UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                    FORM 10-Q

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                         For the quarterly period ended

                               SEPTEMBER 30, 1999

                          Commission File No. 000-27327

                              HOMESERVICES.COM INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                            41-1945806
-------------------------------                           -------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

6800 France Avenue South, Suite 600, Edina, Minnesota             55435
-----------------------------------------------------           ----------
     (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code  (612) 928-5900
                                                    --------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                   Yes                        No  X
                       ----                      ----


Former name, former address and former fiscal year, if changed since last
report.  N/A
         ---

10,422,942 shares of Common Stock, $0.01 par value, were outstanding as of
November 1, 1999.


<PAGE>


                              HOMESERVICES.COM INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

PART I:  FINANCIAL INFORMATION

                                                               PAGE NO.
ITEM 1.   Financial Statements

          Consolidated Balance Sheets..........................    3

          Consolidated Statements of Operations................    4

          Consolidated Statements of Cash Flows................    5

          Notes to Consolidated Financial Statements...........    6

ITEM 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations.....     9

PART II:  OTHER INFORMATION

ITEM 1.   Legal Proceedings....................................   21
ITEM 2.   Changes in Securities and Use of Proceeds............   21
ITEM 3.   Defaults upon Senior Securities......................   21
ITEM 4.   Submission of Matters to a Vote of Security Holders..   21
ITEM 5.   Other Information....................................   21
ITEM 6.   Exhibits and Reports on Form 8-K.....................   22

Signatures.....................................................   23

Exhibit Index..................................................   24

                                      -2-
<PAGE>
<TABLE>
<CAPTION>
                              HOMESERVICES.COM INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                            AS OF
                                                                -----------------------------
                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                   1999             1998
                                                                -------------    ------------
                                                                 (UNAUDITED)
<S>                                                               <C>              <C>
ASSETS
Current Assets:
---------------
Cash and cash equivalents .....................................   $   9,896        $   3,114
Mortgage loans held for sale and other
  receivables, net of allowance ...............................       8,266           17,320
Receivable from affiliates ....................................         200               69
Pending real estate sales contracts ...........................         598                -
Cash held in trust ............................................       9,093            7,932
Income taxes receivable .......................................       4,509            3,902
Other current assets ..........................................       3,105            2,074
                                                                  ---------        ---------
   Total current assets .......................................      35,667           34,411
                                                                  ---------        ---------

Other Assets:
-------------
Office property and equipment, net ............................      21,350           15,453
Intangible assets, net ........................................      98,888           75,122
Investment in 50% or less owned entities ......................       1,747              269
Held-to-maturity securities ...................................         849              651
Available-for-sale security ...................................         277              297
Deferred taxes ................................................          70            2,148
Other assets ..................................................         356              169
                                                                  ---------        ---------
   Total other assets .........................................     123,537           94,109
                                                                  ---------        ---------

TOTAL ASSETS ..................................................   $ 159,204        $ 128,520
                                                                  =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
--------------------
Accounts payable ..............................................   $   5,787        $   5,448
Accrued expenses ..............................................      14,937           11,345
Payable to affiliates .........................................         338              367
Cash held in trust ............................................       9,093            7,932
Current portion of long-term debt .............................         534            3,436
Other current liabilities .....................................         944            1,624
                                                                  ---------        ---------
   Total current liabilities ..................................      31,633           30,152
                                                                  ---------        ---------

Other Liabilities:
------------------
Long-term debt ................................................      68,597           58,009
Agent profit sharing ..........................................       5,463            5,074
Other noncurrent liabilities ..................................         241               91
                                                                  ---------        ---------
   Total other liabilities ....................................      74,301           63,174
                                                                  ---------        ---------

   Total liabilities ..........................................     105,934           93,326
                                                                  ---------        ---------

Commitments and contingencies (note 6)

Stockholders' Equity:
---------------------
Common stock, $0.01 par value, 38,000,000 shares authorized;
  8,235,442 and 6,778,700 shares issued and outstanding,
  at September 30, 1999 and December 31, 1998, respectively ...          82               68
Additional paid in capital ....................................      47,933           39,447
Notes receivable ..............................................        (799)            (896)
Retained earnings (accumulated deficit) .......................       6,057           (3,434)
Accumulated other comprehensive income (loss) .................          (3)               9
                                                                  ---------        ---------

   Total stockholders' equity .................................      53,270           35,194
                                                                  ---------        ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................   $ 159,204        $ 128,520
                                                                  =========        =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                              HOMESERVICES.COM INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                                             THREE MONTHS        NINE MONTHS   MAY 28, 1998
                                           ENDED SEPTEMBER 30,      ENDED         THROUGH
                                         ---------------------  SEPTEMBER 30,  SEPTEMBER 30,
                                           1999         1998        1999           1998
                                         ---------    --------  -------------  -------------
<S>                                      <C>          <C>          <C>            <C>
REVENUES:
   Commission revenue ................   $ 112,280    $ 72,130     $ 261,259      $  98,374
   Title fees ........................       6,116       5,969        16,760          8,424
   Other .............................       4,977       3,238        13,078          4,257
                                         ---------    --------     ---------      ---------
TOTAL REVENUES .......................     123,373      81,337       291,097        111,055
                                         ---------    --------     ---------      ---------

OPERATING EXPENSES:
   Commission expense ................      78,324      48,123       180,409         64,810
   Amortization of pending real estate
     sales contracts .................       2,157      10,834         2,157         15,578
   Salaries and employee benefits ....      15,829       9,942        40,101         13,463
   Occupancy .........................       4,860       3,555        13,886          4,773
   Business promotion and advertising        4,623       3,502        11,841          4,921
   Depreciation and amortization .....       2,357       1,505         6,075          2,105
   Other operating expenses ..........       6,264       5,291        17,990          7,011
                                         ---------    --------     ---------      ---------
TOTAL OPERATING EXPENSES .............     114,414      82,752       272,459        112,661
                                         ---------    --------     ---------      ---------

OTHER INCOME (EXPENSE):
   Interest income ...................         354         219           662            301
   Interest expense ..................      (1,128)       (728)       (3,211)        (1,038)
                                         ---------    --------     ---------      ---------
TOTAL OTHER INCOME (EXPENSE), NET ....        (774)       (509)       (2,549)          (737)
                                         ---------    --------     ---------      ---------

Income (loss) before income taxes ....       8,185      (1,924)       16,089         (2,343)

Income taxes (benefit) ...............       3,320        (761)        6,598           (927)
                                         ---------    --------     ---------      ---------

NET INCOME (LOSS) ....................   $   4,865    $ (1,163)    $   9,491      $  (1,416)
                                         =========    ========     =========      =========

NET INCOME (LOSS) PER SHARE:
   Basic and diluted .................   $    0.62    $  (0.17)    $    1.32      $   (0.21)
                                         =========    ========     =========      =========

Average number of  common
   shares outstanding ................       7,871       6,779         7,216          6,779
                                         =========    ========     =========      =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                              HOMESERVICES.COM INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                                   NINE MONTHS     MAY 28, 1998
                                                                      ENDED           THROUGH
                                                                  SEPTEMBER 30,    SEPTEMBER 30,
                                                                      1999             1998
                                                                  -------------    -------------
<S>                                                                  <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..............................................     $  9,491         $ (1,416)
Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:
  Depreciation and amortization ................................        6,075            2,105
  Amortization of pending real estate sales contracts ..........        2,157           15,578
  Earnings from equity method investments ......................         (843)               -
  Deferred income taxes ........................................        2,070              193
  Changes in assets and liabilities net of effects from
    purchase of subsidiaries:
    Increase in income taxes receivable ........................         (607)          (3,689)
    Decrease in mortgage loans held for sale and
      other  receivables .......................................        9,385            2,319
    Increase in other assets ...................................       (1,114)          (2,978)
    Increase (decrease) in accounts payable ....................         (590)             505
    Increase in accrued expenses ...............................        2,325            1,396
    Increase (decrease) in other liabilities ...................         (140)           3,515
  Other, net ...................................................          469             (483)
                                                                     --------         --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ......................       28,678           17,045
                                                                     --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired .................      (29,014)         (95,809)
Purchase of property and equipment .............................       (6,778)            (818)
Other investing ................................................         (344)             185
                                                                     --------         --------
NET CASH USED IN INVESTING ACTIVITIES ..........................      (36,136)         (96,442)
                                                                     --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt ......................................      (25,413)          (6,479)
Proceeds from long-term debt ...................................       31,647                -
Proceeds from capital transactions .............................        8,500           37,990
Net change in note payable to parent ...........................            -           51,149
Loan costs .....................................................         (494)            (185)
                                                                     --------         --------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................       14,240           82,475
                                                                     --------         --------

