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Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less
Demanding consumers "Internet buyers tend to be better informed on market conditions and better prepared to act on the home they want when they start working with a realtor. Luckily for realtors, these changes don't necessarily hurt, as long as they are able to adjust to the new relationship and realize that the new-style buyers value speed and efficiency over guidance when finding a home." - E-marketer, Internet Home Buyers Changing the House Rules Thanks to the Internet and other technological innovations, more real estate information is freely available than ever before. As a result, consumers are demanding new choices, improved services, faster transactions and lower prices. According to a recent NAR survey, the number of sellers stating that they didn't want to pay a sales commission fee rose from 46 percent in 2003 to 61 percent in 2004. In 2004, 23 percent of Florida home sellers opted to sell independently without an agent, up from 14 percent in 2003 and nearly double the 14 percent national average, according to Planet Realtor. And Web-enabled consumers are demanding a high digital IQ when working with real estate professionals. In addition to being well-versed on their own industry-specific technology, real estate professionals now are expected to utilize laptops, mobile phones, digital cameras, personal digital assistants and global positioning systems to keep pace with Internet buyers and sellers. Downward pressure "If consumers are going to do their own home-shopping online, they expect to save some money, just as they would for using the self-service lane. That's why they are susceptible to online discount brokers and the new affinity companies that are promoting lower commissions if only the consumers will use their agents. These business models promote the idea to consumers that they ought to be paying less money in commissions." Realty Times Columnist Blanche Evans Traditional real estate commissions, typically around six percent of a home's selling price, are facing downward pressure from consumers and competition. Some consumers claim traditional real estate commissions don't reflect: - Today's home prices. Years ago, when median-priced homes sold for $25,000, real estate commissions were typically five percent, or $1,250. Today, with South Florida median home prices around $300,000, the cost of a six percent full-service real estate commission becomes $18,000. Some brokers even charge additional fees to cover administrative costs. When you consider that today's average homeowner sells a home every five to seven years, real estate commissions can dramatically impact your personal savings and net worth. - Owner equity. When selling properties, most homeowners calculate the cost of selling as a portion of sales price, though the commissions are paid out of owner equity. (Equity is the difference between the value of your property and amount of mortgages owed.) Consider this example: You decide to sell a property for $250,000 in which you hold 10 percent equity, or $25,000. After paying a six percent commission of $15,000, you are left with $10,000 before any applicable closing costs. In this example, the $15,000 commission is six percent of the selling price, but 60 percent of the $25,000 equity. - Services performed. Under today's commission structure, selling a $100,000 house at six percent typically costs $6,000, while selling a $500,000 house costs $30,000. Does selling the more expensive home really require five times more effort? Your cost is the same whether the agent spends one hour or 100 hours marketing your home. This is one reason many real estate consumers find fee-for-service real estate so appealing.Developing alternatives "Consumers want what they want, when they want it and will gravitate to the most cost-effective source to obtain it. Why? Because our "one-size-fits-all" approach to working with sellers and buyers is archaic and won't allow consumers to access various segments of help they need in a timely fashion. That's why .com Web start-ups are finding a receptive audience in real estate consumers and why for-sale-by-owners are burgeoning." Julie Garton-Good, Author of "Real Estate a la Carte: Selecting the Services You Need, Paying What They're Worth" Until recently, you have had few practical alternatives to the traditional full-service, full-commission real estate transaction with a broker. Most sellers paid a single commission fee for a full range of real estate services, whether they needed them or not. Now traditional real estate agencies face the challenge of identifying new services that have value to today's sophisticated online and empowered consumers. One result is an "unbundling" of traditional one-size-fits-all real estate services for consumers who want more control over real estate transactions and their associated costs. If you're willing to take on some tasks traditionally performed by agents and brokers, you could receive lower transaction costs. You might benefit from the following emerging alternatives: Fee-for-services "Consumers want assistance from real estate professionals, but don't want to pay for it in the form of traditional commissions," says a la Carte real estate Pioneer Julie Garton-Good. Garton-Good has been preaching the fee-for-services gospel for more than 20 years. As the name implies, you can choose which tasks you feel comfortable performing and hire qualified real estate professionals to do the rest. Many traditional real estate brokerages are beginning to offer a more menu-based service plan. For example, you may not mind listing your home and holding open houses, but you may want assistance with contracts and closings. One-stop shopping In response to dwindling margins and the rising costs of technology and lead generation, some real estate companies are attempting to combine traditional and Web-based services to provide consumers a single source for all their real estate needs. One-stop shopping sites generally provide or partner with lenders, insurers, title companies, real estate attorneys and others to facilitate all aspects of buying and selling. In addition, some sites are adding home-improvement and related services to stay in touch with consumers between buying and selling transactions. Web-based discounters Although many Web-based real estate companies flamed out in the dotcom era, scores of new companies have emerged to take their place. By offering targeted services such as flat-fee MLS listings, buyer rebates and AVM tools, these sites are appealing to independent buyers and sellers who prefer to take a more active role in transactions. In addition to listings, some sites also offer how-to articles and advice for those who choose to go it alone.Tradition + technology + turbulence = opportunities So, given the trends, changes and ongoing industry evolution, what can independent buyers, sellers and investors expect in this new era of real estate? ? The Web and other technologies will continue to evolve and transform the $1.3 trillion real-estate industry. Technology will continue to reduce the time, expense and complexity of manual processes, and increasingly sophisticated search and valuation tools will play a more strategic role. ? Free and low-cost real estate resources will continue to be available and even multiply on the Web. In real estate, knowledge truly is power. Consumers will try to use their power to gain more control of the real estate process and subsequently expect to be compensated in the form of reduced and fee-for-service commissions. ? The role of traditional real estate brokerages will evolve as Web-enabled consumers become more knowledgeable. This likely will trigger some restructuring and consolidation of traditional brokerages, but will also drive the development of innovative new practices targeting online and empowered consumers. Real estate professionals will focus more on promoting their local knowledge and industry expertise, while consumers will perform some buying and selling tasks on their own. ? Traditional real estate commissions and profitability levels will continue to face downward pressure from various sources. The future will be profitable for brokerages that are able to extend their core expertise of neighborhood and industry knowledge into flexible new consumer-centric offerings. ? The traditional high-touch, full-service real estate agency is evolving, not disappearing. Real estate professionals who provide exceptional service and value to their customers will always be in demand. You now can find more real estate knowledge, tools and resources on the Web than ever before, enabling you to buy and sell with increased confidence. For real estate professionals, reinventing the industry means making hard decisions, changing processes and managing new opportunities. But for consumers, reinvention in real estate is a winner, hands-down. Learn more at www.homekeys.net Charles Warnock is Marketing Communications Manager at Homexperts in Miami, Florida. Their Web site is http://www.homekeys.net. Charles writes frequently on real estate, finance, advertising and marketing communications.
