She's impeccably dressed in a blazer and pumps. With a smile frozen on her face, she guides you through yet another charming home, shrugging slightly as you point out the cracked foundation. If you don't like this one, she'll jot down your phone number and haunt you until you buckle under the pressure.
This ugly caricature has no place in Mollie Wasserman's home office, nestled on a quiet street in Medway, Mass. No pushy, face-to-face sales tactics here. Instead, a relaxed Wasserman settles down at her computer on a sunny April morning and checks e-mail from prospective buyers. She encourages clients to visit her custom-designed website and sends them instant e-mails when a new property comes on the market.
Wasserman represents a new breed of realtor, one who uses the Internet to connect with and better serve clients. While Wasserman is an enthusiastic convert to technology--70 percent of her US$6 million in gross sales in 1999 came from her website--other realtors are decidedly less welcoming of the idea. Among their chief misgivings, they fear that the Internet--with its ability to distribute information to buyers that was formerly proprietary to realtors--will chip away at their traditional 6 percent commissions or leave them behind entirely.
Yet realtors, who are 52 years old on average, can no longer ignore the Web if they want to keep up with the younger house-buying set. While close to 40 percent of home buyers now start their search online, only 1 percent of the nation's realtors generated more than 20 percent of their business online last year, according to the National Association of Realtors (NAR), a trade group based in Chicago. Furthermore, dotcom startups offering discount commissions are sprouting up, adding a new layer of competition to an already crowded field.
Global giants such as Re/Max International and Cendant Corp. are holding on to dominant positions even as the dotcoms nip at their heels in a strong market. These companies are frantically jumping on the Internet bandwagon in order to preserve their brands, pushing their agents to use technology and, in some cases, starting their own dotcoms. To arm its forces, the NAR recently kicked off a technology certification program for realtors, called ePro. And a new breed of real-estate startups are developing transaction technologies that will help agents and franchisers streamline the home-buying and selling process by putting the entire deal online, from 'click to close.'
The Web is shaking the residential real-estate industry to its foundation by tearing down the wall of secrecy surrounding the Multiple Listing Service (MLS), the nationwide network of property listings that was closed to the public for decades. Industry observers predict that as many as two-thirds of the country's realtors could soon fall by the wayside as home buyers and sellers increasingly turn to the Web instead of their agents for property listings, mortgage calculations and neighborhood crime reports. But unlike the travel or insurance businesses, where the Internet has been slaying the middlemen in droves, Wasserman is convinced that she'll survive. She and other realtors like her are betting that most consumers would rather turn to a realtor than a website when an inspection goes wrong or a deal goes haywire. And real-estate professionals are finding that customers still want a hand to hold when they're forking over their life's savings. "Buying a home is emotional," says Kristi Graning, vice president for Web services and IT marketing at Re/Max, a real-estate franchiser based in Englewood, Colo. "It's a dream, and it's personal. You need the human element."
Thousands of dotcom startups and national real-estate sites have emerged over the past year to offer listings, virtual tours and mortgage calculators, giving consumers more control and increasing efficiency in an industry once ruled by lockboxes and the old-fashioned sales pitch. Consumers going to the Internet to browse are now, in a few cases, even bidding for homes online.
Robert Moles, president and CEO of the national franchise Century 21 Real Estate Corp., based in Parsippany, N.J., says real-estate professionals will have to use technology to boost customer loyalty in order to survive. Because customers can now get so much information online, Moles says, they are going to expect more from their realtors, who in turn must expand their offerings to include helping connect power and gas utilities and providing crucial information about a new neighborhood. "This change is fundamental, cataclysmic, and it's not going away," says Moles, a 25-year veteran of the real-estate business. "The people who are able to adapt, to redefine the value equation for the consumer--those are the survivors in residential real estate, whether a big company or individual realtor."
Many industries, most notably travel, insurance and financial services, are weathering similar storms as consumers question the need for high commissions when online sites promise a wide array of services. In theory, it should be feasible to buy a home online, even if the transaction is a bit more complicated than ordering a book from Amazon.com. In practice, however, it's much harder to turn a home into a commodity. (How many other purchases can literally make people weep?) If a man's home is his castle, buying or selling one can be like crossing a shark-filled moat.
For decades, realtors had exclusive access to listings, while customers groped blindly for information. Buyers and sellers signed dozens of forms--and continue to do so--entrusting their largest investment to a battalion of agents and lawyers. National real-estate companies consolidated and flourished by building an army of realtors wielding information like clubs over an ill-informed public. Then, in the mid-1990s, something dramatic happened: The NAR put home listings online, making the information available to customers for the first time on its Realtor.com site.
With MLS listings online, entrepreneurs began following the NAR over to the Web. Hans Koch was a pioneer when he started Owners.com in 1995 for sellers who wanted to go it alone. Homeowners who want to avoid the standard 6 percent commission can list their property on the site and select from marketing and transaction packages that include virtual tours, signage and appraisals. At the same time, Realtor.com expanded its listings, putting together 95 percent of the MLS's million-plus listings in the United States and Canada, allowing customers to narrow their searches before contacting agents. Hundreds of others, including Microsoft's HomeAdvisor Technologies, HomeSeekers.com and Homes.com have since followed suit.
