Internet Research Lowers Real Estate Commissions
Posted on: Wednesday, 19 May 2004, 06:00 CDT
LITTLE ROCK (AP) -- Real estate and mortgage brokers have less of a hold on clients from the start of the home-buying process, according to a national study which researchers at the University of Arkansas at Little Rock helped organize.
More Americans are doing Internet research before they make their first calls when starting to buy a home - a practice that's lowered commissions in certain regions, the study concluded.
While less than 1 percent of 5 million homes bought and sold every year are closed online, the study found more than 70 percent of all home buyers start their search on the Internet.
Researchers at UALR, Syracuse University and Penn State surveyed 4,600 randomly selected real estate agents across the nation. The study was funded by the National Science Foundation.
Results showed that the traditional real estate industry sees online brokers as a threat.
Some agents are lowering their commissions and providing fewer services to customers who have researched on their own. For example, a client could choose whether to pay for services such as open houses or printed flyers.
But more people want to work with professionals the nearer they get to buying and selling a home, the report said.
People were found to enlist traditional agents for three reasons: lack of "face time" with online professionals; unwillingness to hunt for houses alone; and a perceived lack of motivation from online brokers who work on salary instead of commission.
In the future, Internet sales could grow if online companies can persuade customers that closing a home online is more convenient than filling out a great deal of paperwork, the study said.
"This research demonstrates that the Internet is changing how people look for homes, as well as how they buy and sell their homes," said Rolf Wigand, who holds the Jerry L. Maulden-Entergy Chair in the Department of Information Science at UALR. "These developments clearly show that they are changing the real estate industry and are making the residential home market more transparent."
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