148,359


$
68,501


$



$
216,860Cost of revenue


27,902



26,346



1,940



56,188



28,213



21,784



832



50,829Gross profit (loss)


153,422



44,952



(1,940
)


196,434



120,146



46,717



(832
)


166,031Sales and marketing


60,125



29,644



1,302



91,071



59,039



28,637



712



88,388Product and web site development


15,922



3,755



2,382



22,059



13,425



1,936



1



15,362General and administrative


22,750



12,832



46,963



82,545



21,033



12,373



35,036



68,442Amortization of intangible assets










3,624



3,624











7,894



7,894Restructuring charges










(1,331
)


(1,331
)










1,316



1,316Litigation settlement










1,750



1,750











2,168



2,168Total operating expenses


98,797



46,231



54,690



199,718



93,497



42,946



47,127



183,570Income (loss) from operations

$
54,625


$
(1,279
)

$
(56,630
)

$
(3,284
)

$
26,649


$
3,771


$
(47,959
)

$
(17,539
)   Real
    Estate Services
  ® ® ® tm ® ®
 37




---



##### 



® ® ® ®
    ® ®
  Move-Related
    Services
  ® ®
  ® tm
    ®
 38




---



##### 



Unallocated
  Form 10-K,
  For the
    Years Ended December 31, 2004 and 2003
  Revenue
    and Related Party Revenue
    Cost
    of Revenue
      Operating
    Expenses
    Sales and Marketing.
  Product and Web site Development.
 39




---



##### 



General and Administrative.
  Amortization of Intangible
    Assets.
  Restructuring Charges.
    Impairment of Long-lived Assets.
  Litigation Settlement.
 40




---



##### 



Stock-based Charges.
  Year EndedDecember 31,2004


2003Revenue

$



$
1,119Cost of revenue






16Sales and marketing


301



3,795Product and web site development






15General and administrative


518



164Restructuring charges






2,140$
819


$
7,249     Interest
    Income (Expense), Net
    Gain
    on Settlement of Distribution Agreement
    Other
    Income, Net
    Gain
    on Disposition of Discontinued Operations and Loss from
    Discontinued Operations
     41




---



##### 



Income
    Taxes
    Segment
    Information
        Year Ended December 31,
    2004


Year Ended December 31,
    2003Real Estate


Move-Related








Real Estate


Move-RelatedServices


Services


Unallocated


Total


Services


Services


Unallocated


TotalRevenue

$
148,359


$
68,501


$



$
216,860


$
142,183


$
63,739


$



$
205,922Cost of revenue


28,213



21,784



832



50,829



33,779



21,381



1,409



56,569Gross profit (loss)


120,146



46,717



(832
)


166,031



108,404



42,358



(1,409
)


149,353Sales and marketing


59,039



28,637



712



88,388



65,547



29,606



5,969



101,122Product and web site development


13,425



1,936



1



15,362



15,115



1,929



21



17,065General and administrative


21,033



12,373



35,036



68,442



21,854



12,767



30,712



65,333Amortization of intangible assets










7,894



7,894











21,863



21,863Litigation settlement










2,168



2,168











63,600



63,600Restructuring charges










1,316



1,316











4,100



4,100Impairment of long-lived assets


























26,999



26,999Total operating expenses


93,497



42,946



47,127



183,570



102,516



44,302



153,264



300,082Income (loss) from operations

$
26,649


$
3,771


$
(47,959
)

$
(17,539
)

$
5,888


$
(1,944
)

$
(154,673
)

$
(150,729
)  42




---



##### 



Real
    Estate Services
  ® ® ® tm ® ®
  ® ® ®
      Move-Related
    Services
  ® ®
  ®
     43




---



##### 



Unallocated
    Liquidity
    and Capital Resources
              tm
 44




---



##### 



Payments Due by PeriodTotal


Due in One


Due in One


Due in Three


OverPayments Due


Year or Less


to Three Years


to Five Years


Five YearsCapital lease obligations

$
1,021


$
1,021


$



$



$
Operating lease obligations


20,322



6,801



7,484



1,789



4,248Obligations under restructuring
    charges


3,557



3,019



538







Distribution agreements


22,675



14,975



7,700







Other purchase obligations


7,710



1,542



3,084



3,084



Total

$
55,285


$
27,358


$
18,806


$
4,873


$
4,248     ® ® tm
  Off-Balance
    Sheet Arrangements
    Recent
    Accounting Developments
   45




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest Rate Risk.
   46




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageHomestore, Inc. Consolidated
    Financial StatementsReport of
    Ernst & Young LLP, Independent Registered Public
    Accounting Firm


48Consolidated
    Balance Sheets


49Consolidated
    Statements of Operations


50Consolidated
    Statements of Stockholders Equity


51Consolidated
    Statements of Cash Flows


52Notes to
    Consolidated Financial Statements


53  47




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                48




---



##### 



HOMESTORE,
    INC.



CONSOLIDATED
    BALANCE SHEETS  December 31,2005


2004(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
13,272


$
14,819Short-term investments


139,050



45,040Accounts receivable, net of
    allowance for doubtful accounts of $1,377 and $1,399 at
    December 31, 2005 and 2004, respectively


15,966



12,532Other current assets


19,485



12,498Total current assets


187,773



84,889Property and equipment, net


20,717



15,242Goodwill, net


19,502



19,502Intangible assets, net


14,264



17,864Restricted cash


5,026



5,840Other assets


1,744



7,167Total assets

$
249,026


$
150,504LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
6,427


$
2,675Accrued expenses


40,879



39,894Obligation under capital leases


1,005



1,774Deferred revenue


43,652



39,487Total current liabilities


91,963



83,830Obligation under capital leases






991Deferred revenue


76



4,100Other non-current liabilities


3,714



4,190Total liabilities


95,753



93,111Commitments and contingencies
    (Note 22)Series B convertible
    preferred stock


91,349



Series A convertible
    preferred stock






Common stock, $.001 par
    value; 500,000 shares authorized, 149,201 and
    146,868 shares issued and outstanding at December 31,
    2005 and December 31, 2004, respectively


149



147Additional paid-in capital


2,047,456



2,043,053Deferred stock-based charges


(351
)


(406
)Accumulated other comprehensive
    income


343



409Accumulated deficit


(1,985,673
)


(1,985,810
)Total stockholders equity


61,924



57,393Total liabilities and
    stockholders equity

$
249,026


$
150,504    49




---



##### 



HOMESTORE,
    INC.



