Buyers Need Real Estate Professionals in the Internet Marketplace

Some three out of every four buyers use the Internet to search for homes.
RISMedia
The Internet has changed but not diminished the role real estate brokers play in helping buyers close real estate transactions successfully, a former president of the National Association of Realtors® told a workshop on competition in the real estate industry sponsored by the Federal Trade Commission and the Department of Justice’s Antitrust Division.

“About three out of four buyers today use the Internet to search for homes, and those using the Internet are more likely to work with a professional than those who do not,” said Cathy Whatley, a Realtor from Jacksonville, Fla. who served as NAR president in 2003. One reason Internet buyers use professionals may be that the hardest task in today’s market is not to locate the property but to negotiate a successful purchase agreement with sellers who frequently receive multiple offers often exceeding list price and then bring the transaction to a successful close, she suggested.

“Providing buyers with information about the properties that are for sale, usually by consulting one of the nation’s 900 multiple listing services, is just one of the services real estate professionals provide. Once buyers identify the house they want to buy, they must be able to successfully negotiate a contract. If they are successful in getting their offer accepted, many other services are required in order to close the transaction. These include arranging inspections, mortgage application and approval, escrow, title insurance, coordination and scheduling of closing, ordering utilities, planning the move, etc. In most cases, participation of a broker/agent to assist the buyer throughout the process is very helpful, if not essential,” Whatley said.

Whatley also discussed the importance that the MLS plays in helping brokers serve buyers. “Without the MLS, it would be far less efficient--and therefore more time-consuming and costly—for buyers to be able to learn about all the properties available for sale in a given market,” she said. She appeared on a panel on real estate buyers.

Addressing another panel at the workshop, Lawrence Yun, a senior economist at NAR, said that real estate customers are free to choose from nearly 80,000 real estate brokerages and more than 2 million real estate licensees, about 1.2 million of whom are Realtors, who abide by the strict Realtor Code of Ethics, and are members of NAR.

“America’s real estate industry is one of the most competitive business environments in the world, characterized by low barriers to entry, intense personal client service and a results-based compensation structure,” Yun said.

“Competition is fierce. Today’s consumer is bombarded with choices on television, radio, newspapers, and the Internet. They are enticed by offers of flat fees, rebates, and other incentives. In fact, discount brokerages and many innovative business models are doing very well in today’s real estate marketplace,” he said. He said that average real estate commission, as computed by Real Trends, have dropped from 5.5% in 1998 to 5.1% in 2003.

Yun cited a recent study by researchers at Pennsylvania State University that found that consumers in 12 residential real estate markets have more information, demand more services, and have more agents and business models to choose from than ever before. The study, undertaken by Professor Steve Sawyer, suggested that increased consumer access to real estate information online is redefining how consumers engage real estate services and may be contributing to the growth of real estate markets and a high level of competition. Potential sellers are more knowledgeable about property values, alternatives and service options.

Access to multiple listing service data may be creating better consumers who demand more of their real estate agents and other value-adding service providers.

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