Inman

Real estate trends grabbing attention

Inman News always has an eye on what trends are surfacing in the real estate industry. Each day, emerging technologies, new businesses and the latest industry statistics cross our desks. We asked our reporting team to single out the trends that stand out the most. Feel free to send feedback on what we may have overlooked to opinion@inman.com.

Here are the trends that caught our eye:

1. Minimum-service standards: Illinois passed a law to be enacted this year to require a minimum level of service from real estate brokers, and several other state Realtor associations also are investigating similar laws. The regulation puts traditional full service companies at odds with newer alternative business models that enable consumers to pay only for the realty services they want.

2. The shrinking sales commission: Downward pressure on commission continues. As consumers perform more research on their own before contacting a real estate agent, they’re negotiating lower commissions in their real estate transactions. Also, the growing number of flat-fee or discount commission brokerages is adding more competition and fueling consumer appetite for lower fees.

3. Increased bundling of services: Real estate brokerages look to grab additional revenue by establishing mortgage, title, insurance companies or partnerships with these companies. Lines are blurring between all of these services. The push for paperless transactions fits in nicely with this trend as companies with partnerships can more easily integrate technology systems with each other.

4. Increasing conflict between traditional/conventional real estate companies and alternative/low-commission real estate brokerages. Battle lines are being drawn in a number of markets. As evidenced by a large turnout at a National Association of Realtors forum earlier this month, there is a lot of interest by association membership in working out perceived kinks between traditional real estate brokerages and alternative real estate business models. The forum, titled, “Full Service and Limited Service Brokers: The Legal Challenges of Working Together,” featured a discussion of the gray areas and potential problem areas in getting these different players to cooperate.

A panelist at the forum discussed the problem of “double-duty,” in which buyer’s agents in some cases may feel the need to hop the table and work directly with a seller to assist the sale if the seller’s agent is a listing-only or limited-service agent. Low-commission and other alternative business models, meanwhile, have complained that traditional brokers have avoided their listings or reacted unfavorably to their listing and pricing strategies. Some report that they have received hate-mail and threats.

5. Online lead game heats up: More and more consumers are starting their home search on the Web and real estate companies are figuring out ways to be the first one they see when beginning that search. More real estate companies are using pay-per-click ads, search engine optimization and third-party lead generation systems such as LendingTree and HouseValues to grab their online share.

There’s a growing emphasis on the quality of leads and lead management technology at the brokerage level. Lead generation companies like Reply.com now emphasize the quality of their leads by using vigorous qualification processes before handing them off to brokers and agents. Companies like Chicago-based Katabat have built lead management platforms that enable brokers to track, qualify and distribute leads to agents and analyze the quality of leads coming from particular Web sites such as Realtor.com.

6. Brokers break up with MLSs: Increasing power struggles within Realtor-owned and operated multiple listing services have caused some large brokers to instead move to a private, broker-owned MLS–like in Chicago–or break off and form their own, like the group of brokers in Bakersfield, Calif. Some of these struggles center around data control; brokers want to make all the decisions about where their listings data is being distributed or displayed, and they want to be properly compensated for any profits made from the MLS data distribution to outside entities.

7. MLSs turn lights out on public listings Web sites: A number of Realtor-operated MLSs have closed down their public Web sites that provided a neutral place for consumers to search for-sale listings. We saw this happen this year in Chicago with the Multiple Listing Service of Northern Illinois, and in Cincinnati. Some argue that consumers could find real estate listings on the broker Web sites since they use broker reciprocity programs to display each other’s listings. But others argue that consumers prefer a neutral MLS site, and that smaller companies relied on the exposure they had on the MLS public site.

8. Online real estate companies going public: ZipRealty (Nasdaq: ZIPR) released its stock on Nov. 10 at $13 a share. ZipRealty is an online residential real estate brokerage that launched in 1999. Zip shares jumped as much as 23 percent in its first day of trading. Zip reported revenue of $44.7 million in the first nine months of 2004.

HouseValues, an online real estate lead and marketing provider, is expected to start trading soon at between $10 and $12 a share. The Bellevue, Wash.-based company reported $33.3 million in revenue for the first nine months of this year. It has applied to trade on the Nasdaq National Market under the symbol “SOLD.” HouseValues providers home seller leads through its HouseValues.com Web site and buyer leads though its JustListed.com site.

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9. Continued low interest rates for mortgages, despite several Fed rate hikes and numerous original predictions that rates would hit 7 percent by the end of the year. The Federal Reserve has raised the federal funds rate four times in five months this year to 2 percent. Meanwhile, rates on the 30-year fixed-rate mortgage averaged 5.74 last week, rates on the 15-year mortgage averaged 5.15 and rates on one-year ARMs were at 4.17, according to Freddie Mac’s latest survey.

10. Push for the automated or “paperless” home sale: Big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the home sale. Title, closing and mortgage companies and individual realty agents have picked up the pace on adoption of these systems. Technology companies are feverishly launching new products to replace old paper ways, including the ability to electronically sign documents and file them with county recorders’ offices. The mortgage and real estate industries also are making progress on establishing technology standards with groups such as MISMO (Mortgage Industry Standards Maintenance Organization) and RETS (Real Estate Technology Standards), so that more parts of the electronic transaction integrate together smoothly.

11. Rising mortgage fraud and efforts to combat it, including companies’ efforts, technology and the FBI’s increased vigilance in catching perpetrators. Fraud in real estate is a sophisticated crime that often involves dozens of people working together in a ring. Cases can take years to investigate and can result in multi-million-dollar losses for lenders. A round of fraud detection technology has emerged to help catch fraud at its earliest stages, where fake or stolen identities could be detected or people associated with past fraudulent loans can be identified.

12. Trend for MLSs to isolate or separate certain kinds of listings in some local markets. MLSs in some markets have put restrictions on exclusive-agency listings – those listings that do not require consumers to pay the listing agent a commission if they sell their home themselves. Supporters of such changes argue that such listings created confusion among agents and consumers who saw for-sale-by-owner signs at the properties, while opponents question whether such moves unfairly restrict trade.

A regional MLS in Ohio has even changed the definition of exclusive-right-to-sell listings — the most common form of listing in which listing agents are guaranteed a commission in the sale of the home. This MLS changed its policy to provide that properties cannot be listed in the MLS as exclusive-right-to-sell if a for-sale-by-owner sign is posted at the property; or if the property is listed as for-sale-by-owner in any online or printed advertisements; or if the listing broker gives the cooperating broker the authority to present offers to purchase/lease directly to the seller or lessor. Typically, the policy changes restrict specific types of listings from being marketed on Realtor.com and some other Web sites.

13. Lots of talk about serving so-called “emerging markets,” which are minority and immigrant families, widely seen as the future customers of real estate and mortgage products. Several studies released over the past year have highlighted what many in the real estate industry have been saying already: The buying power of minority and immigrant groups cannot be overlooked. The emerging markets are increasingly being seen as important to sustaining the nation’s housing market. The number of such households is expected to grow substantially, but the home-ownership rate lags the national average. That presents both opportunities and challenges for the industry. New product offerings might be needed to serve those groups effectively, as well as employees who can directly relate them.

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