SEPARATION AGREEMENT AND RELEASE

Exhibit 10.17

SEPARATION AGREEMENT AND RELEASE

THIS SEPARATION AGREEMENT AND RELEASE (the "Agreement") is entered into by Clayton Lewis, President & Chief Operating Officer (hereinafter referred to as "Employee") and House Values Inc., its parent, affiliates, subsidiaries, officers, directors, and managers (hereinafter referred to as "HouseValues Inc." or "Employer").

RECITALS

A. Employee has been employed by HouseValues Inc., and Employee was terminated January 23, 2007 (the "Termination Date").

B. HouseValues Inc. wishes to offer Employee a separation package in exchange for the Employee’s agreement clarifying and resolving any disputes that may exist between the Employee and HouseValues Inc. arising out of the employment relationship and the ending of that relationship, and any continuing obligations of the parties to one another following the end of the employment relationship.

C. Each of the undersigned parties to this Agreement has had ample opportunity to review the facts and law relevant to this issue, has consulted fully and freely with competent counsel of its choice if desired, and has entered this Agreement knowingly and intelligently without duress or coercion from any source. Employee has had a reasonable time in which to consider whether he wished to sign this Agreement.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises contained below, it is agreed as follows:

Employee’s employment with HouseValues Inc. ended on January 23, 2007. Employee is not expected to have further employment duties to HouseValues Inc.

Employee will be paid his final paycheck through January 23, 2007 on February 6, 2007. Employee will also receive a lump sum for any accrued vacation hours through Termination Date, less applicable withholdings on February 6, 2007.

Employee acknowledges that HouseValues Inc. does not owe him any other compensation in the way of bonus compensation or otherwise, with the exception of any vested distribution for the 401K plan (if applicable).

In exchange for the promises contained in paragraph seven below, and execution of this Separation Agreement, HouseValues Inc. will provide Employee eleven months of base salary. This will be paid in pay period installments coinciding with HouseValues, Inc. standard payroll schedule. The first installment will be made on the first scheduled payroll after the Effective Date (date on which the Separation Agreement is executed); and,

HouseValues agrees that upon the execution of this Separation Agreement, the unvested portion of Employee’s new hire grant stock options and Employee’s January, 2007 refresher grant stock options that would have been exercisable as of the fourth quarterly vesting following Termination (as of January 23, 2007), will become vested and exercisable. Employee agrees to cancellation of all other stock option grants and therefore no acceleration of those other stock option grants, and,

Should Employee elect COBRA by completing the enrollment forms and returning them timely to the healthcare carrier, HouseValues Inc. will pay the first twelve months of COBRA premiums on a monthly basis, directly to the healthcare carrier on Employee’s behalf. Thereafter, Employee will be eligible for continuation of his coverage under the terms and conditions of COBRA, at his own expense. Employee’s COBRA effective date is February 1, 2007. HouseValues Inc. will pay premiums from February 1, 2007 through January 31, 2008 should Employee remain qualified and enrolled in COBRA during that period; and,

HouseValues Inc. agrees that it will not protest any unemployment benefits allowed to Employee, if Employee applies for such benefits.

Employee and HouseValues Inc. agree that the offer of severance pay and benefits by HouseValues Inc. to Employee described in the preceding paragraph is offered by HouseValues Inc. solely as consideration for this Agreement. In the event Employee fails to abide by the terms of this Agreement, HouseValues Inc. may elect, at its option and without waiver of other rights or remedies it may have, not to pay or provide any unpaid severance payments, and to seek to recover previously paid severance pay,

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Employee will be entitled to exercise any portion of the stock option granted to him that is vested as of the Termination Date, subject to the terms of the Company’s 1999 Stock Incentive Compensation Plan and letter agreement between the Company and Employee. It is Employee’s responsibility to be aware of the date that any vested, unexercised portion of the stock option granted to him terminates and become unexerciseable. Employee further acknowledges and agrees that under the terms of the stock option granted to Employee, no shares will vest after the Termination Date and all unvested shares will terminate as of the Termination Date.

Employee expressly reaffirms and incorporates herein as part of this Agreement the Confidential Information, Inventions, Nonsolicitation And Noncompetition Agreement, which Employee signed as part of his employment with HouseValues Inc., a copy of which was given to Employee, and which shall remain in full effect.

Employer and Employee acknowledge the requirement for public filing of Employee’s Agreement at the legally specified date for SEC purposes. Employee agrees that he will keep the terms of this Agreement (including, but not limited to