Net increase in cash and cash equivalents ......................        6,782            3,078
Cash and cash equivalents at beginning of period ...............        3,114                -
                                                                     --------         --------
Cash and cash equivalents at end of period .....................     $  9,896         $  3,078
                                                                     ========         ========
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      -5-
<PAGE>

                              HOMESERVICES.COM INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  GENERAL:

HomeServices.Com Inc. (the "Company" or "HomeServices"),  was formed on July 13,
1999,  for the  purpose of merging  with  MidAmerican  Realty  Services  Company
("MidAmerican  Realty").  On October 7, 1999 the Company merged with MidAmerican
Realty. The accompanying  financial  statements include the financial  position,
results of operations,  and cash flows of HomeServices,  MidAmerican Realty, and
its wholly-owned subsidiaries as if the Company was consolidated for all periods
presented.

In the opinion of management,  the accompanying unaudited consolidated financial
statements of HomeServices  contain all adjustments  (consisting  only of normal
recurring  accruals)  necessary to present  fairly the financial  position as of
September  30,  1999,  the  results of  operations  for the three  months  ended
September  30, 1999 and 1998,  the nine months ended  September 30, 1999 and for
the period May 28, 1998 through  September  30, 1998 and cash flows for the nine
months  ended  September  30,  1999  and for the  period  May 28,  1998  through
September  30, 1998.  The results of  operations  for periods  presented are not
necessarily indicative of the results to be expected for the full year.

Reference  is made  to the  Company's  Registration  Statement  on Form  S-1 (No
333-82997) that includes information necessary or useful to the understanding of
the Company's business and financial statement  presentations.  The accompanying
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes contained in the Registration Statement.

2.  COMPREHENSIVE INCOME:

Comprehensive  income for the three months ended September 30, 1999 and 1998 was
income of $4,878,000 and a loss of $1,163,000, respectively, for the nine months
ended  September 30, 1999 was income of  $9,479,000,  and for the period May 28,
1998 through September 30, 1998 was a loss of $1,416,000.  Comprehensive  income
differs   from  net  income  due  to  changes  in  the  fair  market   value  of
available-for-sale investment securities.

3.  LONG-TERM DEBT:

On  September  20,  1999,  HomeServices  entered  into a new $75 million  senior
secured  revolving  credit  agreement  which  replaced the then  existing  $25.0
million revolving credit facility. The senior secured revolving credit agreement
has a term of three years and is secured by a pledge of the capital stock of all
of the existing and future  subsidiaries of  HomeServices.  Amounts  outstanding
under this revolving credit facility bear interest,  at HomeServices  option, at
either the prime  lending  rate or LIBOR  plus a fixed  spread of 1.25% to 2.50%
which varies based on  HomeServices'  cash flow leverage  ratio. As of September
30, 1999, the blended  average  interest rate on the revolving  credit  facility
borrowings was 7.26%.

4.  BUSINESS ACQUISITIONS:

On July 8, 1999, the Company  acquired  substantially  all of the assets of Paul
Semonin  Realtors  ("Paul  Semonin")  for  $13.3  million.  Paul  Semonin  is  a
Louisville, Kentucky based real estate brokerage firm with 11 branch offices and
a leading market share in Louisville,  and also operates in Lexington,  Kentucky
and southern Indiana.  This transaction was accounted for as a purchase business
combination  and as such the results of  operation  of the  Company  include the
results of Paul Semonin beginning July 8, 1999.

On August 23,  1999,  the Company  acquired the stock of Roy H. Long Realty Co.,
Inc., ("Long  Realty") for $16 million.  Long Realty is a Tucson,  Arizona based
real estate  agency and brokerage  business  with 12 branch  offices in southern
Arizona.  The stock purchase agreement requires  installment payments to be made
based on certain profitability levels, and are required within 31 days after the
close of calendar  year 1999 and 2000.  The  maximum  amount  payable  under the

                                      -6-
<PAGE>

agreement is $1.5 million per year.  This  transaction  was  accounted  for as a
purchase  business  combination  and as such the  results  of  operation  of the
Company include the results of Long Realty beginning August 23, 1999.

As a result of each acquisition the Company recorded goodwill  consisting of the
excess cost over  acquired  net assets.  Acquired  goodwill  is  amortized  on a
straight line basis over 30 years.  Whenever events or changes in  circumstances
indicate  that the  carrying  amount of  goodwill  may not be  recoverable,  the
Company  reviews the  carrying  value of goodwill  for  impairment  based on the
operating cash flows (undiscounted and without interest) of the related business
unit. If the  projection of operating  cash flows over the remaining life of the
goodwill proves to be less than the carrying value of goodwill, an impairment is
recognized.  The Company did not recognize an impairment of goodwill  during the
periods reported.

The following pro forma financial information represents the unaudited pro forma
results  of  operations  as  if  the   aforementioned   acquisitions,   and  the
acquisitions  of Iowa  Realty  Co.,  Inc.  ("Iowa  Realty"),  Edina  Realty Home
Services ("Edina Realty"),  HOME Real Estate Holdings Inc. ("Home Real Estate"),
CBS Real Estate Company ("CBS Real Estate"),  J.C.  Nichols  Residential  ("J.C.
Nichols")  and Nebraska  Land Title & Abstract  Company,  had been  completed on
January 1 for each period presented,  after giving effect to certain adjustments
including  increased  amortization of goodwill  generated from the acquisitions.
These pro forma results have been prepared for comparative  purposes only and do
not purport to be indicative of the results of operations  which would have been
achieved had these  acquisitions  been completed as of January 1 of each period,
nor are the results indicative of the Company's future results of operations (in
thousands except per share amounts).

                                    NINE MONTHS              NINE MONTHS
                                       ENDED                    ENDED
                                 SEPTEMBER 30, 1999       SEPTEMBER 30, 1998
                                 ------------------       ------------------

  Revenues....................        $ 340,446                $ 295,182
  Operating expenses..........          320,251                  295,944
  Net income (loss)...........           10,141                   (2,219)

  Net income (loss) per share.        $    1.23                $   (0.27)

5.  ISSUANCE OF STOCK:

On August 8, 1999, an aggregate of 2,149 shares of common stock of HomeServices'
predecessor,  MidAmerican Realty, were issued in connection with the acquisition
of Paul Semonin  Realtors at a purchase  price of $3,955.33  per share.  The per
share  value was based on  MidAmerican  Realty's  estimated  June 30,  1999 book
value, based on preliminary financial results, which is equivalent to a purchase
price of $5.84  per  share of  HomeServices  stock  after  giving  effect to the
exchange  of  677.87  shares of  HomeServices  common  stock  for each  share of
MidAmerican Realty's common stock in the merger described in note 1.

6.  COMMITMENTS AND CONTINGENCIES:

The Company is a party to a number of lawsuits,  claims and assessments  arising
from the  operation  of its  business.  While the  results of  lawsuits or other
matters against the Company cannot be predicted with certainty,  management,  in
consultation  with  legal  counsel,  does not  expect  these  matters  to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.

The J.C. Nichols asset purchase  agreement requires  installment  payments to be
made based on certain  profitability levels achieved.  The payments are required
60 days after each close of calendar  years 1999 and 2000.  The  maximum  amount
payable  under the  agreement  is  $500,000  per year.  These  payments  will be
recorded as additional costs of acquisition.

The CBS Real Estate stock purchase  agreement  requires certain  installment and
retention  payments be made after the closing date based on agent  retention and
profitability  levels. A $250,000 payment was made in late 1998, with subsequent
net
                                      -7-
<PAGE>

payments of $200,000 made in early 1999. The final  retention  payment is not to
exceed $100,000. The required payments have been made and recorded as additional
costs of acquisition.