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended
    December 31,2005


2004


2003(In thousands, except per share
    amounts)Revenue (including non-cash equity
    charges, see note 2)

$
252,622


$
216,860


$
198,227Related party revenue










7,695Total revenue


252,622



216,860



205,922Cost of revenue (including
    non-cash equity charges, see note 2)


56,188



50,829



56,569Gross profit


196,434



166,031



149,353Operating expenses:Sales and marketing (including
    non-cash equity charges, see note 2)


91,071



88,388



101,122Product and web site development
    (including non-cash equity charges, see note 2)


22,059



15,362



17,065General and administrative
    (including non-cash equity charges, see note 2)


82,545



68,442



65,333Amortization of intangible assets


3,624



7,894



21,863Restructuring charges (including
    non-cash equity charges, see note 2)


(1,331
)


1,316



4,100Impairment of long-lived assets










26,999Litigation settlement


1,750



2,168



63,600Total operating expenses


199,718



183,570



300,082Loss from operations


(3,284
)


(17,539
)


(150,729
)Interest income (expense), net


2,351



672



(406
)Gain on settlement of distribution
    agreement










104,071Other income, net


623



2,366



691Loss from continuing operations


(310
)


(14,501
)


(46,373
)Gain on disposition of
    discontinued operations


855



7,294



2,530Loss from discontinued operations






(679
)


(3,281
)Net income (loss)


545



(7,886
)


(47,124
)Convertible preferred stock
    dividend


(311
)






Net income (loss) applicable to
    common stockholders

$
234


$
(7,886
)

$
(47,124
)Basic income (loss) per share
    applicable to common stockholdersContinuing operations

$
(0.01
)

$
(0.11
)

$
(0.39
)Discontinued operations


0.01



0.05



(0.01
)Basic income (loss) per share
    applicable to common stockholders

$
0.00


$
(0.06
)

$
(0.40
)Diluted income (loss) per share
    applicable to common stockholdersContinuing operations

$
(0.00
)

$
(0.11
)

$
(0.39
)Discontinued operations


0.00



0.05



(0.01
)Diluted income (loss) per share
    applicable to common stockholders

$
0.00


$
(0.06
)

$
(0.40
)Shares used in calculation of
    income (loss) per share applicable to common stockholders:Basic


147,175



136,518



118,996Diluted


182,548



136,518



118,996    50




---



##### 



HOMESTORE,
    INC.



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  Notes





AccumulatedConvertible








Additional





Receivable


Deferred


Other





TotalPreferred Stock


Common Stock


Paid-in


Treasury


From


Stock-based


Comprehensive


Accumulated


StockholdersShares


Amount


Shares


Amount


Capital


Stock


Stockholders


Charges


Income (loss)


Deficit


Equity(In thousands)Balance at December 31, 2002





$




117,839


$
118


$
1,990,755


$
(18,567
)

$
(106
)

$
(2,246
)

$
(424
)

$
(1,930,800
)

$
38,730Comprehensive income (loss):Net loss






































(47,124
)


(47,124
)Unrealized loss on marketable
    securities


































180







180Foreign currency translation


































511







511Comprehensive loss


































691



(47,124
)


(46,433
)Issuance of common stock under
    employee stock purchase plan and exercise of stock options










2,838



3



3,299























3,302Settlement of stock issuance
    obligation










168































Issuance of restricted stock










436



1



343











(344
)










Repayment from stockholders


























68















68Repurchase and retirement of
    treasury stock










(12
)






(4,416
)


4,386







30











Repurchase of common stock










(31
)










(38
)


38















Stock-based charges


















2,610











2,302











4,912Shares returned from escrow
    relating to discontinued operations










(367
)










(251
)


















(251
)Balance at December 31, 2003





$




120,871


$
122


$
1,992,591


$
(14,470
)

$



$
(258
)

$
267


$
(1,977,924
)

$
328Comprehensive income (loss):Net loss






































(7,886
)


(7,886
)Unrealized loss on marketable
    securities


































2







2Foreign currency translation


































140







140Comprehensive loss


































142



(7,886
)


(7,744
)Issuance of common stock under
    employee stock purchase plan and exercise of stock options










3,146



4



3,862























3,866Issuance of restricted stock










148







667











(367
)










300Retirement of treasury stock














(1
)


(14,469
)


14,470



















Stock-based charges






























219











219Shares issued in settlement of
    litigation










22,703



22



60,402























60,424Balance at December 31, 2004





$




146,868


$
147


$
2,043,053


$



$



$
(406
)

$
409


$
(1,985,810
)

$
57,393Comprehensive income (loss):Net income






































545



545Unrealized gain on marketable
    securities


































(2
)






(2
)Foreign currency translation


































(64
)






(64
)Comprehensive income


































(66
)


545



479Issuance of common stock under
    exercise of stock options










1,962



2



3,617























3,619Issuance of restricted stock










106







219











(219
)










Stock-based charges










115







249











274











523Convertible preferred stock
    dividend and accretion of discount






































(408
)


(408
)Shares issued in settlement of
    contractual obligations










150







318























318Balance at December 31, 2005





$




149,201


$
149


$
2,047,456


$



$



$
(351
)

$
343


$
(1,985,673
)

$
61,924  51




---



##### 



HOMESTORE,
    INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended
    December 31,2005


2004


2003(In thousands)Cash flows from continuing
    operating activities:Loss from continuing operations

$
(310
)

$
(14,501
)

$
(46,373
)Adjustments to reconcile net loss
    to net cash provided by (used in) continuing operating
    activities:Depreciation


7,500



7,901



11,267Amortization of intangible assets


3,624



7,894



21,863Impairment of long-lived assets










26,999Provision for doubtful accounts


731



340



2,266Stock-based charges


1,115



819



7,249Gain on settlement of distribution
    agreement










(104,071
)Gain on sales of property and
    equipment


(156
)


(2,226
)


Realized loss on sale of
    marketable securities










180Other non-cash items


(109
)


(40
)


588Changes in operating assets and
    liabilities, net of acquisitions and discontinued operations:Accounts receivable


(4,165
)


(430
)


3,716Prepaid distribution expense






10,509



22,812Other assets


(1,068
)


(130
)


1,108Accounts payable and accrued
    expenses


(680
)


1,414



37,971Accrued distribution agreement






(7,406
)


(22,162
)Deferred revenue


141



5,475



2,131Deferred revenue from related
    parties










(6,657
)Net cash provided by (used in)
    continuing operating activities


6,623



9,619



(41,113
)Net cash provided by discontinued
    operations


855



9,915



421Net cash provided by (used in)
    operating activities


7,478



19,534



(40,692
)Cash flows from investing
    activities:Purchases of property and equipment


(11,154
)


(3,716
)


(8,937
)Purchases of short-term investments


(116,285
)


(24,465
)


(21,575
)Maturities of short-term
    investments


22,275



1,000



Proceeds from sales of marketable
    securities










1,320Proceeds from sales of property
    and equipment


203



6,737



Net cash used in investing
    activities


(104,961
)


(20,444
)


(29,192
)Cash flows from financing
    activities:Proceeds from payment of
    stockholders notes










61Proceeds from exercise of stock
    options, warrants and share issuances under employee stock
    purchase plan


3,619



3,866



3,302Payments on capital lease
    obligations


(1,760
)


(2,079
)


Proceeds from sale of convertible
    preferred stock


94,077







Net cash provided by financing
    activities


95,936



1,787



3,363Change in cash and cash equivalents


(1,547
)


877



(66,521
)Cash and cash equivalents,
    beginning of period


14,819



13,942



80,463Cash and cash equivalents, end of
    period

$
13,272


$
14,819


$
13,942    52




---



##### 



HOMESTORE,
    INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    Business    ® ® ® tm ® tm tm ® ® ®
  2.
    Summary
    of Significant Accounting Policies  Principles of Consolidation and Basis of
    Presentation
  Use of Estimates
  Cash and Cash Equivalents, Short-Term
    Investments
  available-for-sale available-for-sale
  Concentration of Credit Risk
 53