MORE RESOURCES: A Swiss Home So Well Designed It Needs Just One Door The New York Times What is a beneficiary deed? And who can execute one? The Arizona Republic America’s Hottest Real Estate Market: Why Everyone Is Buying Homes in This California City Yahoo Finance How the $1.8 Billion Real-Estate Commissions Lawsuit Came to Be The Wall Street Journal Dominion takes downtown real estate holdings off the market RichmondBizSense Editorial | What’s at stake in court’s real estate ruling on fees Santa Cruz Sentinel Real Estate Transfers - Sent-trib Sentinel-Tribune Employee Spotlight: Scott Loper, Real Estate Project Manager Tampa International Airport Real Estate announce new album, tour with Milwaukee stop Radio Milwaukee Island real estate transactions - 11-29-2023 The Anna Maria Islander Navigating Today’s Real Estate Trends - Bryant-Hafizi Real Estate Magazine of Santa Clarita Whiplash of the real estate market – and taking it back to the 90's. Tahoe Daily Tribune Real Estate Experts Share Their Predictions for the 2024 Housing Market: Will Prices Finally Drop? Yahoo Finance Milwaukee Press Club: Real estate developer Tim Gokhman to ... WisPolitics.com New York City's Biggest Real Estate Loans in October The Real Deal JESCO: From energy innovations to real estate ventures The Worldfolio Wood County real estate transfers | News, Sports, Jobs Parkersburg News Real Estate: November 13 to November 17 Newport This Week Real estate transfers: Craftsman ranch in Bath with basement fit for ... Akron Beacon Journal Beyond the Headlines: How COVID Impacted Commercial Real Estate Wealth Management Three agents join Weichert real estate team | Local News ... Tullahoma News and Guardian Foster Real Estate Report: The #1 reason why real estate deals fall through Shawnee Mission Post MIG Real Estate Pays $33M for Mission Viejo Industrial Orange County Business Journal Aspen Real Estate Snapshot, Nov. 27 Aspen Daily News Worcester County real estate transfers, Sunday, Nov. 26 Worcester Telegram RESIDENTIAL REAL ESTATE: Sinderhoff Los Angeles Business Journal Mayor Jumaane Williams and Other Possibilities That Worry Real ... Commercial Observer REAL ESTATE | Charming home at 447 S. Eighth Avenue in West ... washingtoncountyinsider.com Clark County accepting bids for real estate and mineral rights plots MyWabashValley.com Wilton Real Estate Report (Nov. 17-23, 2023): Five Homes Change ... Good Morning Wilton Berks County real estate transactions for Nov. 26 Reading Eagle Headwaters Highlights: How the real estate office powers Pittsburgh ... lrp.usace.army.mil The future of real estate commissions | CU Boulder Today University of Colorado Boulder Garner family bestows real estate gift to Lyon College Heber Springs Sun-Times Real Estate Sales Include Funeral Home, $1.26M Lakewood ... Jamestown Post Journal Inside Emma Stone's Stylish Real Estate Portfolio Architectural Digest NJ real estate: Somerset County home sales My Central Jersey Glendale real estate closed sales drop less severe than Valley ... Daily Independent 20 states with the lowest real-estate property taxes Accounting Today Local Buyers Watch Real Estate Prices Drop as Seen with 4 ... frontporchnewstexas.com Canada's Real-Estate Market Stumbles as Rate Hikes Bite The Wall Street Journal East Cobb residential real estate sales, Nov. 6-10, 2023 East Cobb News Dennis Agalli, CEO of Employer Capital, Announces Expansion to Real Estate, Finance, and Affordable Housing Solutions Yahoo Finance November 17-23 Gulfport Real Estate Sales The Gabber Newspaper 3 Real Estate Stocks That Could Make You a Millionaire The Motley Fool REAL ESTATE | Papa Johns job openings for West Bend, Wi store washingtoncountyinsider.com 152 Kent units open, with pickleball courts, following Goodman hotel ... Seattle Daily Journal of Commerce Indiana Real Estate Investment and Development Company ... Lebanon Reporter Real estate broker Carlos Marquez discusses the Valley's chances ... Rio Grande Guardian Southlake business park will kick off in early 2024 The Dallas Morning News Santa Rosa: See how much real estate prices have changed last week The Santa Rosa Press Democrat Erie County real estate transactions Buffalo News Cozen O'Connor releases annual real estate survey New York Real Estate Journal Online Branford Real Estate Agents Hold Toy, Coat, Interview Outfit Drive Branford, CT Patch |
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