The Long Realty stock purchase agreement also requires  installment  payments be
made after the closing date,  based on certain  profitability  levels  achieved.
These payments are required within 31 days after the close of calendar year 1999
and 2000.  The maximum  amount  payable  under the agreement is $1.5 million per
year. These payments will be recorded as additional costs of acquisition.

7.  SUBSEQUENT EVENT:

On October 14, 1999, the Company  completed its initial public offering in which
it sold  2,187,500  newly  issued  shares  of  common  stock  and  its  majority
shareholder,  MidAmerican Energy Holdings Company ("MidAmerican Holdings"), sold
1,062,500 shares. Net proceeds to the Company were approximately $27.8 million.

On October 14, 1999, each director of HomeServices received, as compensation for
agreeing to serve as a director,  fully vested options to purchase 50,000 shares
of  common  stock at an  exercise  price  equal to  $5.89.  The  exercise  price
represents  the book value of the common  stock on June 30,  1999,  after giving
effect to the issuance of approximately  677.87 shares of  HomeServices'  common
stock in exchange for each share of common stock of MidAmerican  Realty,  in the
merger of HomeServices and MidAmerican  Realty on October 7, 1999.  HomeServices
expects to take a one-time after tax charge against net income of  approximately
$2.2 million in the fourth quarter of 1999 related to these options.

                                      -8-
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following is  management's  discussion  and analysis of certain  significant
factors  which have affected the  Company's  financial  condition and results of
operations  during  the  periods  included  in the  accompanying  statements  of
operations.

Acquisition History

HomeServices,  as successor by merger to  MidAmerican  Realty,  entered the real
estate brokerage business in May 1998 by acquiring Iowa Realty and Edina Realty,
both formerly part of AmerUs Home Services Inc. Iowa Realty operates in Iowa and
Missouri,  and Edina operates in Minnesota,  Wisconsin,  North Dakota, and South
Dakota.  HomeServices expanded its business with the purchases in August 1998 of
two established real estate brokerage firms in Omaha, Nebraska, HOME Real Estate
and CBS  Real  Estate,  which  were  merged  to form CBS HOME  Real  Estate.  In
September 1998,  HomeServices  acquired J.C. Nichols, a brokerage firm operating
in the  greater  Kansas  City area.  In  December  1998,  HomeServices  acquired
Nebraska  Land  Title &  Abstract.  In July  1999,  HomeServices  acquired  Paul
Semonin,  a  Louisville,  Kentucky  real  estate  brokerage  firm  operating  in
Louisville  and  Lexington,  Kentucky  and  southern  Indiana.  In August  1999,
HomeServices  acquired Long Realty,  a real estate  brokerage  firm operating in
Tucson and southern Arizona.

Each  acquisition  was accounted  for as a purchase  business  combination.  All
identifiable  assets acquired and liabilities assumed were assigned a portion of
the  acquisition  price  equal to their fair  value at the date of  acquisition.
Acquired identifiable assets consisted primarily of receivables and property and
equipment.  The following table displays the purchase price,  goodwill  recorded
and liabilities assumed for the above acquisitions, in thousands of dollars.

                                      PURCHASE    GOODWILL    LIABILITIES
                                       PRICE      RECORDED      ASSUMED
                                      --------    --------    -----------

   Iowa Realty and Edina Realty.....  $ 78,300    $ 54,607     $ 31,641
   Home Real Estate.................     5,200       3,145          301
   CBS Real Estate..................     5,300       3,512          637
   J.C. Nichols.....................    16,800      13,128        7,708
   Nebraska Land Title & Abstract...       800         346          273
   Paul Semonin.....................    13,300      10,177        1,783
   Long Realty......................    16,000      14,700        2,518

Overview

REVENUES.  HomeServices' commission revenue consists of sales commissions earned
by  providing  real estate  brokerage  services to customers in the purchase and
sale  of  new  and  existing  homes.  Sales  commissions  typically  range  from
approximately 5% to 7% of the sales price and may be shared between the seller's
broker and the buyer's broker.  In transactions in which  HomeServices is acting
as a broker  on  either  the buy side or the sell  side of a  transaction  and a
third-party  broker is acting as a broker on the other side of the  transaction,
HomeServices will typically share approximately 50% of the sales commission with
the other broker.  In transactions  in which  HomeServices is acting as the sole
broker,  HomeServices receives 100% of the sales commission.  Commission revenue
is recorded as revenue  upon the closing of the home sale  transaction.  For the
three and nine months ended September 30, 1999,  commission revenues represented
approximately 91% and 90%, respectively, of total revenues.

In addition, to a lesser extent, HomeServices earns fee revenue by providing the
following services:

          Mortgage origination services for which HomeServices  receives various
          fees--approximately 1% of revenues for the nine months ended September
          30, 1999;
                                     -9-
<PAGE>

          Title  services for which  HomeServices  receives a fee from the title
          insurance  underwriters  or from the home  buyer--approximately  6% of
          revenues for the nine months ended September 30, 1999;

          Escrow   and  other   closing   administrative   services   for  which
          HomeServices typically receives a fee from home  buyers--approximately
          1% of revenues for the nine months ended September 30, 1999;

          Relocation  services for corporate  customers;  franchise  services in
          which  HomeServices  provides  third parties with the right to use any
          one of its brand names in connection with the  residential  activities
          conducted by such third parties, and for which HomeServices receives a
          fee from such third parties;  and advertising  services to third-party
          providers  of  home  care  related  services  for  which  HomeServices
          receives a  fee--less  than 1% of revenues  for the nine months  ended
          September 30, 1999.

Revenue derived from title and other services is recorded as revenue at the time
that the services are performed.

A  substantial   portion  of  HomeServices'   revenues  has  been  derived  from
traditional real estate brokerage services. While HomeServices has not presently
derived any significant revenues from its E-commerce operations, it expects that
a larger  percentage of its revenues  will be derived from  services  other than
traditional  real  estate  brokerage  services  as  HomeServices   develops  its
E-commerce platform.

EXPENSES.  Commission expense represents commissions paid to HomeServices' sales
associates  and is based on a  percentage  of the  sales  commission  earned  by
HomeServices.  Typically, the percentage of the sales commission that is paid to
HomeServices'  sales  associates  will  vary  based  on such  factors  as  sales
associate  productivity  and rates that are paid to competing  associates in the
same  local or  regional  market.  The  percentage  of total  commissions  which
HomeServices  or  its  predecessor   has  paid  to  sales   associates   average
approximately  65% over the three  years ended  December  31,  1998.  Similar to
commission  revenue,  commission  expense is  recorded  as an  expense  upon the
closing of the home sale transaction.

Amortization  of pending  real estate sales  contracts  is the  expensing of the
value of real estate sales contracts that are pending when real estate brokerage
firms  are  acquired.  Upon the  acquisition  of real  estate  brokerage  firms,
HomeServices  establishes  an asset for the value of pending  real estate  sales
contracts.  HomeServices  amortized  pending real estate sales contracts for its
1998  and  1999   acquisitions   over  the  three-month   period  subsequent  to
acquisition,  reflecting the period over which HomeServices  estimates that such
contracts result in closed real estate transactions.

Each director of  HomeServices  has received,  as  compensation  for agreeing to
serve as a director,  fully vested  options to purchase  50,000 shares of common
stock at an exercise  price equal to $5.89.  The exercise  price  represents the
book value of the common  stock on June 30,  1999,  after  giving  effect to the
issuance  of  approximately  677.87  shares  of  HomeServices'  common  stock in
exchange for each share of common stock of MidAmerican  Realty, in the merger of
HomeServices and MidAmerican Realty on October 7, 1999.  HomeServices expects to
take a  one-time  after tax charge  against  net  income of  approximately  $2.2
million in the fourth quarter of 1999 related to these options.