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fair Value of Financial Instruments
  Prepaid Commissions
  Property and Equipment
  Product and Web site Development
    Costs SOP 98-1,
  Identifiable Intangibles, Goodwill and other Long-Lived
    Assets
   54




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Range ofType

LivesCustomer, merchant lists and
    relationships


2-5Exclusive electronic listing and
    rights agreement


9NAR operating agreement


15Online traffic


3Porting relationships


5Purchased content


5Purchased technology


3-5Tradename, trademarks, brand name


5-15Other


2-15   Revenue Recognition
      Software Revenue
  SOP 98-9, SOP 97-2,
 55




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  SOP 98-9.
  Advertising Revenue
  Shipping and Handling Income and
    Costs No. 00-10,
  Advertising Expense
  Stock-Based Charges
    2005


2004


2003Net income (loss) applicable to
    common stockholders:As reported

$
234


$
(7,886
)

$
(47,124
)Add: Stock-based employee
    compensation charges included in reported net loss


550



300



3,069Deduct: Total stock-based
    compensation determined under the fair value-based method for
    all awards


(17,429
)


(15,747
)


(20,067
)Pro forma net loss

$
(16,645
)

$
(23,333
)

$
(64,122
)Net income (loss) per
    share  basic and diluted:As reported

$
0.00


$
(0.06
)

$
(0.40
)Pro forma

$
(0.11
)

$
(0.17
)

$
(0.54
)  56




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended
    December 31,2005


2004


2003Risk-free interest rates


4
%


3
%


3
%Expected lives (in years)


4



4



4Dividend yield


0
%


0
%


0
%Expected volatility


124
%


130
%


144
%   EITF 00-18,
    Year Ended
    December 31,2005


2004


2003Revenue

$



$



$
1,119Cost of revenue










16Sales and marketing


291



301



3,795Product and web site development










15General and administrative


824



518



164Restructuring charges










2,140$
1,115


$
819


$
7,249     Income Taxes
  Net Income (Loss) Per Share
  Foreign Currency Translation
 57




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Comprehensive Income
  Segments
  Recent Accounting Developments
    Reclassifications
  3.
    Discontinued
    Operations     58




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year Ended
    December 31,2004


2003Revenue

$
9,137


$
12,788Total expenses


9,816



16,069Loss from discontinued operations

$
(679
)

$
(3,281
)     Year Ended
    December 31,2005


2004


2003Gross proceeds from sale

$
855


$
10,981


$
2,300Less:Cash subject to escrow






850



Net assets sold






2,210



Transaction costs






627



Cash and Homestore stock received
    from purchase of iPlace










(230
)Gain on disposition of
    discontinued operations

$
855


$
7,294


$
2,530     4.
    Restructuring
    Charges   59




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        LeaseObligationsEmployee


andTermination


Related


Asset


ContractualBenefits


Charges


Write-offs


Obligations


TotalInitial restructuring charge

$
6,364


$
12,782


$
10,917


$
5,733


$
35,796Cash paid


(3,511
)


(137
)






(141
)


(3,789
)Non-cash charges










(10,917
)






(10,917
)Restructuring accrual at
    December 31, 2001


2,853



12,645







5,592



21,090Cash paid


(2,274
)


(5,480
)






(3,631
)


(11,385
)Change in estimates


(396
)


6,027







(798
)


4,833Non-cash charges






488











488Sale of a subsidiary


(156
)














(156
) 60




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  LeaseObligationsEmployee


andTermination


Related


Asset


ContractualBenefits


Charges


Write-offs


Obligations


TotalRestructuring accrual at
    December 31, 2002


27



13,680







1,163



14,870Cash paid


(6
)


(4,970
)






(576
)


(5,552
)Change in estimates


(10
)


1,290







(203
)


1,077Non-cash charges


















Sale of a subsidiary


















Restructuring accrual at
    December 31, 2003


11



10,000







384



10,395Cash paid


(5
)


(3,966
)






(11
)


(3,982
)Change in estimates






987







28



1,015Restructuring accrual at
    December 31, 2004


6



7,021







401



7,428Cash paid






(3,260
)






(8
)


(3,268
)Change in estimates


(6
)


(1,172
)






(148
)


(1,326
)Restructuring accrual at
    December 31, 2005

$



$
2,589


$



$
245


$
2,834          61




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     LeaseObligationsEmployee


andTermination


Related


AssetBenefits


Charges


Write-offs


TotalInitial restructuring charge

$
1,720


$
309


$
260


$
2,289Non-cash charges










(260
)


(260
)Cash paid


(1,452
)


(187
)






(1,639
)Change in estimates


(242
)


1,584







1,342Restructuring accrual at
    December 31, 2002


26



1,706







1,732Cash paid


(12
)


(387
)






(399
)Change in estimates


(14
)


46







32Restructuring accrual at
    December 31, 2003






1,365







1,365Cash paid






(386
)






(386
)Change in estimates






372







372Restructuring accrual at
    December 31, 2004






1,351







1,351Cash paid






(414
)






(414
)Change in estimates






29







29Restructuring accrual at
    December 31, 2005

$



$
966


$



$
966        62




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     LeaseObligationsEmployee


andTermination


RelatedBenefits


Charges


TotalInitial restructuring charge

$
1,590


$
2,033


$
3,623Cash paid


(1,190
)


(253
)


(1,443
)Restructuring accrual at
    December 31, 2002


400



1,780



2,180Cash paid


(268
)


(1,119
)


(1,387
)Change in estimates


(132
)


(417
)


(549
)Restructuring accrual at
    December 31, 2003






244



244Cash paid






(212
)


(212
)Change in estimates










Restructuring accrual at
    December 31, 2004






32



32Cash paid






(12
)


(12
)Change in estimates






(20
)


(20
)Restructuring accrual at
    December 31, 2005

$



$



$
      63




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Stock-basedEmployee


Charges ForTermination


AcceleratedBenefits


Vesting


TotalInitial restructuring charge

$
1,401


$
2,140


$
3,541Cash paid


(511
)






(511
)Non-cash charges






(2,140
)


(2,140
)Restructuring accrual at
    December 31, 2003


890







890Cash paid


(804
)






(804
)Change in estimates


(71
)






(71
)Restructuring accrual at
    December 31, 2004


15







15Cash paid










Change in estimates


(15
)






(15
)Restructuring accrual at
    December 31, 2005

$



$



$
   5.
    Impairment
    of Long-Lived Assets    ®
     64




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Short-term
    Investments  available-for-sale
  Unrealized


Unrealized


EstimatedBook Value


Gains


Losses


Fair ValueDecember 31, 2005Auction rate preferred instruments

$
139,050


$



$



$
139,050December 31, 2004Auction rate preferred instruments

$
45,040


$



$



$
45,040   available-for-sale
  7.
    Property
    and Equipment    As of
    December 31,2005


2004Computer software and equipment

$
48,026


$
37,415Furniture, fixtures and office
    equipment


4,264



4,007Leasehold improvements


6,658



6,352Machinery and equipment


1,926



67060,874



48,444Less: accumulated depreciation


(40,157
)


(33,202
)$
20,717


$
15,242     8.
    Goodwill
    and Other Intangible Assets    As of
    December 31,2005


