Real Estate Webmasters just assumed that they were penalized - there was no confirmation of an actual penalty. In reality many other sites suffered the same fate around the same time and came back without making any changes. It is not unusual for sites to disappear from Google for short periods - and then come back.
REW assumed that they were penalized and that penalty was for having a link directory and then expanded that theory to include reciprocal linking on their Realtor sites. If you had checked SEO forums around that time you would have found that others had also dissappeared - Google had been very unstable - and then came back the same time REW came back.
REW has no strong focus as they chase multiple areas. Google probably has a hard time trying to figure out what the focus of the site really is. Are they a web design company? Are they a real estate forum? Are they a real estate information site? Are they are blog community? Are they a real estate directory? Google likes to see some focus in my experience.
I too used to have a site that tried to be all things to all people and ranked for many different things too - web design, directory, forums, real estate in multiple areas etc. It disappeared one day and never did come back. I too assumed it was links that caused the problem but that did not seem to be the case...
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