One consumer sold on the Web is Amy Lopez of White Plains, N.Y. "If you want to be an informed customer these days, you just have to use the Internet," says Lopez, who took advantage of the plethora of online real-estate sites when she and her husband decided to sell their home in March. "In my experience, realtors have the tendency to be pushy, so I decided to do the work myself," says Lopez, who was preparing to move her family to Syracuse, N.Y., over the summer. After perusing Real-tor.com to compare home prices, she posted ads for her house on several sites, including Owners.com. Two-and-a-half weeks later, the Lopez family accepted an offer from a woman who saw the ad on Owners.com for $280,000, $5,000 above the asking price.
Lopez acknowledges that realtors can still be useful for those moving to new cities or neighborhoods, although she won't need one because she is planning to rent in Syracuse. And she admits that not everyone wants to market their own home. That's music to the ears of full-service realtors. Brad Inman, a former real-estate journalist whose HomeGain.com allows sellers to screen agents online, argues that realtors provide valuable services for the majority, who don't have the time or inclination to sell their own home. "Selling your own home is great for the 15 percent of people who build model airplanes or give birth at home," Inman says. "But most of us don't want that. We want a professional." And the national franchises are offering extra services online to make the moving process easier. For example, Coldwell Banker Real Estate Corp.'s website features a concierge service that will help you arrange to have your new house painted and petunias planted before you move in. Owners.com recently added an Owner's Agent service that will match the buyer or seller with an agent and result in a rebate of part of the costs of the home sale.
Despite new competition, the offline real-estate leaders say they're going strong, even though most don't share revenue information. Re/Max, which is privately held, reported more than 1.2 million transactions last year, up from 1 million in 1997. This success reflects, in part at least, a booming real-estate market. When times get tough again, real-estate professionals predict they will need the Web even more to attract valued customers.
Meanwhile, dotcoms have challenges of their own. The same problems that plague traditional realtors are showing up online. Out-of-date information, poor or nonexistent photos and property descriptions that can best be described as "creative," are just as likely to be found on a dotcom as on the listing sheets offered by traditional realtors. While many sites are beefing up their offerings with online loan processing and home improvement tips, many offer less information than the Sunday newspaper listings.
And though a host of sites offer MLS listings, the NAR has joined with eBay in a fight to protect databases from copyright infringement. The NAR hopes Congress will pass a bill that would carry criminal penalties for anyone violating the rights of the original gatherer of information--in this case, the realtor. "The realtor is the one who is putting the listing and photo together," says Dennis Cronk, the NAR's president, noting that local associations make the decision whether to allow an Internet site to post their listings, created exclusively by realtors. "Pirates are extracting data they want and marketing that content. We want to see the Internet grow, but I'm deeply concerned that realtors may cease to make information available."
Dressed in army fatigues, Re/Max cofounder and chairman Dave Liniger stood before the microphone and addressed his soldiers, thousands of Re/Max agents and brokers who came to hear him speak about the "Real-Estate Wars" at the company's February convention in Las Vegas. "The new armies are the dotcoms....They've got more money than they've got brains," Liniger said as he swaggered across the stage. "The real question we have is, are these new companies allies or armies that are enemies of ours?"
Liniger has observed the transformation of the residential real-estate industry over three decades, as agents have exchanged answering services for cell phones and e-mail. He sees, as other national leaders do, that in order to survive, his agents, and Re/Max as a whole, need to transform themselves to serve a younger public before new startups take his business and erode his brand. "The battlefield conditions are chaotic, but not for the smart people," he said. "If you're not embracing technology and using it in every aspect, you're going to be retiring soon."
As Liniger rallies his troops, his CTO and Web services staff are busy working on technology strategies that will encourage Re/Max agents to get online. Like its competitors, Re/Max's website offers property search, mortgage rates, home repair services and home-buying tips similar to dotcoms. But even before the Internet rush, Re/Max had set up an online forum with Compuserve in the early '90s. That forum became Mainstreet, an extranet that now links about one-third of its 60,000 agents and provides them tips on how to download, upload and build a personal website. Mainstreet will move to an extensible markup language (XML) platform over the next 12 to 18 months, says Re/Max CTO Bruce Benham. That will allow the company to share data with business partners to find out more quickly which houses are on the market and provide instant messaging capabilities so that agents can share information.
Century 21 also has an intranet for brokers and sales associates and is part of parent Cendant's year-old global referral network. An Internet-based transaction reporting system automatically posts listings online, and the company is working on a project to launch back-office management tools that will help integrate the often fragmented business. The goal is to secure customer referrals online and offer services that will keep them coming back. "The push for change is coming from the consumer," says CEO Moles, noting that the younger Web-focused home buyers and sellers want more information quickly as well as good service. "We want to use technology to do a better job and create customers for life."
Traditional companies and franchisers, including Cendant and the smaller Keller Williams Realty, based in Austin, Texas, are also launching their own dotcoms. "I believe in the Internet," says Gary Keller, founder and chairman of the realty agency, who expects that all of his company's 5,800 agents will have e-mail and a personal website by the end of the year. But Keller considers most current online sites useless because the transaction isn't yet on the Web. He was involved in the creation and recent launch of a separate company, Homesbyauction.com, that allows registered agents to auction homes over the Internet.