2004Real Estate Services

$
12,988


$
12,988Move-Related Services


6,514



6,514Total

$
19,502


$
19,502    65




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of
    December 31,2005


2004Gross


Accumulated


Gross


AccumulatedAmount


Amortization


Amount


AmortizationCustomer lists and relationships

$
786


$
732


$
18,786


$
18,407Trade name, trademarks, web sites
    and brand names


19,746



6,902



19,746



5,499Purchased technology


9,099



9,099



9,325



8,642Purchased content










7,631



7,631Porting relationships










1,728



1,728NAR®
    operating agreement


1,578



601



1,578



451Other


5,515



5,126



6,377



4,949Total

$
36,724


$
22,460


$
65,171


$
47,307     Year Ended
    December 31,

Amount2006

$
1,8582007


1,4232008


1,4232009


1,4232010


1,417   9.
    Other
    Current Assets    December 31,2005


2004Prepaid commissions

$
7,139


$
6,226Cash surrender value of life
    insurance policies


5,218



Other


7,128



6,272$
19,485


$
12,498  66




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Accrued
    Expenses    December 31,2005


2004Accrued payroll and related
    benefits

$
16,060


$
14,109Accrued restructuring charges


3,264



4,656Accrued legal and professional fees


9,140



9,588Other


12,415



11,541$
40,879


$
39,894   11.
    Related-party
    Transactions      12.
    Segment
    Information     67




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Year Ended
    December 31, 2005Real Estate


Move-RelatedServices


Services


Unallocated


TotalRevenue

$
181,324


$
71,298


$



$
252,622Cost of revenue


27,902



26,346



1,940



56,188Gross profit (loss)


153,422



44,952



(1,940
)


196,434Sales and marketing


60,125



29,644



1,302



91,071Product and web site development


15,922



3,755



2,382



22,059General and administrative


22,750



12,832



46,963



82,545Amortization of intangible assets










3,624



3,624Litigation settlement










1,750



1,750Restructuring charges










(1,331
)


(1,331
)Total operating expenses


98,797



46,231



54,690



199,718Income (loss) from operations

$
54,625


$
(1,279
)

$
(56,630
)

$
(3,284
)   For the Year Ended
    December 31, 2004Real Estate


Move-RelatedServices


Services


Unallocated


TotalRevenue

$
148,359


$
68,501


$



$
216,860Cost of revenue


28,213



21,784



832



50,829Gross profit (loss)


120,146



46,717



(832
)


166,031Sales and marketing


59,039



28,637



712



88,388Product and web site development


13,425



1,936



1



15,362General and administrative


21,033



12,373



35,036



68,442Amortization of intangible assets










7,894



7,894Litigation settlement










2,168



2,168Restructuring charges










1,316



1,316Total operating expenses


93,497



42,946



47,127



183,570Income (loss) from operations

$
26,649


$
3,771


$
(47,959
)

$
(17,539
)   68




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  For the Year Ended
    December 31, 2003Real Estate


Move-RelatedServices


Services


Unallocated


TotalRevenue

$
142,183


$
63,739


$



$
205,922Cost of revenue


33,779



21,381



1,409



56,569Gross profit (loss)


108,404



42,358



(1,409
)


149,353Sales and marketing


65,547



29,606



5,969



101,122Product and web site development


15,115



1,929



21



17,065General and administrative


21,854



12,767



30,712



65,333Amortization of intangible assets










21,863



21,863Litigation settlement










63,600



63,600Restructuring charges










4,100



4,100Impairment of long-lived assets










26,999



26,999Total operating expenses


102,516



44,302



153,264



300,082Income (loss) from operations

$
5,888


$
(1,944
)

$
(154,673
)

$
(150,729
)     ® ® ®
  13.
    Stock
    Plans  Option
    Plans
       69




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       WeightedNumber





Averageof Shares


Price per Share


Exercise PriceOutstanding at December 31,
    2002


24,315


$
0.30 to 89.25


$
3.32Granted


2,564



0.56 to 3.68



1.84Exercised


(1,595
)


0.30 to 3.57



1.59Cancelled


(2,735
)


0.30 to 89.25



6.25Outstanding at December 31,
    2003


22,549



0.30 to 89.25



2.87Granted


8,459



2.18 to 4.88



3.37Exercised


(1,739
)


0.30 to 3.00



1.39Cancelled


(1,356
)


0.30 to 89.25



5.40Outstanding at December 31,
    2004


27,913



0.30 to 89.25



2.99Granted


7,031



1.95 to 5.10



2.31Exercised


(1,962
)


0.30 to 4.80



1.84Cancelled


(767
)


0.30 to 69.63



5.86Outstanding at December 31,
    2005


32,215


$
0.30 to 89.25


$
2.84       OptionsOutstandingWeighted Average





Options ExercisableNumber


Remaining


Average


Number


AveragePrices

of Shares


Contractual Life


Exercise Price


of Shares


Exercise Price$0.30 to 1.34


3,226



6.82


$
0.53



2,542


$
0.531.43 to 1.72


402



6.63



1.46



337



1.451.76


10,820



6.07



1.76



10,641



1.761.95 to 2.07


1,360



9.43



1.95



178



1.962.16


4,300



9.21



2.16



800



2.162.18 to 2.25


3,253



7.77



2.25



1,744



2.252.26 to 3.57


3,365



8.64



2.86



1,323



2.963.57 to 4.32


3,929



8.40



4.12



1,189



4.154.35 to 72.13


1,555



6.45



15.70



1,027



21.1089.25


5



4.09



89.25



5



89.25$0.30 to 89.25


32,215



7.45


$
2.84



19,786


$
2.91  70




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Employee
    Stock Purchase Plan
      14.
    Warrants       71




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        15.
    Series B
    Convertible Preferred Stock       72




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Gross Proceeds

$
100,000Costs and expenses of issuance


(5,924
)Embedded derivative liability


(3,137
)Net convertible preferred stock at
    issuance


90,939Accretion of discount


99Dividends


311Net convertible preferred stock @
    12/31/2005

$
91,349   16.
    Capitalization    Voting
 73




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Dividends
  Liquidation
  Redemption
  Conversion ® ®
  Repurchase
    of Common Stock
    Issuance
    of Common Stock
      ® ®
 74




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          17.
    Net
    Income (Loss) per Share    Year Ended
    December 31,2005


2004


2003Numerator:Loss from continuing operations

$
(310
)

$
(14,501
)

$
(46,373
)Gain on disposition of
    discontinued operations


855



7,294



2,530Loss from discontinued operations






(679
)


(3,281
)Net income (loss)


545



(7,886
)


(47,124
)Convertible preferred stock
    dividend


311







Less: net income (loss) applicable
    to Series B Preferred Stock


3







Net income (loss) applicable to
    common stockholders

$
231


$
(7,886
)

$
(47,124
)Denominator:Basic weighted average shares
    outstanding


147,175



136,518



118,996Dilutive effect of options,
    warrants and restricted stock


11,489







Dilutive effect of assumed
    conversion of convertible preferred stock


23,884







Fully diluted weighted average
    shares outstanding


182,548



136,518



118,996Basic income (loss) applicable to
    common stockholders:Continuing operations

$
(0.01
)

$
(0.11
)

$
(0.39
)Discontinued operations


0.01



0.05



(0.01
)Net income (loss)

$
0.00


$
(0.06
)