HomeServices' office property and equipment are depreciated over their estimated
useful  lives,  which  range  from  three to 39 years  using  straight-line  and
accelerated  methods.  As of September 30, 1999,  goodwill,  net of  accumulated
amortization,  comprised  approximately  61% of  HomeServices'  total assets and
approximately  183% of  stockholder's  equity.  Goodwill arises when an acquirer
accounts for a business  acquisition under the purchase method of accounting and
the  purchase  price  exceeds  the fair  value of the  tangible  and  separately
measurable  intangible net assets of that business.  Goodwill is an accumulation
of various factors that  HomeServices  believes will lead to profits above those
that might  normally be expected from just  acquiring  the tangible  assets of a
business.  It can  reflect  different  things  for  each  business  acquisition,
including factors such as market share, name recognition,  competitive  position
and management.  HomeServices  amortizes  goodwill over its projected life of 30
years on a straight-line basis. Generally accepted accounting principles require
that this goodwill and all other intangible  assets be amortized over the period
benefited.  Amortization  represents a noncash deduction in the determination of
operating income and so reduces reported  earnings,  but it does not reduce cash
flows.

                                      -10-
<PAGE>

HomeServices,  in accordance  with  generally  accepted  accounting  principles,
analyzes  the  recoverability  of  goodwill  at  each  balance  sheet  date  and
determines at that time the recoverability of any intangible assets.  Management
has  determined  that the period of benefit to be derived  from  goodwill  is at
least 30 years.  If management had overlooked  factors  indicating  that shorter
benefit periods were appropriate for material portions of goodwill, earnings for
periods  immediately  following the  acquisition  would be overstated.  In later
years,  HomeServices  would then be burdened by the  continuing  charge  against
earnings  without  receiving  the  associated  benefits  to income  expected  by
management earlier in arriving at the consideration  paid for that business.  In
that case,  earnings in later years could even be impaired if  management  later
determines that the goodwill  period selected  earlier was not appropriate or if
management  later  determines  that goodwill is not  recoverable  as a result of
events or changes in  circumstances.  The amount of the  impairment  or writeoff
would be the  difference  between  the  goodwill  and the  present  value of the
estimated  expected  future cash flows over the remaining  life of the goodwill.
Such writeoff could adversely affect HomeServices' business, financial condition
and the market price of its common stock.

Management has reviewed all of the factors and expected  associated  future cash
flows which it considered in determining  the amount paid to acquire  companies.
Management  has concluded  that the expected  associated  future cash flows from
goodwill  will  continue  for at least 30 years and that  there was no  material
evidence to indicate  that any material  portion of the expected  benefits  from
goodwill would dissipate in a shorter period.

All other operating  expenses consist  primarily of the following:  (1) salaries
and employee benefits paid to employees,  which excludes sales  associates;  (2)
occupancy  costs,  such  as rent  and  utilities;  (3)  business  promotion  and
advertising costs; and (4) other general and administrative expenses,  including
telecommunications,  office  supplies,  professional  and  management  fees, and
corporate charges for services provided by MidAmerican Holdings.

Income tax expense  reflects  the tax effect of book income and expense for each
period presented.

RESULTS OF OPERATIONS

Results of operations of HomeServices are significantly influenced by the timing
of the entities  acquired as described above. The results of operations  reflect
the revenues and expenses of each of the entities from their respective dates of
acquisition as more fully described above under "Acquisition History."

                                      -11-
<PAGE>

HISTORICAL  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED  SEPTEMBER 30, 1999
AND 1998,  THE NINE MONTHS ENDED  SEPTEMBER 30, 1999 AND THE PERIOD MAY 28, 1998
THROUGH SEPTEMBER 30, 1998

The following table reflects  selected  information for the periods indicated in
dollars and as a percentage of total revenues.  Dollars are in thousands  except
closed transaction sides or unless otherwise noted.

<TABLE>
<CAPTION>

                                             THREE MONTHS                       NINE MONTHS           MAY 28 THROUGH
                                          ENDED SEPTEMBER 30,              ENDED SEPTEMBER 30,       SEPTEMBER 30,
                                  ------------------------------------     -------------------    -------------------
                                         1999                1998                   1999                   1998
                                  ----------------    ----------------     -------------------    -------------------


<S>                               <C>        <C>      <C>        <C>        <C>         <C>        <C>         <C>
Commission...................     $112,280   91.0%    $ 72,130   88.7%      $ 261,259   89.7%      $  98,374   88.6%
Title fees...................        6,116    5.0%       5,969    7.3%         16,760    5.8%          8,424    7.6%
Other........................        4,977    4.0%       3,238    4.0%         13,078    4.5%          4,257    3.8%
                                  --------            --------              ---------              ---------
  Total revenues.............      123,373  100.0%      81,337  100.0%        291,097  100.0%        111,055  100.0%
                                  --------            --------              ---------              ---------

Commission expense...........       78,324   63.5%      48,123   59.2%        180,409   62.0%         64,810   58.4%
Amortization of pending
  real estate contracts......        2,157    1.7%      10,834   13.3%          2,157    0.7%         15,578   14.0%
Depreciation and
  amortization...............        2,357    1.9%       1,505    1.9%          6,075    2.1%          2,105    1.9%
All other operating
  expenses...................       31,576   25.6%      22,290   27.4%         83,818   28.8%         30,168    27.2%
                                  --------            --------              ---------              ---------
Total operating expenses.....      114,414   92.7%      82,752  101.7%        272,459   93.6%        112,661   101.4%
                                  --------            --------              ---------              ---------
Operating income.............        8,959    7.3%      (1,415)  (1.7)%        18,638    6.4%         (1,606)   (1.4)%
Other income (expense), net..         (774)  (0.6)%       (509)  (0.6)%        (2,549)  (0.9)%          (737)   (0.7)%
                                  --------            --------              ---------              ---------
Income (loss) before
   income taxes..............        8,185    6.6%      (1,924)  (2.4)%        16,089    5.5%         (2,343)   (2.1)%
Income taxes (benefit).......        3,320    2.7%        (761)  (0.9)%         6,598    2.3%           (927)   (0.8)%
                                  --------            --------              ---------              ---------
Net income (loss)............     $  4,865    3.9%    $ (1,163)  (1.4)%     $   9,491    3.3%      $  (1,416)   (1.3)%
                                  ========            ========              =========              =========

Selected Statistics:
Closed transaction sides.....       23,965              17,133                57,358                 23,663
Closed transaction volume
   (in millions).............     $  3,706            $  2,414              $  8,583               $  3,268
Average home sales price.....     $  154.6            $  140.9              $  149.6               $  138.1
</TABLE>

SEASONALITY.  HomeServices' real estate brokerage business is subject to
seasonal  fluctuations because fewer home sale transactions tend to close during
the first and fourth quarters of the year. Accordingly,  revenues of some of the
brokerage firms have historically been weakest in the first and fourth quarters.
Although  commission  expense  is  variable  with  closed  transactions,   other
expenses,  such as rent, are fixed. On a consolidated  basis,  the  relationship
between  HomeServices'  expenses  and  revenues  may be subject  to  significant
fluctuation on a quarter-to-quarter basis. As a result, on a consolidated basis,
HomeServices'  operating  results and  profitability  are lower in the first and
fourth quarters relative to the remainder of the year. Accordingly, HomeServices
does not  believe  that its results of  operations  for the three or nine months
ended September 30, 1999 will be indicative of its results of operations for the
year ending December 31, 1999.

RESULTS OF OPERATIONS OF  HOMESERVICES  FOR THE NINE MONTHS ENDED  SEPTEMBER 30,
1999

REVENUES.  Total revenues for the first nine months of 1999 were $291.1 million.
Commission  revenue  accounted for 89.7% of total  revenues and was generated by
the entities  acquired by  HomeServices  in 1998 and the third  quarter of 1999.
Title fees  totaling  $16.8  million  accounted  for 5.8% of total  revenues and
included  title  revenues of the brokerage  firms and a title  services  company
acquired in December 1998.  Other revenues  include escrow and closing  revenue,
mortgage service fee income, franchise fees, relocation and referral revenue and
various other revenues.

                                      -12-
<PAGE>

COMMISSION EXPENSE.  Commission  expense  totaled $180.4  million,  or 69.1% of
commission  revenue,  for the nine months ended  September 30, 1999.  Commission
expense as a percentage of commission  revenue will vary due to sales  associate
productivity, seasonality and pay scales of the various subsidiaries.

AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS.  Upon acquiring the real
estate brokerage companies,  HomeServices  established an asset for the value of
pending real estate sales contracts.  The value of these acquired  contracts for
the 1999  acquisitions  was $2.8 million of which $2.2 million was  amortized to
expense in the third quarter of 1999. This was a noncash expense.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the first nine
months of 1999 totaled $6.1 million, which included $2.0 million of amortization
of goodwill related to the 1998 and 1999 acquisitions.

ALL OTHER OPERATING  EXPENSES.  All other operating  expenses for the first nine
months of 1999 totaled $83.8 million.  Salaries and employee benefits  accounted
for $40.1 million of the total.  Included in salaries and employee  benefits for
the 1999 nine-month  period was a higher than usual amount of medical claims and
the initiation of the sales agent stock  purchase  plan.  Also included in other
operating expenses were additional occupancy and start-up costs due to expansion
of the title business in Omaha.

OTHER INCOME (EXPENSE), NET.  Other income  (expense),  net for the first nine
months of 1999 consisted primarily of interest expense. Interest expense for the
first nine months of 1999 was $3.2 million. Interest expense in 1999 reflected a
full  nine-month  amount of  interest  related to debt used to finance  the 1998
acquisitions. Initial financing was obtained through borrowings from MidAmerican
Holdings.  In the fourth quarter of 1998,  these borrowings were refinanced with
the  proceeds of a $35.0  million  private  placement  of 7.12% senior notes and
borrowings  of $25.0 million under a revolving  credit  facility.  An additional
$8.0 million of debt was borrowed by HomeServices  from MidAmerican  Holdings in
August  1999 to  finance  the  acquisition  of Long  Realty.  Other  income  was
primarily  interest  income.  In September of 1999, the Company replaced the $25
million revolving credit facility with a $75 million facility.

INCOME TAXES (BENEFIT).  The  effective  tax rate for the  nine  months  ended
September 30, 1999, was 41.0%.

NET  INCOME  (LOSS).  Net  income  for the  first  nine  months of 1999 was $9.5
million,  reflecting  operations  of the entities  acquired in 1998 for the full
nine  month  period  in 1999  and Paul  Semonin  and Long  Realty  from  date of
acquisition  through  September 30, 1999, which  acquisition dates are disclosed
above under  "Acquisition  History." Net income included the amortization of the
value of real estate  contracts  that were pending at the date of acquisition of
Paul  Semonin and Long Realty.  Amortization  of these sales  contracts  for the
first nine  months of 1999  resulted  in a $2.2  million  non-cash  charge  that
reduced  net  income  by $1.3  million.  Net  income  excluding  the  impact  of
amortization of pending real estate sales contracts for the first nine months of
1999 was $10.8 million.

EBITDA for the nine months ended September 30, 1999 was $26.9 million. EBITDA is
defined as net income (loss) before income taxes,  and interest and other income
(expense),  net, plus  depreciation and amortization and amortization of pending
real estate sales contracts. EBITDA for HomeServices was computed as follows (in
thousands):

                                      -13-
<PAGE>

                                                             NINE MONTHS
                                                                ENDED
                                                            SEPTEMBER 30,
                                                                1999
                                                            -------------

Net income............................................       $   9,491
Income taxes..........................................           6,598
Interest and other (income) expense, net..............           2,549
                                                             ---------
Operating income......................................          18,638
  Amortization of pending real estate sales contracts.           2,157
  Depreciation and amortization ......................           6,075
                                                             ---------
     EBITDA ..........................................       $  26,870
                                                             =========

HomeServices has included information concerning EBITDA because it believes that
it is  useful  to  an  investor  in  evaluating  the  operating  performance  of
HomeServices as it compares to other companies  because this measure is a widely
accepted  financial  indicator  used by  investors  and  analysts to compare the
operating performance of companies.  While EBITDA is routinely used by investors
and analysts,  it may not  necessarily be comparable to other  similarly  titled
measures  of other  companies  due to  potential  differences  in the methods of
calculation.  EBITDA is not  intended  to  represent  cash flows for the periods
presented,  or results of  operations  in  accordance  with  generally  accepted
accounting  principles.  EBITDA  should not be  considered  in isolation or as a
substitute  for measures of  performance  prepared in accordance  with generally
accepted accounting principles.

RESULTS OF OPERATIONS OF  HOMESERVICES  FOR THE PERIOD FROM MAY 28, 1998 THROUGH
SEPTEMBER 30, 1998

The  results  of  operations   for  this  period   reflect  the   operations  of
HomeServices' consolidated subsidiaries,  Iowa Realty and Edina Realty and their
subsidiaries, for the entire period. They also include the results of operations
for Home Real  Estate,  CBS Real  Estate  and J.C.  Nichols  from  their date of
acquisition  through  September 30, 1998, which  acquisition dates are disclosed
above under "Acquisition History."

REVENUES.  Total revenues for the period were $111.1 million.  Commission
revenue from the real estate brokerage operations was $98.4 million, or 88.6% of
total revenues.  Title fees for the period were $8.4  million, or 7.6% of total
revenues.  The amount of title fees is affected by the number of  brokerage  and
mortgage refinancing transactions. The number of refinancing transactions during
the period was  favorably  affected by  interest  rates which were lower in 1998
than in 1997. Other revenues were $4.3 million, or 3.8% of total revenues. Other
revenues  include  escrow and  closing  revenue,  mortgage  service  fee income,
franchise fees, relocation and referral revenue and various other revenues.

COMMISSION EXPENSE.  Commission expense from the real estate brokerage
operations was $64.8 million, or 65.9% of commission revenue.

AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS.  Upon acquiring the real
estate brokerage companies,  HomeServices  established an asset for the value of
pending real estate sales contracts.  The value of these acquired  contracts for
the 1998 acquisitions was $18.3 million, of which $15.6 million was amortized to
expense in the period from May 28, 1998 through  September 30, 1998.  This was a
noncash expense.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the period was
$2.1 million,  of which $0.7 million was the amortization of goodwill related to
the 1998 business acquisitions.

ALL OTHER OPERATING EXPENSES.  All other  operating  expenses  for the  period
totaled $30.2 million, or 27.2% of total revenues.  All other operating expenses
included  salaries and employee  benefits of $13.5 million,  occupancy  costs of
$4.8 million,  business  promotion and advertising  expenses of $4.9 million and
other operating costs.

                                      -14-
<PAGE>

OTHER INCOME (EXPENSE), NET.  Other income  (expense)  consisted  primarily of
interest expense,  totaling $1.0 million. Initial financing for the acquisitions
was obtained through borrowings from MidAmerican Holdings. In the fourth quarter
of 1998,  most of those  borrowings were refinanced with the proceeds of a $35.0
million private  placement of 7.12% senior notes and borrowings of $25.0 million
under a revolving  credit  facility.  The other  income was  primarily  interest
income.

INCOME TAXES (BENEFIT).  The effective tax rate for the period May 28, 1998
through September 30, 1998 was 39.6%.

NET INCOME (LOSS).  HomeServices' net loss for the period from May 28, 1998
through  September  30,  1998  was  $1.4  million.  The net  loss  included  the
amortization  of the value of real estate sales  contracts  that were pending at
the date of  acquisition  for each  entity  acquired  by  HomeServices  in 1998.
Amortization  of these sales  contracts for the period May 28, 1998 to September
30, 1998 resulted in an $15.6 million  noncash charge that reduced net income by
$9.4 million.  Net income  excluding the impact of  amortization of pending real
estate sales  contracts  for the period May 28, 1998 through  September 30, 1998
was $8.0 million.

