Noelle K
USA Today
Marnie Azadian and husband Hratch bought their house in Tulsa after viewing it online, something more buyers are willing to try.
The Azadians with their German shepherds, Amber, bottom, and Tristan. Marnie Azadian says her commute is more of a “pain” that it appeared when the couple used only the Internet in scouting their home. By Robert S. Cross for USA TODAY
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.”
