Realty Times - Internet-Savvy Real Estate Firms Will Excel

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Internet-Savvy Real Estate Firms Will Excel

by Broderick Perkins

Realty firms will narrowly avert a substantial reduction in commissions, but only if they accelerate their use of the Internet to meet the needs of ever-more plugged in home buyers.

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Major changes in the way homes are being purchased also mandate that lenders and title insurers also step up their response to the Internet-induced industry change.

So says "Changes in the Way Homes Are and Will Be Bought and Sold" is Laguna Beach, CA-based Weston Edwards & Associates, a research and consulting firm, and their third and largest biannual study of the real estate industry.

Sponsored by 33 major real estate firms, eight months of research and more than 700 one-on-one interviews resulted in a 300-page report with these key findings.

By 2000, half of all home buyers will used the Internet to help them find a home and the money to finance it, compared to 40 percent last year. Realtors, lenders and title insurance companies are struggling to catch up with the demand for Internet services.

By 2003, Internet mortgage origination will grow to only 10 percent of all originations, not more as previously expected.

Purchase mortgages have not become the Internet commodities expected, rather home buyers still follow real estate agents' lender recommendations 71 percent of the time.

Realtors who upgrade and broaden their services will remain dominant as a buyer's or seller's agent, or both, with no sharp drop in their commissions.

All-or-nothing "Realty firms" are out. "Home service businesses," offering a menu of services, are in.

Half of all sub prime lending is not mainstream and will continue to grow in importance.

When Weston surveyors asked Realtors to respond to the findings, Realtors suggested, among other things:

To retain your existing commissions realty firms need to provide more services, say to help consumers live happily in their homes, not just those services provided to help them buy homes.

Prepare for speed. Speeding up the home buying process will increase Realtors competitive edge.

Realtors' mortgage lending operations should give home buyers a choice of Internet origination, telemarketing origination and in-house loan officer origination. Lenders responding to Weston's findings said, in part:

Determine the best way to participate in Internet origination, which could be a combination of multi-lender sites, a lender's own site and auctions.

Put hand-holding in Internet origination, now considered a "faceless" operation not for the faint-of-heart consumers looking for a loan.

Include sub prime lending among loan programs to help keep customers for life. Title insurers had these remarks about Weston's findings:

Title companies as they exist today will soon be history. As real estate firms merge, add new services and grow, so must title companies to continue to compete.

Title companies must learn to handle transactions faster.

Become some title companies are better in certain markets, some form of cooperation is necessary to serve national needs. An "industry title company utility" was suggested.

Technology can provide a seamless bundling of many services and dramatically speed the process. The competitive advantage goes to those companies who implement technology best.

"Home buyers and home sellers using the Internet are performing many of the functions traditionally provided by Realtors. The study indicates, however, that the reinvention process (among real estate firms) is beginning," and real estate industry professionals should be able to meet the growing Net-based demand without losing income, said Dr. Weston Edwards.

Published: October 22, 1999

Use of this article without permission is a violation of federal copyright laws.

A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the
Deadline Newsroom.

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Today's Headlines 10/22/1999 12:00:00 AM

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