EBITDA for the period from May 28, 1998  through  September  30, 1998 was $16.1
million.  EBITDA for HomeServices was computed as follows (in thousands):

                                                          MAY 28, 1998
                                                            THROUGH
                                                          SEPTEMBER 30,
                                                               1998
                                                          -------------

Net loss .............................................      $ (1,416)
Income tax benefit....................................          (927)
Interest and other (income) expense, net..............           737
                                                            --------
Operating loss........................................        (1,606)
  Amortization of pending real estate sales contracts.        15,578
  Depreciation and amortization ......................         2,105
                                                            --------
   EBITDA ............................................      $ 16,077
                                                            ========

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

REVENUES.  Total  revenues for the three months  ended  September  30, 1999 were
$123.4  million,  an increase  of $42.0  million,  or 52%,  compared to the same
period in 1998. Commission revenue for the three months ended September 30, 1999
was $112.3 million,  an increase of $40.2 million,  or 56%, compared to the same
period in 1998.  Total closed  transactions for the three months ended September
30, 1999 were 23,965,  an increase of 6,832, or 40%, compared to the same period
in 1998.  The  increase is  primarily  due to the  inclusion of Home Real Estate
Company,  CBS Real Estate Company and J.C. Nichols for the entire period in 1999
and the  acquisition  of Paul  Semonin and Long  Realty in the third  quarter of
1999. The average home sales price  increased from $140,900 in the third quarter
of 1998 to $154,600  in the third  quarter of 1999,  an  increase  of 9.7%.  The
combination of the increase in closed  transactions  and the higher average home
sales price  resulted in a 54%  increase  in closed  transaction  volume to $3.7
billion for the three  months  ended  September  30,  1999  compared to the same
period in 1998.

Title fees for the three months ended  September 30, 1999 were $6.1 million,  an
increase  of $0.1  million,  or 2%,  compared  to the same  period in 1998.  The
increase in title fees in 1999 was due to the  acquisition of a title company in
December 1998, offset by the reduction in refinancing activity due to increasing
interest rates.

Other revenues for the three months ended  September 30, 1999 were $5.0 million,
an increase of $1.7 million,  or 54%,  compared to the same period in 1998.  The
increase is primarily due to the acquisitions during the period.

                                      -15-
<PAGE>

COMMISSION EXPENSE. Commission expense from the real estate brokerage operations
for the three months ended September 30, 1999 was $78.3 million,  an increase of
$30.2  million,  or 63%,  compared to the same period in 1998.  The  increase in
commission  expense is due to higher volume  resulting from the acquisitions and
paying a higher percentage of commission  revenue to the agents due primarily to
higher sales  associate  productivity.  Commission  expense as a  percentage  of
commission revenue increased from 66.7% for the three months ended September 30,
1998 to 69.8% for the same period in 1999.

DEPRECIATION  AND  AMORTIZATION.  Depreciation  and  amortization  for the three
months ended  September 30, 1999 was $2.4 million,  an increase of $0.9 million,
or 57%,  compared to the same period in 1998,  primarily as a result of business
acquisitions.

ALL OTHER OPERATING EXPENSES.  All other operating expenses for the three months
ended  September 30, 1999 were $31.6  million,  an increase of $9.3 million,  or
42%,  compared to the same period in 1998.  The increase is due primarily to the
inclusion  of CBS HOME Real  Estate and J.C.  Nichols  for the entire  period in
1999, the  acquisitions of Paul Semonin and Long Realty in 1999 and, to a lesser
degree,  higher activity levels at Iowa Realty and Edina Realty. As a percentage
of total revenue, all other operating expenses decreased to 25.6% from 27.4%.

OTHER  INCOME  (EXPENSE).  Other  income  (expense)  for the three  months ended
September 30, 1999 and 1998 consisted  primarily of interest  expense.  Interest
expense for the three  months  ended  September  30, 1999 was $1.1  million,  an
increase of $0.4 million,  or 55%, compared to the same period in 1998. Interest
expense in 1999  reflected a full  quarter of  interest  related to debt used to
finance the third quarter 1998 acquisitions and additional borrowings to finance
the 1999 acquisitions. Initial financing in 1998 was obtained through borrowings
from  MidAmerican  Holdings.  In the  fourth  quarter  of  1998,  most of  those
borrowings  were  refinanced  with  the  proceeds  of a  $35.0  million  private
placement of 7.12% senior notes and  borrowings  of $25.0 million under the then
existing revolving credit facility. Other income was primarily interest income.

INCOME TAXES.  The higher amount of income tax expense for the three months
ended September 30, 1999 as compared to the same period in 1998 is  primarily
the result of the difference in income before income taxes between the periods.

NET INCOME.  Net income for the three months ended  September  30, 1999 was $4.9
million,  an increase of $6.0 million  compared to the same period in 1998.  Net
income was significantly  impacted by the timing of acquisitions and the related
amortization  of pending real estate sales  contacts over the three months after
acquisition  which was $2.2  million and $10.8  million in the third  quarter of
1999 and 1998, respectively.  Net income excluding the impact of amortization of
pending  real estate sales  contracts in the third  quarter of 1999 and 1998 was
$6.1 million and $5.3 million, respectively.

EBITDA for the three months ended  September 30, 1999 and 1998 was $13.5 million
and  $10.9  million,  respectively.  The  timing of  acquisitions  significantly
impacted EBITDA. EBITDA for HomeServices was computed as follows (in thousands):

                                                         THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                        -------------------
                                                          1999      1998
                                                        -------   --------

Net income (loss).....................................  $ 4,865    $(1,163)
Income taxes (benefit)................................    3,320       (761)
Interest and other (income) expense, net..............      774        509
                                                        -------    -------
Operating income (loss)...............................    8,959     (1,415)
  Amortization of pending real estate sales contracts.    2,157     10,834
  Depreciation and amortization ......................    2,357      1,505
                                                        -------    -------
    EBITDA ...........................................  $13,473    $10,924
                                                        =======    =======

                                      -16-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

HomeServices' capital requirements consist primarily of working capital, capital
expenditures and acquisitions. Historically, HomeServices has funded its working
capital  and  capital  expenditures  using  cash and cash  equivalents  on hand.
Acquisitions  have been financed  through  borrowings under its revolving credit
facility,   the  private  placement  of  the  7.12%  senior  notes,  loans  from
MidAmerican  Holdings  and capital  contributions.  HomeServices'  cash and cash
equivalents totaled $9.9 million at September 30, 1999, compared to $3.1 million
at December  31,  1998.  On October 14,  1999,  HomeServices  closed the initial
public offering of its common stock.  Net proceeds to HomeServices from the
offering were approximately $27.8 million.

HomeServices'  cash provided by operating  activities  was $28.7 million for the
nine months ended  September  30, 1999 and $17.0  million for the period May 28,
1998 through  September 30, 1998. The most significant  adjustment to net income
(loss) for  HomeServices'  1998  periods was the  amortization  of pending  real
estate sales  contracts.  For the nine months ended  September 30, 1999,  and at
least in the near future,  depreciation  and  amortization,  including  goodwill
amortization and amortization of pending real estate sales contracts,  will be a
material  adjustment  to  reconcile  net  income  to cash  flow  from  operating
activities.

HomeServices'  cash used in investing  activities was $36.1 million for the nine
months ended  September  30, 1999 and $96.4 million for the period May 28, 1998,
through September 30, 1998.  HomeServices' cash used in investing activities for
its 1998  periods was  primarily a result of the  acquisitions  of Iowa  Realty,
Edina Realty,  Home Real Estate, CBS Real Estate and J.C. Nichols for a combined
$95.8  million,  net of cash  acquired.  HomeServices'  cash  used in  investing
activities  for its 1999 periods was primarily a result of the  acquisitions  of
Paul Semonin and Long Realty for a combined $29.0 million, net of cash acquired.

HomeServices'  cash provided by financing  activities  was $14.2 million for the
nine months ended  September 30, 1999,  and $82.5 million for the period May 28,
1998  through  September  30,  1998.  HomeServices'  cash  provided by financing
activities in each of the periods was the result of capital contributions, loans
from MidAmerican Holdings, and advances under the revolving credit agreement.

In November 1998, HomeServices issued $35.0 million of 7.12% senior notes due in
annual  increments of $5.0 million  starting in 2004, with the final payment due
in 2010.  Under the terms of the 7.12%  senior  notes and the  revolving  credit
facility described below,  HomeServices may not issue,  assume or guarantee debt
that would cause its total debt to exceed 65% of total  capitalization  and must
maintain equity capitalization of at least $25.5 million.

