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If there's any lingering doubt about how the
Internet is transforming the way people buy and sell homes, here's
eye-widening proof: Marnie Azadian and her husband just moved from
Scottsdale, Ariz., into a $410,000 home in Tulsa that they bought
100% over the Internet.
They never visited Tulsa, where Marnie had accepted a job. They
never opened the front door, or a kitchen drawer. Never drove around
the neighborhood.
"I did have some moments of 'Oh my gosh, what did we just do?' "
says Azadian, 57, but no regrets about the house they'd fallen in
love with from a virtual tour. (Though her commute is a bit more of
"a pain" than it looked like on mapquest.com.)
Risky? Maybe so. But this is just a glimpse of how rapidly and
radically the Internet and other techno-gadgets are reshaping real
estate sales. Already, 80% of buyers used the Internet to help find
a home, according to the National Association of Realtors. Day by
day, new real estate tools are surfacing on the Web.
Technology is shifting knowledge and power to buyers and sellers. In
doing so, it's loosening Realtors' long-standing control of vital
information and cutting into their sales commissions. For more than
100 years, Realtors have guarded the details of homes for sale via
their multiple listing services. At least 900 regional MLS systems
exist nationwide. Unless the MLS systems become more open, unified
and technologically sophisticated, they risk being replaced by a Web
search engine.
"The Internet is a significant threat to Realtors, who in previous
decades have had iron-grip control over all necessary information
for those seeking to buy or sell a home," says Stuart G,abriel of
the University of Southern California's Lusk Center for Real Estate.
Compared with the patchwork of MLS systems, each with its own board
of directors, "The Internet search engines may be very competitive
and very efficient."
Signs of upheaval in the industry were evident by late 2005, when
the Justice Department filed an antitrust lawsuit against the
National Association of Realtors. Justice wants the Realtors to stop
letting brokers withhold for-sale listings from low-cost Internet
rivals.
The Realtors' policy is on hold. But Brian McDonald, a deputy
assistant attorney general for the antitrust division, says the
policy's restrictions still exert "a chilling effect in the market"
because some companies won't risk introducing new Internet business
strategies if they could be undercut in the future.
But even as the two sides file motions, delaying the trial, the
Internet is leveling the playing field and prodding the industry to
adapt faster than you can say, "Your honor, we'd like a recess to
consider new developments."
In just the past few months:
•Zillow.com, which created a stir last year by posting its estimated
values of millions of homes across the country, has started showing
homes for sale. In the past two months, nearly 32,000 people have
listed their homes for sale.
An additional 16,000 have put "Make Me Move" prices on their homes.
That feature lets homeowners who aren't really looking to sell put a
kind of dream price tag on their home, just in case someone wants to
make a sweet offer. Zillow says the Make Me Move prices tend to be
about 17% higher than its "zestimates," which means owners are
taking the option seriously.
•Trulia.com is asking real estate agents to post homes for sale and
has introduced "heat maps," showing the price and popularity of
sales by state, county and neighborhood.
•Google.com is trolling for real estate agent listings for its
classified-ads system, known as Google Base. The Houston Association
of Realtors, for example, announced in December it would put all of
its listings on Google.
•By the end of the month, apartment hunters will be able to use some
cellphones with GPS technology to find places to rent. From the
national database of apartments.com, customers can see a list of the
70 closest apartments from where they are standing. On cellphone
screens, they'll be able to see apartment details, floor plans, area
maps and call the manager to see the property. (Gannett, which owns
USA TODAY, also owns a stake in the parent company of apartments.com.)
This summer, the inventor of the technology, SmarterAgent.com, says
it'll launch a similar service for houses on the market.
•Forget grainy aerial photos of homes. Microsoft's Live Local lets
people use their Xbox 360 or other video-game controller to take 3D
street tours of 15 cities. The company is busy adding more
locations.
"It used to be, five or seven years ago, that our job was about
helping clients find the right home," says Pat Lashinsky of
ZipRealty, a discount brokerage. Now, "The clients are very involved
in finding their own homes; there are so many tools and ways they
can do it."
The role of the agent, which for years was mainly to bring together
buyers and sellers, increasingly is "to help clients with all of the
paperwork," Lashinsky says. Nearly one out of four buyers last year
found the home they wanted on the Internet, up from 2% a decade ago,
according to the NAR.
There's no hard data on how many people are quite as bold as the
Azadians, willing to buy a home with only a high-tech tour from
afar. But there's anecdotal evidence that more buyers are willing to
make a leap of faith in cyberspace.
Virtual tours
J.R. Crawford, an agent on Vashon Island, Wash., said she had three
buyers last year who made offers after taking virtual tours. Though
each bid was contingent on a walk-through of the home, Crawford
recalls that one buyer from Texas opened the door and said, "I know
where I'm going; you don't have to walk me through the house."
That said, buyers should beware: The quality of the information and
the tools on websites can vary dramatically. A USA TODAY test of 10
popular sites found very different results for available homes,
prices and lenders. (Chart, above.)
For now, the vast majority of home buyers still use real estate
agents, in some way, during the sales process. The Azadians said the
good telephone rapport they developed with the seller's agents in
Tulsa gave them the confidence they needed to put their trust in
technology. They sent all their documents via express mail.
But fewer buyers think they need agents to supply vital information.
Last year, 69% of buyers said their agent was a "very useful" source
of information, down from 72% the year before, according to the
Realtors association.
Sellers, likewise, are doing more work themselves, from scheduling
appraisals to holding open houses. As homeowners bear more of the
labor, and agents less, many sellers don't want to pay as much for
an agent's services. Rather than pay a traditional 6% commission,
more sellers are saving money by using agents who provide a la carte
services — such as advertising homes on the Realtors' multiple
listing service and filling out contracts.
These limited-service brokers are especially popular in high-cost
areas, like the Washington, D.C., Northern Virginia and Maryland
region, where the typical 6% commission on the average-priced home
of about $400,000 could cost the seller $24,000.
Which is why four of the top-10-producing real estate agent teams in
that area offer a la carte services, says David Charron, president
of the MRIS, the multiple listing service for the Washington area,
the largest in the country.
"That shows the business is evolving," Charron says.
Federal regulators, however, say the industry hasn't changed enough.
The Federal Trade Commission has made the Realtors' multiple listing
services in seven metro areas drop policies that hampered
limited-service brokers. The FTC is suing one MLS operator in
Michigan for rebuffing listings from limited-service brokers.
"There are more (actions) in the pipeline," says Maureen Ohlhausen,
director of the FTC's office for policy planning.
The Justice Department, meantime, is moving forward with its
antitrust case against the NAR. The Realtors are fighting back. They
argue that the broker should control the information about the
seller's home and decide how to share that information and with
whom.
Competitive pressures, though, are shrinking the number of brokers
who can afford to guard their listings from Internet rivals or a la
carte agents. Just ask Re/Max International. It was among the firms
singled out in the Justice Department's lawsuit as sounding
anti-competitive by expressing fear of the threat from
Internet-based brokers. Now, Re/Max displays all available homes for
sale on its website — even homes from low-cost Internet companies.
"The consumer is the one we really need to think of, and the
exposure for their listing," says Kristi Graning, senior vice
president of technology for Re/Max. "We encourage listings to be
exposed on as many websites as possible. … The data is already out
there. Give consumers the data, and in exchange the consumer will
give us trust and believe in our services."
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