$
(0.40
)Diluted income (loss) applicable
    to common stockholders:Continuing operations

$
(0.00
)

$
(0.11
)

$
(0.39
)Discontinued operations


0.00



0.05



(0.01
)Net income (loss)

$
0.00


$
(0.06
)

$
(0.40
)  75




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     18.
    Supplemental
    Cash Flow Information    
    The Company paid $75,000 in interest.
    The Company issued 150,000 shares of stock to settle
    contractual obligations of $318,000.
    The Company issued 115,740 shares of restricted common
    stock to its Chief Executive Officer. These shares vest over
    three years. The expense associated with these shares was
    $250,000 and was recognized in 2005.
    The Company issued 105,450 shares of restricted common
    stock to certain members of its Board of Directors. Theses
    shares vest over three years. The charge associated with these
    shares was $219,000 and is being recognized over the three-year
    vesting period.
    The Company excluded $1.8 million of capital expenditures
    and associated accounts payable recorded at the end of December
    2005 as these purchases were subsequently funded through an
    equipment financing arrangement in January 2006.    
    The Company paid $62,000 in interest.
    The Company sold two of its business units generating net
    proceeds of $9.5 million and a gain on sale of
    $7.3 million.
    The Company sold its Welcome
    Wagon®
    facility generating net proceeds of $6.3 million and a gain
    on sale of $1.4 million.
    The Company issued 20 million shares of stock and paid
    $3.0 million in settlement of the Securities
    Class Action lawsuit that had previously been accrued at
    $53.6 million.
    The Company issued 200,000 shares of stock and paid
    $150,000 in settlement of the derivative litigation suit which
    had previously been accrued at $710,000.
    The Company issued 2.3 million shares of stock in
    settlement of the Top
    Producer®
    litigation resulting in an additional charge of $793,000 against
    an existing accrual of $7.9 million.
    The Company granted 70,922 shares of restricted common
    stock to its Chief Executive Officer. These shares vest over
    three years. The expense associated with these shares was
    $300,000 and was recognized in 2004.
    The Company issued 77,250 shares of restricted common stock
    to certain members of its Board of Directors. These shares vest
    over three years. The charge associated with these shares was
    $367,000 and is being recognized over the three-year vesting
    period.
    The Company funded $3.2 million of capital expenditure
    through an equipment lease financing arrangement.    
    The Company paid $103,000 in interest.
    The Company was required to accelerate 1,162,945 options for
    terminated former executives and incurred a $2,609,000 expense
    in 2003. 76




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    The Company issued 436,000 shares of restricted stock to
    certain members of the Companys Board of Directors. These
    shares vest over three years. The charge associated with the
    issuance of these shares was $344,000 and is being recognized
    over the three-year vesting period.
    The Company funded $2.1 million of capital expenditures
    through an equipment lease financing arrangement.  19.
    Defined
    Contribution Plan    20.
    Income
    Taxes    December 31,2005


2004Deferred tax assets:Net operating loss carryforwards

$
370,174


$
357,067Deferred expenses


11,230



14,889Impairment charges


6,232



2,863Amortization of acquired
    intangible assets


11,098



3,748Other


710



624399,444



379,191Less: valuation allowance


(399,444
)


(379,191
)Net deferred tax assets






Deferred tax liabilities:Amortization of acquired
    intangible assets






Total gross deferred tax
    liabilities






Net deferred tax asset (liability)

$



$
    77




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             21.
    Settlements
    of Disputes and Litigation  Settlement
    of AOL Dispute
      Settlement
    of Securities Class Action Lawsuit
   78




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           79




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or
  Settlement
    of Derivative Litigation
  first-amended
      Settlement
    of Other Litigation
   80




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           81




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      ® ® ® ®
    22.
    Commitments
    and Contingencies  Operating
    and Capital Leases
   82




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Capital


OperatingYear Ended
    December 31,

Leases


Leases2006

$
1,021


$
9,8202007






6,3282008






1,6942009






8942010 and thereafter






5,143Total

$
1,021


$
23,879Less: Amount representing interest


(16
)Net capital leases


1,005Less: Current portion


(1,005
)Long-term capital leases

$
         Distribution
    Agreements
    Year Ending
    December 31,2006

$
14,9752007


7,700Total

$
22,675   Other
    Commitments
  ® ® ®
 83




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ending
    December 31,2006

$
1,5422007


1,5422008


1,5422009


1,5422010


1,542Total

$
7,710     Legal
    Proceedings
  Contingencies
    Related to Pending Litigation
  Government
    Investigations
      Insurance
    Coverage Litigation
   84




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             and/or and/or
  Other
    Litigation
  ® ® ® ®
 85




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (Stichting Pensioenfonds ABP v. AOL Time
    Warner. et.al.) and/or
 86




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 10-K.
  Civix-DDI, ®
     87




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Contingencies
  Form 10-K
  23.
    Subsequent
    Events  Stock
    Plans
    Acquisition
    of Moving.com
   88




---



##### 



HOMESTORE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   24.
    Quarterly
    Financial Data (unaudited)    Three Months EndedMar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,2005


2005


2005


2005


2004


2004


2004


2004(In thousands, except per share
    amounts)Revenue

$
56,456


$
63,253


$
66,338


$
66,575


$
53,424


$
54,320


$
54,782


$
54,334Gross profit


43,555



49,714



52,437



50,728



40,174



41,853



42,127



41,877Income (loss) from continuing
    operations


(395
)


3,320



1,945



(5,180
)


(4,777
)


(3,960
)


(4,753
)


(1,011
)Income (loss) from discontinued
    operations














855



(306
)


(302
)


180



7,043Net income/(loss)


(395
)


3,320



1,945



(4,325
)


(5,083
)


(4,262
)


(4,573
)


6,032Convertible preferred stock dividend














(311
)














Net income/(loss) applicable to
    common stockholders

$
(395
)

$
3,320


$
1,945


$
(4,636
)

$
(5,083
)

$
(4,262
)

$
(4,573
)

$
6,032Basic net income (loss) per share
    applicable to common stockholders:Continuing operations

$
(0.00
)

$
0.02


$
0.01


$
(0.04
)

$
(0.04
)

$
(0.03
)

$
(0.03
)

$
(0.01
)Discontinued operations














0.01















0.05Net income (loss)

$
(0.00
)

$
0.02


$
0.01


$
(0.03
)

$
(0.04
)

$
(0.03
)

$
(0.03
)

$
0.04Diluted net income (loss) per share
    applicable to common stockholders:Continuing operations

$
(0.00
)

$
0.02


$
0.01


$
(0.04
)

$
(0.04
)

$
(0.03
)

$
(0.03
)

$
(0.01
)Discontinued operations














0.01















0.05Net income (loss)

$
(0.00
)

$
0.02


$
0.01


$
(0.03
)

$
(0.04
)

$
(0.03
)

$
(0.03
)

$
0.04  89




---



##### 



Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rule 13a-15
   90




---



##### 



Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
                       91




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON INTERNAL CONTROL OVER FINANCIAL REPORTING
                    92




---



##### 



Item 9B.
    Other
    Information   PART III    Item 10.
    Directors
    and Executive Officers of the Registrant    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  The following documents are filed as part of this
    report:
   93