In May  1998,  HomeServices  entered  into a  revolving  credit  agreement  with
MidAmerican Holdings to borrow funds from time to time, primarily to support the
acquisitions.  The maximum indebtedness during the life of the agreement through
September 30, 1999, was $54.2 million. As of December 31, 1998 and September 30,
1999,  there were no  borrowings  under this  agreement.  The  interest  rate on
borrowings  is equal to the  30-day  LIBOR  rate  plus 1%,  which  was  6.40% at
September  30, 1999.  On June 24, 1999,  the  revolving  credit  agreement  with
MidAmerican   Holdings  was  amended  to  reduce  MidAmerican   Holdings'  total
commitment and HomeServices'  borrowing capacity  thereunder from $100.0 million
to $10.0 million.

Also,  in  November  1998,  HomeServices  obtained  a $25.0  million,  five-year
revolving credit facility.  On September 20, 1999,  HomeServices  entered into a
new $75 million senior secured  revolving  credit  agreement  which replaced the
then existing  $25.0  million  revolving  credit  facility.  The senior  secured
revolving  credit agreement has a term of three years and is secured by a pledge
of the  capital  stock  of  all  of the  existing  and  future  subsidiaries  of
HomeServices.  Amounts  outstanding  under this revolving  credit  facility bear
interest, at HomeServices option, at either the prime lending rate or LIBOR plus
a fixed spread of 1.25% to 2.50%,  which varies based on HomeServices' cash flow
leverage ratio.  As of September 30, 1999, the blended average  interest rate on
the revolving credit facility borrowings was 7.26%.

HomeServices  believes  that the net proceeds  that it received from its initial
public offering of common stock, together with its cash flow from operations and
borrowings under its $75 million revolving credit facility,  will be adequate to
meet

                                      -17-
<PAGE>

its needs for working  capital,  capital  expenditures,  debt  service,  planned
acquisitions  and the continued  development of its  E-commerce  platform for at
least the next year. If,  however,  net proceeds from the offering and cash flow
from operations and borrowings under  HomeServices'  revolving credit facilities
are insufficient to satisfy HomeServices' liquidity requirements, it may need to
raise additional funds through public or private  financings or the formation of
strategic  joint ventures.  HomeServices  cannot assure you that such additional
funding,  if  needed,  will be  available  on  favorable  terms,  or at all.  If
HomeServices raises additional funds in the future by issuing equity securities,
the percentage  ownership of its then current stockholders would be reduced, and
those equity  securities could be preferred  securities  having rights senior to
the common stock.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

HomeServices  is subject to changes in interest  rates  which  could  negatively
impact its business.  HomeServices'  fixed rate  long-term  debt does not expose
HomeServices to the risk of earnings loss from increased  interest  expense as a
result of  changes  in the  market  interest  rate,  because  the rate is fixed.
HomeServices  has managed its  interest  rate risk for its  variable  rate debt,
which is based on LIBOR rates,  by entering into interest rate swap  agreements.
The swap arrangements  effectively fix the interest rate for that portion of the
variable rate debt. In the future, HomeServices may continue using interest rate
swaps to reduce risk on the variable debt or, when appropriate,  may replace the
variable rate debt with fixed rate debt. As of September 30, 1999, HomeServices'
financial  positions  related to  financial  instruments  that are  sensitive to
changes in interest have not changed  materially  since  December 31, 1998 other
than the  replacement  of the variable rate credit  facility with a new variable
rate credit facility. The prior facility had expected maturities of $3.0 million
annually  in  1999,  2000,  2001 and 2002 and  $13.0  million  in 2003.  The new
facility has an expected  maturity of $31.5  million in 2002.  The interest rate
for both the prior and the new facility is based upon the 30-day LIBOR rate.

YEAR 2000 COMPLIANCE

What is  generally  known as the year 2000  computer  issue arose  because  many
existing  computer programs and embedded systems use only the last two digits to
refer to a year. Therefore,  those computer programs do not properly distinguish
between a year that begins with "20"  instead of "19".  If not  corrected,  many
computer  applications  could fail or create erroneous  results.  The failure to
correct a  material  year 2000 item  could  result in an  interruption  in, or a
failure of, certain  normal  business  activities or  operations.  Such failures
could  materially  and adversely  affect  HomeServices'  results of  operations,
liquidity and financial condition.

The year 2000 issue could  potentially  impact systems  critical to HomeServices
including  real estate  listing,  agent  support,  accounting,  vendor and agent
payment  processing,  payroll,  and loan origination  systems.  HomeServices has
performed an inventory  of its  potential  year 2000 issues and has verified the
readiness  of all of its systems  through a  systematic  process of  assessment,
remediation  and testing.  To date,  HomeServices  has incurred  $2.0 million in
costs related to addressing  the year 2000 issue.  HomeServices  does not expect
the total remaining cost of readiness to exceed $300,000.

Additionally,  HomeServices'  business  operations  are heavily  dependent  upon
service providers, most significantly  communication providers.  HomeServices is
inquiring of its material  third-party vendors and service providers,  including
multiple  listing  service  providers,  regarding  the status of their year 2000
readiness preparations.  HomeServices has completed its assessment of all of its
material  third party vendors and service  providers to determine that they have
taken actions to minimize the risk of year 2000 problems that would impede their
ability to maintain a business relationship with HomeServices. Approximately 92%
of   HomeServices'   material  third  parties  have   responded   affirmatively.
HomeServices  is continuing  to follow up with its material  third parties which
did not respond or whose  response was not adequate  enough to be  considered by
HomeServices  as affirmative  at this time. The process used to assess  material
third parties entails  obtaining  information about their year 2000 preparedness
activities via correspondence,  published reports and/or websites, and by direct
contact (in person or via telephone) as necessary for  additional  details about
their  year  2000  readiness,  supply  chain  assessment,  contingency  planning
activities and other relevant  information.  The results of each  assessment are
documented  and  returned  to  the  material   third  party  for   verification,
clarification  or  correction.  It is  important  to note  that the  purpose  of
HomeServices'  supply  chain/business  partner  assessment  initiative is not to
obtain  specific  assurances  that its  material  third  parties  are year  2000
compliant   (which  is  an   attribute  of  hardware   and   software,

                                      -18-
<PAGE>

not of  organizations),  but rather to  determine  they have  taken  appropriate
actions to minimize the risk of problems  stemming  from year 2000 problems that
would  impede   their   ability  to  maintain  a  business   relationship   with
HomeServices.  Due to  inescapable  uncertainties  about  the year  2000  issue,
HomeServices  cannot  provide  assurance  that material  third party vendors and
service providers will be unaffected by year 2000-related  problems. Any failure
by HomeServices' material third-party vendors and service providers to comply in
a timely manner could have a material adverse effect on its operations.

Year  2000  risk  scenarios  that  are  applicable  to  HomeServices  have  been
identified and written  contingency plans have been developed.  The objective of
HomeServices'  contingency planning effort is to determine the potential causes,
symptoms, triggers and effects of specific risks and to develop individual plans
in  response  to each of these  risks.  Each plan  consists  of  mitigation  and
recovery tasks to minimize  impact in the event of occurrence of a specific risk
scenario.  Scenarios  that have been  identified as  applicable to  HomeServices
include,  but are not limited to, loss of internal and  external  voice and data
communications,  inability to occupy facilities,  loss of business applications,
and  miscellaneous  business  interruptions.   Contingency  plans  developed  by
HomeServices specify staffing requirements,  preventive actions to be taken, and
transition and validation activities,  as well as recovery tasks to be exercised
in the event that year 2000 problems are  encountered  during the  transition to
2000. The  contingency  plans will be subjected to ongoing review and refinement
through the remainder of the year.

In each of HomeServices' future  acquisitions,  HomeServices intends to evaluate
the systems of the acquired  companies to determine  whether  their  systems are
year 2000  ready.  If an  acquired  company's  systems  are not year 2000 ready,
HomeServices  intends  to  prepare a plan to bring the  systems  into a state of
readiness.  While  HomeServices  cannot  guarantee you that all future  acquired
companies  will be year 2000 ready on a timely basis,  the cost of bringing such
companies  into a state of readiness is not expected to have a material  adverse
effect  on   HomeServices'   financial   condition  or  results  of  operations.
Nonetheless,  HomeServices may experience  material  unexpected costs associated
with bringing such companies into a state of readiness.

