The lead-follow-or-get-out-of-the-way mantra that ushered in the information age in the real estate industry could be costing professionals money if they haven't kept up with the times.

The Internet has allowed consumers to harness the market power to foster increased competition, which among other things, has changed the way some agents do business and forced some to lower commissions in many regions of the country.

The findings are based on a survey of 4,600 randomly selected real estate agents whose responses are recorded in "Towards Friction-Free Work: a Multi-method Study of the Use of Information Technology in the Real Estate Industry," a long-winded title for an extensive independent national study by information technology and business researchers at the University of Arkansas at Little Rock, Syracuse University, and Penn State.

The study's findings include:

• An agent might agree to sell a house for a 4.5 percent rather than 7 percent commission.

• Along with lowered commissions, traditional agents are "unbundling" their services to keep up with the real or perceived online competition. Agents may allow the consumer to choose additional services like open houses or printed flyers for an additional fee, instead of providing all services for a flat commission or fee.

• The traditional real estate industry acknowledges that online brokers and agents are a threat, especially since more than 70 percent of all home buyers begin their search for a new home on the Internet.

Funded by the National Science Foundation, in cooperation with the National Association of Realtors, the report is nevertheless a mixed bag conceding that consumers, while doing much more of the initial legwork to buy a home, still want to interact with traditional real estate professionals. That's especially true in the latter stages of buying and selling a home.

Competition from the new Internet real estate business is not what many expected. Less than 1 percent of the 5 million homes bought and sold each year are closed online.

Still, the industry's traditional sector should be concerned, the report says.

The paper-laden process of closing a home is an online gold waiting to be mined by companies with the resources to make it so. Goldman Sachs and FrontLine Capital are already using resources to move into online real estate and that means more consumers soon could bypass traditional agents, brokers and lenders, the report says.

For the industry, the academic report is an eerie reminder of the warnings in real estate consulting and management guru Stefan Swanepoel's "Real Estate Confronts..." series which began in the late 1990s.

"In the year 2000, the Internet is primarily a marketing medium. By the year 2003, it will redefine how we do business," Swanepoel said after the third "Real Estate Confronts The e-Consumer" published in 2000.

That hasn't rung completely true.

Real estate professionals still have ample time to get their electronic docs in a row because, while consumers have largely been the major information technology benefactors thus far, the industry itself still hasn't fully awakened to technology's clarion call.

"There was a time when it was assumed that agents would be 'disintermediated' -- bypassed -- as buyers and sellers find each other on the World Wide Web," said Dr. Rolf Wigand, a chairman in ULAR's Department of Information Science who represented ULAR in the report.

"The previous information monopoly on the Multiple Listing Service (MLS), for instance, has been broken, giving the consumer the freedom to search the MLS and web-based market alone. But technology has not entirely replaced personal interaction with agents," he added.

It remains a costly and tedious process for the industry to fully render transactions in the electronic ether and a primary culprit is financing.

Consumer Reports recently called online mortgage shopping "more annoying than using a bank" and cited a litany of online mortgage applications problems including delays, misleading claims, pressure tactics and unnecessary risks to personal financial information. And, unlike what consumers may find in their real estate agent's office, online mortgage interest rates often were not competitive bargains.

The academic study also found factors that keep consumers from turning completely to Internet agents: they still need hand holding which often is unavailable from online agents and brokers.

"Buying a new home, typically coupled with a move to a new city -- the average American family moves every 7.5 years -- is a rather turbulent and stressful life event," said Wigand.

"Agents can make the move less stressful, offering help that can't be found on the Web..."

Published: May 21, 2004

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.