---



##### 



Exhibits
  Number

Exhibit Title2.01

Agreement and Plan of Merger dated
    December 31, 1998 between NetSelect, Inc. and InfoTouch
    Corporation. (Incorporated by reference to Exhibit 2.01 to
    our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)2.02

Agreement and Plan of
    Reorganization dated June 20, 1998 among NetSelect, Inc.,
    National New Homes Co., Inc., MultiSearch Solutions, Inc., Fred
    White, and R. Fred White III. (Incorporated by reference to
    Exhibit 2.02 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)2.03

Exchange Agreement dated
    March 31, 1998 among NetSelect, Inc., The Enterprise of
    America, Ltd., and Roger Scommegna. (Incorporated by reference
    to Exhibit 2.03 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)2.04

Agreement and Plan of
    Reorganization dated May 19, 1999 between NetSelect, Inc.,
    Avenue Acquisition Corporation and SpringStreet, Inc.
    (Incorporated by reference to Exhibit 2.04 to our
    registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)2.05

Stock Purchase Agreement dated
    October 12, 1999 among
    Homestore.com®,
    Inc., The Homebuyers Fair, Inc., certain shareholders of
    The Homebuyers Fair, Inc., and Central Newspapers, Inc.,
    as Shareholder Agent. (Incorporated by reference to
    Exhibit 2.01 to our current report on
    Form 8-K
    filed November 15, 1999.)2.06

Stock Purchase Agreement dated
    October 12, 1999 among
    Homestore.com®,
    Inc., FAS-Hotline, Inc., the shareholders of FAS-Hotline, Inc.,
    and Central Newspapers, Inc., as Shareholder Agent.
    (Incorporated by reference to Exhibit 2.02 to our current
    report on
    Form 8-K
    filed November 15, 1999.)2.07

Agreement and Plan of
    Reorganization dated October 26, 2000 among
    Homestore.com®,
    Inc., Metal Acquisition Corp., WW Acquisition Corp., Move.com,
    Inc., Welcome
    Wagon®
    International, Inc., Cendant Membership Services Holdings, Inc.
    and Cendant Corporation. (Incorporated by reference to
    Annex A to the definitive proxy statement filed
    November 29, 2000.)3.01.1

Restated Certificate of
    Incorporation dated June 23, 2005.(2)3.01.2

Certificate of Designation of
    Series B Convertible Participating Preferred Stock dated
    November 29, 2005.(2)3.02

Bylaws dated June 22, 2005.
    (Incorporated by reference to Exhibit 3.1 to our current
    report on
    Form 8-K
    filed June 28, 2005.)3.03.1

RealSelect, Inc.s
    Certificate of Incorporation dated October 25, 1996.
    (Incorporated by reference to Exhibit 3.05.1 to our
    registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)3.03.2

RealSelect, Inc.s
    Certificate of Amendment to Certificate of Incorporation dated
    November 25, 1996. (Incorporated by reference to
    Exhibit 3.05.2 to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)3.04

RealSelect, Inc.s Amended
    By-laws dated December 1999. (Incorporated by reference to
    Exhibit 3.07 of our
    Form 10-K
    for the year ended December 31, 1999 filed March 10,
    2000.)4.01

Form of Specimen Certificate for
    common stock. (Incorporated by reference to Exhibit 4.01 to
    our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed July 8, 1999.)4.02.1

NetSelect, Inc. Second Amended and
    Restated Stockholders Agreement dated January 28, 1999.
    (Incorporated by reference to Exhibit 4.02.1 to our
    registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)4.02.2

Amendment No. 1 to NetSelect,
    Inc. Second Amended and Restated Stockholders Agreement dated
    April 9, 1999. (Incorporated by reference to
    Exhibit 4.02.2 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.01.1

Operating Agreement dated
    November 26, 1996, between
    REALTORS®
    Information Network, Inc. and RealSelect, Inc. (Incorporated by
    reference to Exhibit 10.02 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.01.2

First Amendment to Operating
    Agreement dated December 27, 1996 between
    REALTORS®
    Information Network, Inc. and RealSelect, Inc. (Incorporated by
    reference to Exhibit 10.02.2 to our registration statement
    on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.) 94




---



##### 



Number

Exhibit Title10.01.3

Amendment No. 2 to Operating
    Agreement dated May 28, 1999 between
    REALTORS®
    Information Network, Inc. and RealSelect, Inc. (Incorporated by
    reference to Exhibit 10.02.3 to our registration statement
    on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)10.02

Master Agreement dated
    November 26, 1996, among NetSelect, Inc., NetSelect,
    L.L.C., RealSelect, Inc., CDW Internet, L.L.C., Whitney Equity
    Partners, L.P., Allen & Co., InfoTouch Corporation, and
    REALTORS®
    Information Network, Inc. (Incorporated by reference to
    Exhibit 10.03 to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)10.03

Joint Ownership Agreement dated
    November 26, 1996, among National Association of
    REALTORS®,
    NetSelect, L.L.C., and NetSelect, Inc. (Incorporated by
    reference to Exhibit 10.04 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.04

Trademark License dated
    November 26, 1996, between National Association of
    REALTORS®
    and RealSelect, Inc. (Incorporated by reference to
    Exhibit 10.05 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.05

Agreement dated August 21,
    1998 among RealSelect, Inc.,
    REALTORS®
    Information Network, Inc., National Association of
    REALTORS®,
    NetSelect, Inc., and NetSelect L.L.C. (Incorporated by reference
    to Exhibit 10.29 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.06

Agreement dated May 28, 1999
    among NetSelect, Inc., RealSelect, Inc.,
    REALTORS®
    Information Network, Inc. and National Association of
    REALTORS®.
    (Incorporated by reference to Exhibit 10.30 to our
    registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)10.07

Letter Agreement Regarding Rental
    Site Acquisition dated May 17, 1999 among National
    Association of
    REALTORS®,
    REALTORS®
    Information Network, Inc. and RealSelect, Inc. (Incorporated by
    reference to Exhibit 10.32 to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)(1)10.08

Stock and Interest Purchase
    Agreement (NetSelect Series A and B Preferred) dated
    November 26, 1996, among NetSelect, Inc., NetSelect L.L.C.,
    and InfoTouch Corporation. (Incorporated by reference to
    Exhibit 10.06 to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.09

Stock Purchase Agreement dated
    March 16, 2002 between Experian Holdings, Inc. and
    Homestore.com®,
    Inc. (Incorporated by reference to Exhibit 2.1 to our
    Form 8-K
    filed March 19, 2002.)10.10

Distribution Agreement dated
    January 9, 2003 between America Online, Inc. and Homestore,
    Inc. (Incorporated by reference to Exhibit 10.10 to our
    annual report on
    Form 10-K
    filed March 26, 2003.)(1)10.11.1

Office Lease dated
    September 18, 1998 between RealSelect, Inc. and WHLNF Real
    Estate Limited Partnership for 225 West Hillcrest,
    Suite 100, Thousand Oaks, California. (Incorporated by
    reference to Exhibit 10.24.1 to our registration statement
    on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.11.2

First Amendment to Office Lease
    dated March 31, 1999 between RealSelect, Inc. and WHLNF
    Real Estate Limited Partnership for 225 West Hillcrest,
    Suite 100, Thousand Oaks, California. (Incorporated by
    reference to Exhibit 10.24.2 to our registration statement
    on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)10.12

