Consumers are demanding a range of real estate products and cost options and driving the real estate industry to a new era of specialization and segmentation, according to a work group that included real estate brokers, sales associates and consultants.
The work group, formed by a National Association of Realtors committee that is composed of Realtor association executives, also reported “conflicting consumer desires” – consumers seem to want both autonomy and personalized service in real estate transactions.
“The Consumer: Catalyst of Change,” a Realtor association report released this month that is based on the work group discussions, also noted that consumers are hungry for: “convenient online services and search tools, including full information about listed properties,” “immediate responses to their online or telephone communications,” “personal, friendly service from both the agent and the real estate company,” “a smoothly integrated transaction process with effective solutions for any hurdles along the way and no surprises at closing,” “low fees and commissions or a choice of fee packages,” and “a convincing sense that the agent and broker add value to the buying (and) selling experience.”
The report also states that “retail giants like Wal-Mart or Home Depot … dominate their sectors by offering the consumer a wider selection of choices and lower prices than their competitors. And companies that fail to respond to changing consumer preferences – even once-dominant leaders like General Motors – pay the price.”
The downward pressure on industry commissions and fees is likely to accelerate, according to members of the work group who were interviewed for the report, in part because of “a huge overcapacity of real estate professionals relative to the business.”
A one-size-fits-all real estate business model appears to be going the way of the dinosaurs, the report also states, and “brokers, agents, multiple listing services … and suppliers are successfully developing and utilizing different business models.”
Changes in technology have occurred at an even faster rate than changes in consumer behavior, according to the report, and this technology has served to empower consumers and alter their demands. It remains to be seen whether the continuing impact of the Internet on the real estate industry will be evolutionary or revolutionary, the report states.
“Today, there appear to be some online companies with the potential market reach to create revolutionary change in the real estate industry.
“Consumers are comfortable using leading auction sites to buy and sell large items – including some types of real estate. Fast, user-friendly search sites have created a new perception that any information – including data on communities, neighborhoods and properties – is instantly available and free.”
While similar reports in 2001 and 2003 focused on technological innovations and alternative real estate business models as drivers for change, the latest report “focuses on the consumer as the primary driver of change,” the report states.
Other trends and likely trends that members of the work group identified: a more diverse society, a smarter consumer, a new generation of tech-savvy buyers who want instant information, more requests for one-shop real estate services, a demand for a more efficient and transparent transaction process and cost structure, increasing industry consolidation, and a more rapid response rate to consumer inquiries.
One consultant, who is quoted in the report, said, “We have always said that real estate is a local business and one that is too personal to be done over the Internet. But there will be a certain number of transactions done over the Internet – maybe even 10 percent – in the next five years.”
A veteran agent, meanwhile, said there will continue to be a demand for the traditional model of high-quality service for a commensurate commission rate.
The report on the work group discussions also noted that consumer access to property data is a key issue for MLSs. “It is a given that property data will be available to the public in some manner so the debate is on control and content. Should a local or regional MLS allow consumers to access listing information – and retain control of the process – or simply serve as a database for brokers and their agents?”
Some working group members questioned whether changing real estate market conditions could impact alternative business models, while others said that the industry would likely continue to be populated by many types of business models.
Managing Internet leads and customer relationships today are important topics for real estate professionals, as is the growth in referral fees, according to the report. “One broker noted that more than 25 percent of all transactions now have some type of referral fee attached – a trend that could have significant consequences for their long-term profitability.”