Why Real Estate Agents Have Good Reason To Fear The Web

from the marginally-useful dept

There have been a number of stories lately about real estate professionals lashing out against online real estate services like Zillow and RedFin, which are seen as threats to their traditional business. A new study done by two economics professors sheds some light on why they might be feeling embattled. In an examination of the housing market in Madison, Wisc., the pair found that homes sold using brokers did not fetch sellers any additional profits after commissions were taken out. What makes Madison interesting is that it has a thriving website of for-sale-by-owner homes, so sellers there don't have to do much legwork if they want to sell on their own. This means that real estate agents may still add value in communities where such services aren't popular, but it's value that could disappear as services like RedFin startt to take hold. Thus the agents' fear seems to have a legitimate basis, and their behavior conforms nicely to the rent-seeking tactics exemplified by similarly organized professional groups.

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  1. identicon
    Chester, 5 Apr 2008 @ 3:54pm

    Real Estate and the web

    I read this post with interest as I am in architecture/construction and have a love/hate relationship with my counterparts on the agency/brokerage end.

    It seems that the issue of commission is a hot bed issue.
    The documentation involved in selling a residential home does not change whether you price the home at say $220,000 or $300,000, you still need the Purchase and Sale Agreement, Escrow Instructions, Home Inspections, etc. Needless to say, I think that the internet will help more on the buying side. There are tech savvy individuals/couples who can choose a home that they like and visit it on the weekend, then pay a flat fee to Redfin and save on the buying commission.

    I think the value/efficacy of brokers is more on the selling-end where busy couples/individuals may not have time to collect market data on home pricing or may not have much experience in marketing.

    I do see that there is a resentment towards agents some justified, some not. As the housing bubble grew, there are so many new faces in the field, many of these new agents are unfamiliar with finance/construction/title/economics. At the peak of the market, I had a Realtor (r) trying to convince me that I would be priced out of the market if I did not buy (That was in June of 2007 here in Los Angeles. Since then home prices have dropped 16-24% depending on how the statistics are manipulated :) ) and I had tried to explain to her market equilibrium of the oversupply of houses and tightening mortgage/credit markets. Her only response was "Interest rates are going up. Wouldn't you like to have a place of your own?". As I continued to discuss policies of the Fed, it was obvious that she was new, unskilled, and trying to make a quick buck. Will be interesting to see if there is a structure change to the traditional agency/brokerage model.

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