Standard Office Lease Form,
    Westlake North Business Park dated March 7, 2000 between
    Westlake North Associates, LLC, and Homestore, Inc. for 30700
    Russell Ranch Road, Westlake Village, California. (Incorporated
    by reference to Exhibit 10.33 to our
    Form 10-K
    for the year ended December 31, 2000 filed April 2,
    2001.)10.13

NetSelect, Inc. 1996 Stock
    Incentive Plan. (Incorporated by reference to Exhibit 10.16
    to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)(3)10.14

NetSelect, Inc. 1999 Equity
    Incentive Plan. (Incorporated by reference to Exhibit 10.17
    to our registration statement on
    Form S-1
    (File
    No. 333-79689)
    filed May 28, 1999.)(3)10.15

Homestore.com®,
    Inc. 1999 Stock Incentive Plan. (Incorporated by reference to
    Exhibit 10.18 to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed July 27, 1999.)(3)10.16

Homestore.com®,
    Inc. 1999 Employee Stock Purchase Plan. (Incorporated by
    reference to Exhibit 10.19 to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed July 27, 1999.)(3)10.17

Homestore.com®,
    Inc. 2002 Stock Incentive Plan. (Incorporated by reference to
    Exhibit 4.04 to our registration statement on
    Form S-8
    (File
    No. 333-89172)
    filed May 24, 2002.)(3) 95




---



##### 



Number

Exhibit Title10.18

InfoTouch Corporation 1994 Stock
    Incentive Plan. (Incorporated by reference to Exhibit 10.20
    to our registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)(3)10.19

Move.com, Inc. 2000 Stock
    Incentive Plan. (Incorporated by reference to Exhibit 4.04
    to our registration statement on
    Form S-8
    (File
    No. 333-55828)
    filed February 16, 2001.)(3)10.20

Cendant Corporation Move.com Group
    1999 Stock Option Plan as assumed by Cendant Corporation from
    Move.com, Inc. and amended and restated effective as of
    March 21, 2000. (Incorporated by reference to
    Exhibit 4.05 to our registration statement on
    Form S-8
    (File
    No. 333-55828)
    filed February 16, 2001.)(3)10.21

1997 Stock Initiative Plan of
    Cendant Corporation as amended and restated through
    October 14, 1998. (Incorporated by reference to
    Exhibit 4.06 to our registration statement on
    Form S-8
    (File
    No. 333-55828)
    filed February 16, 2001.)(3)10.22

Amendment to Amended and Restated
    1997 Stock Incentive Plan of Cendant Corporation dated
    March 27, 2000. (Incorporated by reference to
    Exhibit 4.07 to our registration statement on
    Form S-8
    (File
    No. 333-55828)
    filed February 16, 2001.)(3)10.23

Amendment to Amended and Restated
    1997 Stock Incentive Plan of Cendant Corporation dated
    March 28, 2000. (Incorporated by reference to
    Exhibit 4.08 to our registration statement on
    Form S-8
    (File
    No. 333-55828)
    filed February 16, 2001.)(3)10.24

Homestore 401(k) Plan.
    (Incorporated by reference to Exhibit 10.25 to our
    registration statement on
    Form S-1/A
    (File
    No. 333-79689)
    filed June 17, 1999.)(3)10.25

Form of Indemnity Agreement
    between Homestore. Inc. and each of its directors and executive
    officers (Incorporated by reference to Exhibit 10.25 to our
    annual report on
    Form 10-K
    for the year ended December 31, 2003 filed March 15,
    2004.)(3)10.26

Employment Agreement dated
    March 6, 2002 between
    Homestore.com®,
    Inc. and W. Michael Long. (Incorporated by reference to
    Exhibit 6.01(A) to our quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2002 filed May 14,
    2002.)(3)10.27

2003 Executive Bonus Plan of W.
    Michael Long. (Incorporated by reference to Exhibit 10.1 to
    our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)(3)10.28

2005 Executive Bonus Plan of W.
    Michael Long. (Incorporated by reference to Exhibit 10.1 to
    our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.29

Employment Agreement dated
    March 6, 2002 between
    Homestore.com®,
    Inc. and Jack D. Dennison. (Incorporated by reference to
    Exhibit 6.03(A) to our quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2002 filed May 14,
    2002.)(3)10.30

2003 Executive Bonus Plan of Jack
    D. Dennison. (Incorporated by reference to Exhibit 10.2 to
    our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)(3)10.31

2005 Executive Bonus Plan of Jack
    D. Dennison. (Incorporated by reference to Exhibit 10.2 to
    our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.32

Employment Agreement dated
    March 6, 2002 between
    Homestore.com®,
    Inc. and Lewis R. Belote III. (Incorporated by reference to
    Exhibit 6.02(A) to our quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2002 filed May 14,
    2002.)(3)10.33

2003 Executive Bonus Plan of Lewis
    R. Belote III. (Incorporated by reference to
    Exhibit 10.3 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)(3)10.34

2005 Executive Bonus Plan of Lewis
    R. Belote III. (Incorporated by reference to
    Exhibit 10.4 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.35

Executive Retention and Severance
    Agreement dated April 24, 2002 between
    Homestore.com®,
    Inc. and Allan P. Merrill. (Incorporated by reference to
    Exhibit 6.06(A) to our
    Form 10-Q
    for the quarter ended March 31, 2002 filed May 14,
    2002.)(3)10.36

Memorandum dated March 29,
    2002 to Allan P. Merrill. (Incorporated by reference to
    Exhibit 6.07(A) to our
    Form 10-Q
    for the quarter ended March 31, 2002 filed May 14,
    2002.)(3)10.37

2003 Executive Bonus Plan of Allan
    P. Merrill. (Incorporated by reference to Exhibit 10.5 to
    our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 31, 2003.)(3) 96




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##### 



Number

Exhibit Title10.38

2005 Executive Bonus Plan of Allan
    P. Merrill. (Incorporated by reference to Exhibit 10.6 to
    our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.39

Executive Retention and Severance
    Agreement dated September 30, 2002 between
    Homestore.com®,
    Inc. and Allan D. Dalton. (Incorporated by reference to
    Exhibit 10.1 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2002 filed
    November 14, 2002.)(3)10.40

Offer Letter dated October 7,
    2002 between
    Homestore.com®,
    Inc. and Allan D. Dalton. (Incorporated by reference to
    Exhibit 10.2 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2002 filed
    November 14, 2002.)(3)10.41

2003 Executive Bonus Plan of Allan
    D. Dalton. (Incorporated by reference to Exhibit 10.4 to
    our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)(3)10.42

Realtor + Top Producer 2005
    Executive Bonus Plan of Allan D. Dalton. (Incorporated by
    reference to Exhibit 10.3 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.43

Executive Retention and Severance
    Agreement dated September 30, 2002 between
    Homestore.com®,
    Inc. and Michael Douglas. (Incorporated by reference to
    Exhibit 10.4 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2002 filed
    November 14, 2002.)(3)10.44

Offer Letter dated
    September 30, 2002 between
    Homestore.com®,
    Inc. and Michael R. Douglas. (Incorporated by reference to
    Exhibit 10.5 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2002 filed
    November 14, 2002.)(3)10.45

