SAN FRANCISCO — When RE/MAX International founder and chairman David Liniger entered the real estate business, technology was an IBM electric typewriter with a self-correcting ribbon. And consumer access to property listings was a printed multiple listing service book — intended for agents only — that agents occasionally lent out to clients.
Now, the Internet has taken hold. But its impacts on the industry have not been as dramatic as one might expect, Liniger said during a real estate conference Wednesday.
“The Internet has not affected RE/MAX growth, profitability, share or whatever. Despite six presidencies, four major recessionals and all the technological changes that have occurred, it has not upset the apple cart,” Liniger told an audience during Inman News‘ Real Estate Conference, which draws real estate professionals and technologists from around the country.
A true adventurer who has flown in hot-air balloons and jet planes, the RE/MAX founder rattled off a top-10 list of Internet lessons learned.
Items on his list refuted some common notions about the popularity of the Internet among consumers, the value of the Internet for real estate professionals, and the usefulness of third-party intermediaries that sell leads to agents.
But Liniger also noted that the Internet is still an important tool to reach consumers, and said that RE/MAX plans to promote its Web site to consumers through extensive advertising.
Gone are the days of real estate ads with “warm friendly faces, shaking hands and a dog running around the yard” — now the message is intended to drive people to the Internet, he said.
In 1998 during very early stages of the real estate industry’s moves to online, RE/MAX embarked on a bold initiative to place all of its property listings and all of the other property listings available on Realtor.com on its Web site, Liniger recalled.
“On Dec. 5 of 1998, RE/MAX went live with 100 percent of listings that Realtor.com had — it was a firestorm that erupted overnight. We had RE/MAX listings and had every other listing that was on Realtor.com. At the time I was in Alice Springs, Australia, trying to fly a balloon around the world.”
Other real estate companies complained about the fact that RE/MAX was displaying all of the listings, and Realtor.com asked RE/MAX to stop the practice, Liniger said.
“We never lost that dream that that’s where we’d be.” In August last year the company announced the same plans — this time minus the “firestorm,” he said. “What a difference in thinking there was among (real estate professionals) in a period of eight years.”
RE/MAX International spends about $60 million in national advertising and an equal amount for regional advertising annually, and Liniger said he believes that it’s better for the company to generate leads for its franchise offices rather than rely on outside companies. He said that any company that pays “an interloper or interceptor” for real estate leads “is making a very stupid mistake,” as such intermediaries can cut deeply into agent commissions.
The best sources of leads are from repeat customers, followed by referrals, he said, adding that the Internet has surpassed newspapers in its strength as a lead generator. But, he added, “The Internet leads are colder, take longer to incubate. It doesn’t mean we don’t believe in (Internet-generated) real estate leads.” And the Internet has definitely assisted the company’s international expansion, Liniger said, as some countries lack an MLS.
A proprietary May 2006 RE/MAX survey of about 4,500 people age 25-55, 65 percent of whom are homeowners, found that two-thirds of respondents have not searched for real estate information on the Web.
The survey revealed that only a small percentage of people visited Google and Yahoo! for real estate information, Liniger said. “We found that incredibly surprising, because we thought the search engines would be much stronger. Without a doubt the Internet is costing people more money than they thought,” he said, as companies continue to advertise in traditional media while also investing in Internet advertising.
It is a myth that the Internet has changed real estate commissions, Liniger said: “That’s nonsense.” There are more than 1.2 million Realtors in the country, and the “cutthroat competition out there” has put pressure on commissions, he said. Likewise, RE/MAX and its affiliated agents have not realized any significant income gains because of the Internet, he said.
“We don’t track commissions among RE/MAX (offices). People not in the real estate business think we’re overpaid, and the reality is we’re not. I was a Realtor. I know what it’s like to spend money on advertising and not get the money back. I personally think most lawyers are overpaid.”
The Internet is often heralded as a tool of empowerment for the masses of real estate consumers, though Liniger said the Internet has a more basic role in quenching a thirst for information. “I keep hearing the word ’empowered’ — that we’re empowering the customer. The customer says, “I wanted more information. I wanted to look at more houses … save some time. What they wanted is total, full access. They wanted it 35 years ago.”
Now an industry power broker with more than 120,000 affiliated agents, RE/MAX has overcome adversity and was once considered a radical business model because of its unconventional commission structure, which awarded the lion’s share of commissions to agents. The company attracted maverick agents who wanted to be part of the revolution. “We kept stressing we were the change in the industry. Don’t be afraid to change.”
He said it takes some thick skin to stick it out with a new business model in the real estate business. “Don’t just try something. You don’t try the real estate business, ladies and gentlemen — it tries you. Just don’t quit.”
As for the current real estate market, Liniger said he doesn’t think the wild times of the past few years will completely implode. “It’s definitely going to be a downturn — (but) a slow fizzle and slow letdown rather than a bubble burst and bubble collapsing” in many markets, he said.