Home buyers, sellers empowered by online information
Photo by Tyler Mallory - Kimberly and Joe Cohen used the Internet to research a new house for themselves and their children, Michael (left) and Zach.
Kimberly and Joe Cohen of Elk Grove Village, Ill., sold their home in just 20 days amid a tough real estate market in 2008, and they credit advancing technology for the quick sale. Their Realtor set up a website for their home, which they could edit themselves.
And in their own search for a new house, they were able to browse online listings of homes that specifically fit their needs. It’s a big change from just a few years ago, when the only way to get a comprehensive list of homes for sale was to go to an agent’s office.
The Cohens didn’t use the Web at all when they last bought a house in 2002 — only 41 percent of home buyers back then researched purchases online, according to National Association of Realtors spokesman Walt Molony. Now 87 percent of consumers do so. “I can’t imagine anyone doing real estate shopping now without the Internet,” Kimberly says.
Thanks to technology, innovation, the recession and changes in law, the real estate industry’s been completely transformed in the past decade. Information access has empowered home buyers and sellers more than ever, changing the agent’s role from gatekeeper to guide.
“The data was the secret sauce for many years,” says Saul Klein, CEO of InternetCrusade, which administers technology certification nationwide for NAR members. “That’s all changed now.”
Consumers now enjoy more control over the buying and selling process. “Technology is opening up this whole world of possibility for what a consumer can do, and it’s making the process tremendously efficient,” says Albert Hepp, owner of BuySelf Realty and president of the American Real Estate Broker Alliance, which represents nontraditional brokers. “I have sellers who decide on Friday to sell their home, and the next morning they’re on the MLS.”
Most of the approximately 4 million homes for sale in the country can be found online, either on national advertising sites such as Realtor.com or individual broker sites – or, most likely, as many sites as possible.
For example, RE/MAX, one of the leaders in the industry, contracts with about 600 of the nation’s Multiple Listing Services to list their data, according to Marnie Blanco, RE/MAX vice president for e-business. “We’re all for having as much information as possible out there,” Blanco says. “It benefits our agents in the long run.”
Independent websites popping up over the past few years such as Zillow and Trulia, which compile nationwide data about homes – whether they’re for sale or not – have also revised the playing field. Both sites combine public records with sales information and community tools to connect buyers, sellers and agents.
Each claims to list about 75 percent of homes for sale at any given time. Although each was met with resistance from the industry at first, Zillow vice president for communications Amy Bohutinsky says that most of its listings now come from brokers or MLSs.
Despite the many technological advances, the biggest changes are yet to come as information becomes more personalized and tools more precise. By year’s end, according to Klein, potential buyers will be able to walk through a neighborhood with a GPS-enabled cell phone in hand and be fed instant information on homes for sale around them.
And Steve Cook, editor of The Reecon Advisory Report, a residential real estate newsletter, says that while the Internet has already made a big impact on listings, crucial elements like financing and closing services haven’t been affected as deeply. However, he says online tools are beginning to make these processes more user-friendly as well. “Buying a home is going to get easier, not harder,” Klein says.
With the economic downturn battering the market, sellers can use all the help they can get. Innovative business models, which move away from the standard fee of a percentage of the sale, have been around for decades but have recently picked up a larger slice of the pie.
The Consumer Federation of America says they made up about 1 percent of home sales in the mid-1990s, but NAR says 15 percent of sellers used a nontraditional broker in 2008.
David and Pat Gauck of Southport, N.C., paid a flat-fee broker $500 to list their house on the MLS and arrange showings. The home sold in August 2008 in just seven weeks — for more than the appraised price. “They saved us about $11,000,” David says.
According to Hepp, the variety of options available to customers, such as flat-fee brokers, fee-for-service or online-referral models, helps ease the economic pressure by reducing the cost of selling and buying a home for consumers. The downturn also relieves some of the tension that had existed between traditional brokers and the new business models.
“We’re seeing sellers where the flat-fee option makes the difference between selling and foreclosure,” Hepp says. “Even the Realtor who would love to have them do a traditional listing realizes that it just can’t work for that seller.”
The NAR estimates housing sales will remain slow this year. But they also predict 900,000 more sales than there would have been, thanks to the economic stimulus legislation and record-low interest rates. Conventional 30-year, fixed mortgage rates averaged 5.06 percent in the first 12 weeks of 2009, down from 6.03 percent in 2008. Home prices are at their lowest in years.
Observers say now is the best time to be buying a house, provided you can obtain a loan amid tighter lending practices. “A qualified buyer is the golden goose,” says Steve Murray, an industry consultant and editor of REAL Trends. “They can be patient. Even if they give a very low offer, the seller has to understand that this might be the only offer that comes along for months.”
Because of the shrinking market, commission rates have actually gone up, despite what most would think, since an agent who can close a sale is now a more valuable commodity than when properties sold briskly. “Somebody who can sell a house in a slow market is worth more,” Klein says.
Murray, whose real estate trade publication monitors commissions on a yearly basis, says the average rate for traditional Realtors was 5.28 percent in 2008, up from a low of 5.01 percent in 2005.
In this environment, the agents who are most able to adapt and serve their clientèle will prosper. “It’s individual real estate agents, not their business model or commission, that really matter to people,” Molony says.