Doing business at Internet speed won't be easy for an industry traditionally behind the technological curve. In 1995, when Wasserman was building her personal website as an agent for a national franchise, the only comment she got from her supervisor was: "Stop playing with computers and go sell houses." What's more, most MLS databases are operated as individual fiefdoms with no common standard for exchanging property listing information. "EDI standards for manufacturing have been around for years, but we have nothing," Re/Max's Benham notes. Without common standards, realtors from different states have been unable to exchange information electronically. For example, the MLS in California might display data in a different way than its counterpart in Colorado; a realtor from California would have a hard time helping a client moving to the Rocky Mountain state.
Over the next few years, industry players expect to see an XML-based standard for the exchange of property title, mortgage and ancillary services such as insurance and relocation assistance. And as the NAR prepares to push its ePro program, 5,000 realtors have already signed up for the online course designed to teach them how to use the Internet to market property, capture buyers and develop webpages.
The Internet is putting increasing pressure on realtors' standard commissions, as online sites offering lower rates tempt buyers and sellers. And while many realtors may soon be running screaming from the room, new technologies are being developed that, paradoxically, will help some of them survive in the Internet age by enhancing the services they offer to home buyers.
HomeAdvisor Technologies and Homestore.com have developed transaction management tools that allow agents and their clients to track via the Web the multiple steps of the sales process in real-time. (While Microsoft offers its own real-estate site, its technology is becoming available to realtors.) One of those angling for market share in transaction management is iProperty, a Bloomington, Ind.-based startup that's rolled out Chorus, a transaction management product.
Beta-tested by 400 Indiana realtors earlier this year, Chorus allows professionals to set up custom pages for each buyer or seller within an agency's website. Customers can then view homes, apply for mortgages and order inspection services, all the while checking on the status of their transaction day or night. All parties involved would be able to track the process until they arrive at a "virtual closing," shaving weeks off of a typical closing process. Using Chorus, the realtor can become a "home services agent," establishing a relationship with a customer that will continue even after the sale by providing them with additional services such as home value tracking or tips on when to refinance, according to Ari Vidali, iProperty's technology evangelist.
Another B2B contender, Homebid.com, based in Scottsdale, Ariz., is offering to host websites for traditional brokerages and is developing applications for auctioning properties online. All of these technology providers are hoping legislation recently legalizing the digital signature passed by Congress will further speed up transactions. (President Clinton has since signed the legislation.) Surrounded by her two digital cameras and a high-speed laser color printer, Wasserman sits at her computer in her home office and works at serving her customers. She clicks on an e-mail from a woman looking for a one-bedroom condo that will accept a pet and immediately creates an online action plan, insuring the new client will receive regular new listing updates by e-mail and regular mail. By signing on with Wasserman, this new client will have direct access to MLS listings, which contain town, address and price range information.
Though the realtor's role and traditional commission structure are bound to change, industry observers agree with Wasserman that the good agents aren't going away. "Technology gives me the time and ability to serve my customers well," Wasserman says. "But in the end, I have confidence people will always need me."
Having just bought a house, Senior Writer Susannah Patton hopes that pushy realtors become relics of the past. Send your thoughts to email@example.com.
FOLLOW THE MONEY
Median home price paid by a Web shopper: $138,000 Median home price paid by a non-Web shopper: $120,000 Median income of Web shopper: $69,900 Median income of non-Web shopper: $55,800 Source: National Association of Realtors TROUBLE IN THE CYBERHOOD Venture capitalists have poured millions into real-estate websites over the past year, but the startups are still hemorrhaging money from heavy spending on marketing and advertising. Most are privately held and don't release financial information, but those that have gone public show steep losses.
HomeSeekers.com, which features 850,000 listings and also hosts agent websites, said its net cash loss increased to $3.5 million for the quarter ended Dec. 31, 1999, compared with a loss of $500,000 for the same period a year earlier. Homestore.com lost $29.2 million in the first quarter ended March 31, compared with a $27.4 million loss a year earlier.
"Very few models have figured out a way to generate positive earnings on a long-term basis," says Nick Karris, a real-estate analyst at Gomez Advisors in Lincoln, Mass. "There is more and more competition, and the cost for attracting and retaining the consumer is going up."
But don't expect these sites to roll over and die. HomeSeekers.com said consumer traffic to its website reached all-time highs during the December quarter, a promising sign as the company tries to boost brand awareness. Jim J. Fowler, a senior research analyst at Thomas Weisel Partners in San Francisco, describes Homestore.com as a durable model because of its wide coverage in national listings. With at least twice as many property listings as its nearest competitor, Homestore.com is well positioned to capture a good share of the industry's estimated $200 billion in marketing and e-commerce revenues, Fowler says.
As weaker dotcoms flounder, however, analysts predict a consolidation as industry leaders harvest the best of new technologies. "Companies with established brand names, many of whom have offline presences, will be buying up the Internet pure plays," predicts Karris.