In the days before listing information was released to the public on the Internet, receiving full service from a licensed Realtor used to be about the only way for buyers and sellers to transact a home. Information was closely guarded by the real estate community, and the only alternative for consumers was to represent themselves. The advance of the discount e-broker has changed the paradigm. The question is how much?

The release of information on the Internet was originally endorsed by the National Association of Realtors to accomplish three important objectives - create a revenue stream for the publication of listings to be used to empower the Realtor community; save Realtors money in marketing costs (and reduce/share the power of newspapers to charge outlandish ad rates;) and to stimulate the desire for home ownership in people who enjoy window-shopping on the 'Net.

Although competition quickly eliminated paid posting of listings, what was not anticipated, although it should have been, is that the Internet-empowered consumer (IPC) would push for reduced fees, based on such beliefs as they "found the home themselves on the Web." Like spoiled children, the IPC is oblivious to the considerable platform design, hardware and software costs, and training undertaken by the Realtor associations, the MLS organization, the brokers, and the agents, not to mention the cooperative effort involved with third-party service providers, in order to post "free" listing information on the Internet.

Nevertheless, consumer demand for reduced service fees, as evidenced by the success of some online airline ticket and stock trading services did drive the idea for an alternative way of doing business, and now the traditional Realtor faces new, and possibly healthy, competition from the e-commerce sector.

With about 70 percent or more of home buyers looking at homes and related services on the Internet, according to research by Realtor.com, new business models are emerging which are impacting traditional brokerage. The new e-brokers are not only offering reduced fees to consumers and employing brokers and agents as salaried employees, they are also creating dot com one-stop-shops with title, escrow, lending, and other services. They are becoming online loan originators. They are embracing transaction management platforms. They are, in short, turning the traditional real estate business model upside down.

How the e-discounters got a foot in the door

The National Association of REALTORS is the only organization to do research on the topic to date, but their findings in the homebuyer-seller survey of 1998 are that about four out of five homes are sold by a Realtor. But, at the same time, more sellers are attempting to sell their own homes, according to the unpublished infamous A.D.Little survey. Most sellers capitulate and end up hiring a Realtor, but fewer are doing so, according to the soon-to-be-released homebuyer-seller survey.

Although the desire for more control on the part of sellers may be a reflection of the hot seller's market that has gripped the country over the last three years, it can also be assumed that for a variety of reasons, sellers are more confident about trying to sell their own homes themselves or with limited services by a broker. The reasons are many.

1. It's been well documented that Realtors are an aging population. According to some studies they are as much as 20 years older than the average home buyer. These younger people grew up with computers and are used to the Internet. They don't follow traditions and are not brand loyal. They like to be in control, the exact opposite of the traditional real estate model in which the consumer places themselves in the hands of the trusted Realtor. The generation gap is awkward for many of these consumers, so they are more likely to be open to a new kind of brokerage business model - the e-broker.

2. Sellers are also aging. The boomer is the bellwether player of the home-selling population. These sellers may have transacted as many as four or five times, so they are confident of their experience. Knowing the drill, they are less intimidated by the selling and buying process than first-timers and are more likely to attempt to sell homes themselves or again, with limited support and costs.

3. The real estate community has done little to inspire confidence in buyers or sellers except at the individual level. While the N.A.R. spends millions to improve the media image of Realtors, the organization continues to support business practices which are confusing to customers at best and at worst, raise legal issues.

Real estate is the only agency-oriented business in which industry leaders endorse transactional agency, or agency devoid of fiduciary responsibility. It is this fact to which most distrust of Realtors by consumers can be traced. Until the industry embraces full disclosures of the types of representation that are possible, and/or makes single agency a viable alternative, Realtors will continue to rank low on the public's trust-o-meter. Witness the unscrupulous agent portrayed by Annette Bening in "American Beauty" and listen to the slight in Billy Crystal's "screwed by a real estate agent," remarks, broadcast at the Academy Awards 2000 to over 60 million people across the world. As long as Realtors are a conniving Hollywood stereotype, many consumers will seriously consider other means of buying or selling a home besides working with an agent.

4. The market during the last four years has improved across the nation, resulting in the highest levels of homeownership in history. Many areas are enjoying such a boon, that homes are selling at unprecedented rates. In January 2000, the N.A.R. announced that home inventories were at an all time low of three months on hand nationwide. Under these conditions, sellers become more confident that they can find buyers as easily as professionals.

At the risk of inviting constraint of trade suits, the traditional real estate industry has no other choice than to grin and bear the e-discounters and figure out ways to compete with them. Ultimately the consumer will have the power to make or break the discount or fee-for-service business model. Either they will embrace it or they won't, but the question is how much will they support it and what will the consequences be for them and the industry?

Part II -" How Much Will Fee-for-service Be Embraced by the Public?" will run tomorrow.

Published: May 5, 2000

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

Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.