IAC launched its online/offline brokerage in Portland,OR in March, is establishing its next office in Seattle, and will soon be in two other cities, according to IAC President and COO Doug Lebda, who was speaking to analysts during an earnings call. RealEstate.com, a subsidiary of Lending Tree, IAC’s big mortgage lead generation play, achieved quick results out of the gate, putting 30 houses under contract in March, while adding 12 new listings.

“We’re in testing mode,” said Lebda. “But the early results are encouraging and we’re in this for the long-term.”

The effort employs new business models for real estate. “The brokerage model we are undertaking is very different,” said Lebda. “Centrally, through the Web and call centers, you control lead flows coming in. Leads are transmitted over the phone and the Web to agents in the field.” Lebda added that “the system comes with less capital expenditure than traditional real estate models,” with “much higher conversion margins and scalability.”

Under the realestate.com model, agents stand to make much lower commissions. Agents earn a third of the total commission, compared to 50-70 percent norms in the market today. IAC keeps two-thirds — and also benefits from leads to other real estate service providers.

For agents, the tradeoffs are easier and better leads. Leads alone might have cost them a third of their commission from the likes of a Home Gain. The concept also promises that their piece of the action is derived from the full commission, usually six percent, rather than a HelpUSell-like commission, which is around 4.5 percent. It also promises a steady flow of business, and apparently, efficient operations – although I can’t figure out why it is more efficient.

In my view, IAC’s entry into brokerages is going to be controversial — especially to the 96 Top 500 brokers that are members of the Realestate.com network and provide leads for its various services. I’m also wondering whether IAC will have any luck maintaining full service commissions when the trend is going the other way. The average commission today is 5.1 percent. If commissions fall, it will be harder to convince good agents to take a smaller piece of the action. A third trend that goes against IAC is that home sellers are going a la carte with agents, and are incresingly less reliant on brokerage brands.

But if it works, IAC could be a contender. It has many things going for it, starting with the tie-ins to Lending Tree, Ask, Service Magic and Citysearch. But then…. its success would give banks a good case for changing federal legislation that keeps them out of the real estate business. It is a good question why IAC, with all its perceived advantages, should be treated any differently than Bank of America.