2003 Executive Bonus Plan of
    Michael R. Douglas (Incorporated by reference to
    Exhibit 10.6 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)(3)10.46

2005 Executive Bonus Plan of
    Michael R. Douglas (Incorporated by reference to
    Exhibit 10.5 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed August 5,
    2005.)(3)10.47

Stipulation and Agreement of
    Settlement between California State Teachers Retirement
    System and Homestore, Inc. dated as of August 12, 2003.
    (Incorporated by reference to Exhibit 10.7 to our quarterly
    report on
    Form 10-Q
    for the quarter ended September 30, 2003 filed
    November 13, 2003.)10.48

Settlement Agreement and Release
    dated August 5, 2003 among Homestore, Inc., Welcome
    Wagon®
    International, Inc., Cendant Corporation, Cendant Membership
    Services Holdings, Inc, Century 21 Real Estate Corporation,
    Coldwell Banker Real Estate Corporation, ERA Franchise Systems,
    Inc., NRT Incorporated, and Cendant Mortgage Corporation.
    (Incorporated by reference to Exhibit 10.1 to our quarterly
    report on
    Form 10-Q
    for the quarter ended June 30, 2003 filed August 14,
    2003.)10.49

Registration Rights Agreement
    dated August 5, 2003 among Homestore, Inc., Cendant
    Corporation and Cendant Membership Services Holdings, Inc.
    (Incorporated by reference to Exhibit 10.2 to our quarterly
    report on
    Form 10-Q
    for the quarter ended June 30, 2003 filed August 14,
    2003.)10.50

Listings License Agreement dated
    August 5, 2003 between Cendant Corporation and Homestore,
    Inc. (Incorporated by reference to Exhibit 10.3 to our
    quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2003 filed August 14,
    2003.)10.51

Source Code License and
    Maintenance Services Agreement dated August 5, 2003 between
    Homestore, Inc. and Cendant Corporation. (Incorporated by
    reference to Exhibit 10.4 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2003 filed August 14,
    2003.)10.52

Option Agreement dated
    August 5, 2003 between Cendant Membership Services
    Holdings, Inc. and Homestore, Inc. (Incorporated by reference to
    Exhibit 10.5 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2003 filed August 14,
    2003.)10.53.1

Distribution Agreement dated
    June 30, 2004 between America Online, Inc. and Homestore,
    Inc. (Incorporated by reference to Exhibit 10.1 to our
    quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2004 filed August 4,
    2004.)10.53.2

Amendment to Distribution
    Agreement dated as of October 29, 2005 between Registrant
    and America Online, Inc. (Incorporated by reference to
    Exhibit 10.1 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2005 filed
    November 9, 2005.)(4) 97




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##### 



Number

Exhibit Title10.54

Contract of Sale dated as of April
    2004 between 115 south Service Road, LLC and Welcome
    Wagon®
    International, Inc. (Incorporated by reference to
    Exhibit 10.2 to our quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2004 filed August 4,
    2004.)10.55

Asset Purchase Agreement dated
    October 6, 2004 between Homestore, Inc. and Wyld
    Acquisition Corp. (Incorporated by reference to
    Exhibit 10.1 to our quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2004 filed
    November 5, 2004.)10.56

Master Distribution Agreement
    dated February 2, 2005 among Homestore, Inc., Homestore
    Sales Company, Inc. and NRT Incorporated.(2) (4)10.57

Exclusivity Termination Agreement
    between Homestore, Inc., RealSelect, Inc.,
    REALTORS®
    Information Network, Inc. and the National Association of
    REALTORS®
    (Incorporated by reference to Exhibit 10.1 to our current
    report on
    Form 8-K
    filed April 21, 2005.)10.58

Form of Certificate of Stock
    Option Grant to Executive Officers (Incorporated by reference to
    Exhibit 10.1 to our quarterly report on
    Form 10-Q
    for the quarter ended March 31, 2005 filed May 6,
    2005.)(3)10.59

Settlement Agreement and Releases
    dated September 20, 2005 between the Company and Wolff
    (Incorporated by reference to Exhibit 10.1 to our current
    report on
    Form 8-K
    filed September 26, 2005.)10.60

Preferred Stock Purchase
    Agreement, dated November 6, 2005, by and among Homestore,
    Inc. and the Purchasers signatory thereto (Incorporated by
    reference to Exhibit 10.1 to our current report on
    Form 8-K
    filed November 7, 2005.)10.61

Stockholders Agreement, dated
    November 29, 2005, by and among Homestore, Inc., Elevation
    Partners, L.P. and Elevation Employee Side Fund, LLC.
    (Incorporated by reference to Exhibit 10.1 to our current
    report on
    Form 8-K
    filed November 30, 2005.)14.01

Homestore, Inc. Code of Conduct
    and Business Ethics. (Incorporated by reference to
    Exhibit 14.1 to our current report on
    Form 8-K
    filed March 21, 2005.)21.01

Subsidiaries of Homestore, Inc.(2)23.01

Consent of Ernst & Young
    LLP, Independent Registered Public Accounting Firm.(2)24.01

Power of Attorney (included on
    signature pages to this report).(2)31.01

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.(2)31.02

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.(2)32.01

Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.(2)32.02

Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.(2)99.01

Schedule II  Valuation
    and Qualifying Accounts.(2)     (1)
    
    Confidential treatment has been granted with respect to certain
    information in these exhibits pursuant to a confidential
    treatment request.(2)
    
    Filed herewith.(3)
    
    Denotes management contracts and compensatory plans and
    arrangements.(4)
    
    Confidential treatment has been requested with respect to
    certain information in these exhibits pursuant to a confidential
    treatment request.  Exhibits
   98




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##### 



SIGNATURES      By:
    /s/  W.
    MICHAEL LONG   Chief Executive Officer
  By:
    /s/  LEWIS
    R. BELOTE, III    Chief Financial Officer
    POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K attorneys-in-fact,
    Signature

Title

DatePrincipal Executive
    Officer:/s/  W.
    MICHAEL LONGW.
    Michael Long

Chief Executive Officer and
    Director

March 7, 2006Principal Financial Officer and
    Principal Accounting Officer:/s/  LEWIS
    R. BELOTE, IIILewis
    R. Belote, III

Chief Financial Officer

March 7, 2006 99




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##### 



Signature

Title

DateAdditional Directors:/s/  JOE
    F. HANAUERJoe
    F. Hanauer

Chairman of the Board and Director

March 7, 2006/s/  FRED
    D. ANDERSONFred
    D. Anderson

Director

March 7, 2006/s/  L.
    JOHN DOERRL.
    John Doerr

Director

March 7, 2006/s/  WILLIAM
    E. KELVIEWilliam
    E. Kelvie

Director

March 7, 2006/s/  KENNETH
    K. KLEINKenneth
    K. Klein

Director

March 7, 2006/s/  ROGER
    B. MCNAMEERoger
    B. McNamee

Director

March 7, 2006/s/  V.
    PAUL UNRUHV.
    Paul Unruh

Director

March 7, 2006/s/  BRUCE
    G. WILLISONBruce
    G. Willison

Director

March 7, 2006/s/  ALAN
    J. YASSKYAlan
    J. Yassky

Director

March 7, 2006  100