SEASONALITY

HomeServices' real estate brokerage business is subject to seasonal fluctuations
because fewer home sale  transactions  tend to close during the first and fourth
quarters of the year.  Accordingly,  revenues of some of HomeServices' operating
subsidiaries  historically  have been strongest in the second and third quarters
of the calendar year.  While  commissions are paid to sales associates only upon
the sale of a home,  many of  HomeServices'  other  expenses,  such as rent, are
fixed.  As  a  result,  on  a  consolidated  basis,  the  relationship   between
HomeServices' expenses and revenues may be subject to significant fluctuation on
a  quarter-to-quarter  basis.  HomeServices  believes its charges for occupancy,
telecommunications,  professional  fees,  data  processing,  equipment  leasing,
office expense,  corporate charges, and depreciation,  which approximated 11% of
total 1998 operating  expenses on a historical  basis, are costs that can not be
significantly reduced in the short-term during a seasonal slow down.

IMPACT OF INFLATION AND INTEREST RATE CHANGES

HomeServices' results of operations are sensitive to changes in the U.S. economy
and the economies of the markets in which it operates  and, to a lesser  extent,
interest rates,  particularly home mortgage rates.  During periods of inflation,
the value of residential real estate increases.  While increases in the value of
residential   real  estate   typically  lead  to   corresponding   increases  in
HomeServices'  commissions per transaction side, inflation typically also causes
mortgage interest rates to increase.  As mortgage  interest rates increase,  the
level  of  residential   transaction  volume  declines,   leading  to  decreased
commission  revenue and decreased revenue from the related  ancillary  services.
Additionally,  HomeServices'  title businesses receive revenues from refinancing
transactions that also decline during periods of high interest rates.

                                      -19-

<PAGE>

FORWARD-LOOKING STATEMENTS

Certain information included in this report contains forward-looking  statements
made pursuant to the Private  Securities  Litigation Reform Act of 1995 ("Reform
Act").   Such   statements   involve   substantial   risks  and   uncertainties.
Forward-looking  statements  are based on  current  expectations  and  involve a
number of known and unknown risk and  uncertainties  that could cause the actual
results or  performance  of the Company to differ  materially  from any expected
future  results or  performance,  expressed or implied,  by the  forward-looking
statements. In connection with the safe harbor provisions of the Reform Act, the
Company has  identified  important  factors that could cause  actual  results to
differ materially from such expectations,  including uncertainty with respect to
future  acquisitions,  development,  implementation  and customer  acceptance of
e-commerce services, general industry conditions and fluctuations, management of
rapid growth,  changes to regulations  and  legislation,  interest rate changes,
access to capital  and future  financings,  Year 2000  readiness,  all of which,
together  with other  matters,  are  described in detail under the caption "Risk
Factors" in the Company's  Prospectus dated October 7, 1999. The Company assumes
no responsibility to update forward-looking information contained herein.

                                      -20-
<PAGE>

PART II - OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS.
------  ------------------

     As of  September  30,  1999,  there are no  material  outstanding  lawsuits
against the Company or its subsidiaries.

ITEM 2  CHANGES IN SECURITIES AND USE OF PROCEEDS.
------  ------------------------------------------

On October 14, 1999,  HomeServices completed an initial public offering in which
it sold 2,187,500 shares of its common stock,  $0.01 par value, and its majority
stockholder, MidAmerican Holdings, sold 1,062,500 shares of HomeServices' common
stock. The managing underwriters in the offering were U.S. Bancorp Piper Jaffray
Inc. and Credit Suisse First Boston Corporation. The shares of common stock sold
in the offering were registered under the Securities Act of 1933, as amended, on
a  Registration  Statement  on Form  S-1  (the  "Registration  Statement")  (No.
333-82997).  The  Registration  Statement,  which  registered a maximum offering
price of $69,000,000 of common stock,  was declared  effective by the Securities
and Exchange Commission on October 7, 1999. All 3,250,000 shares of common stock
covered by the  Registration  Statement  were sold in the offering at a price of
$15.00 per share for gross  proceeds  of $48.75  million.  Offering  proceeds to
HomeServices,  net  of  approximately  $2.6  million  in  aggregate  underwriter
discounts and  commissions  and  approximately  $2.7 million in other  estimated
expenses, were approximately $27.8 million.

All of the net offering  proceeds  received on October 14, 1999 from the initial
public offering were used to temporarily  reduce borrowings under  HomeServices'
senior secured revolving credit agreement.  Although  HomeServices had disclosed
in the  Registration  Statement  that  it had  tentative  plans  to use  the net
proceeds  from  the  offering  for  continued   development  of  its  e-commerce
operations,  working capital and general  corporate  purposes,  by using the net
proceeds  from the  offering  to repay  borrowings  under the credit  agreement,
HomeServices  has the ability to reborrow such amount under the credit agreement
to fund its  e-commerce  development,  working  capital  and  general  corporate
purpose  activities.  None of the net offering proceeds received by HomeServices
have been or will be paid  directly  or  indirectly  to any  director,  officer,
general partner of HomeServices or their associates,  persons owning 10% or more
of  any  class  of  HomeServices'   equity   securities,   or  an  affiliate  of
HomeServices.


ITEM 3  DEFAULTS UPON SENIOR SECURITIES.
------  --------------------------------

        Not applicable.

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------  ----------------------------------------------------

         Not applicable.

ITEM 5  OTHER INFORMATION.
------  ------------------

         Not applicable.

                                      -21-

<PAGE>

ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K.
------  ---------------------------------

(A)      EXHIBITS:

Exhibits Filed Herewith
-----------------------

         Exhibit 3.1      Restated Bylaws of HomeServices.Com Inc.

         Exhibit 3.2      Amended and Restated  Certificate of Incorporation of
                          HomeServices.Com Inc.

         Exhibit 3.3      Certificate of Designation for the Series A Junior
                          Participating Preferred Stock.

         Exhibit 4.1      Rights Agreement.

         Exhibit 10.1     Registration Rights Agreement.

         Exhibit 10.2     Services Agreement.

         Exhibit 10.3     Stock Option Plan.

         Exhibit 10.4     Tax Indemnity Agreement.

         Exhibit 10.5     Amendment,   Consent  and  Waiver  Agreement  by
                          Massachusetts  Mutual Life Insurance Company,  CM Life
                          Insurance  Company  and the  Guardian  Life  Insurance
                          Company  of  America  in favor of  MidAmerican  Realty
                          Services Company dated August 27, 1999.

         Exhibit 10.6     Second  Amendment,  dated  September 15, 1999, to
                          Note Purchase Agreement dated November 1, 1998.

         Exhibit 27.1     Financial Data Schedule.


(B)      REPORTS ON FORM 8-K

         Not applicable.


                                      -22-
<PAGE>


SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                           HOMESERVICES.COM INC.
                                -----------------------------------------------
                                               (Registrant)





Date:  November 19, 1999                  /s/  Dwayne J. Coben
                                -----------------------------------------------
                                               Dwayne J. Coben
                                Senior Vice President & Chief Financial Officer


                                      -23-

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.
-----------

         Exhibit 3.1      Restated Bylaws of HomeServices.Com Inc.

         Exhibit 3.2      Amended and Restated Certificate of Incorporation of
                          HomeServices.Com Inc.

         Exhibit 3.3      Certificate of Designation for the Series A Junior
                          Participating Preferred Stock.

         Exhibit 4.1      Rights Agreement.

         Exhibit 10.1     Registration Rights Agreement.

         Exhibit 10.2     Services Agreement.

         Exhibit 10.3     Stock Option Plan.

         Exhibit 10.4     Tax Indemnity Agreement.

         Exhibit 10.5     Amendment,   Consent  and  Waiver  Agreement  by
                          Massachusetts  Mutual Life Insurance Company,  CM Life
                          Insurance  Company  and the  Guardian  Life  Insurance
                          Company  of  America  in favor of  MidAmerican  Realty
                          Services Company dated August 27, 1999.

         Exhibit 10.6     Second  Amendment,  dated  September 15, 1999, to
                          Note Purchase Agreement dated November 1, 1998.

         Exhibit 27.1     Financial Data Schedule.

                                      -24-