Q&A: Study Shows Practitioners Adapt Well to Technology
Real estate professionals have embraced the evolution of technology in the industry, maintaining their vital role within transactions.
June 1, 2004
How is technology impacting real estate practices and careers? As lead investigator in a research project funded by the National Science Foundation, Rolf Wigand, Ph.D., an endowed chair in the University of Arkansas at Little Rock’s CyberCollege, has spent part of the past five years gathering answers.
Based on a combination of field interviews, surveys, and discussions with real estate professionals, he and colleagues Kevin Crowston, Ph.D., a professor at the School of Information Studies at Syracuse University, and Steve Sawyer, Ph.D., a professor at the School of Information Sciences and Technology at Pennsylvania State University, have just published their findings in a final report, Towards Friction-Free Work: A Multi-Method Study of the Use of Information Technology in the Real Estate Industry.
The report reaffirms what real estate practitioners have known for years—that technology, far from disintermediating practitioners, has solidified their place in the transaction. Wigand recently took time to discuss their research and its implications.
What was the purpose of this research project?
WIGAND: Our focus is on how the use of information and communication technologies (ICT) is changing ways real estate professionals conduct their work and on organizational and industry-wide changes resulting from this increased reliance on ICT.
Why focus on real estate?
WIGAND: As an information-intensive business, real estate is a good example the role ICT can play in a changing industry.
Traditionally, real estate professionals connect buyers with sellers through control and dissemination of information (i.e., the MLS). They’re valued for the information skills they bring to both listings and sales. And, they use a lot of technology, including cell phones, the Internet, e-mail, and geographical information systems (GIS).
Since practitioners and real estate companies are pure market intermediaries, their positions are threatened by new ways for buyers and sellers to find one another.
What does your research reveal about technology’s impact on the real estate profession?
WIGAND: Real estate professionals already use ICT extensively. All rely on the fax, phone, and MLS, and nearly all now use e-mail and mobile phones or pagers, as well. Many use Web sites—about three-quarters have some sort of Web presence and 40 percent report depending on it, according to our study. We found ICT used in all phases of the real estate process but more so in the initial stage—getting listings and searching for houses—than in the closing stages during contract negotiations and closing.
But is ICT forcing practitioners to rethink or expand their services?
WIGAND: To maintain and strengthen their position as intermediaries, real estate practitioners are now stressing individual service and other value-added mechanisms, such as buyer-broker relationships, connections to other homebuying services, buy/sell transactions, and guarantees.
Many real estate practitioners we interviewed described themselves as “hand-holders,” “babysitters”, “social workers,” and “guides for buyers and sellers.” They provide a set of legitimizing, value-added services beyond their role as intermediaries. For example, they provide access to resources from their social network, such as information about mortgage providers, house inspectors, skilled workers, and so forth.
Other value-added players such as banks would like to assume parts of the traditional role of the real estate professional as coordinators of the transactions. This doesn’t seem to be happening broadly yet, but the industry has been battling—even at the Congressional level—about the rules for real estate.
Another example is electronic closings, which exist in some jurisdictions but the legal system in most parts of the United States creates obstacles to electronic closings. Nevertheless, there’s enormous pressure for a move in this direction. Efforts such as those by the Mortgage Industry Standards Maintenance Organization (MISMO), a group started by the Mortgage Bankers Association, are underfoot to establish electronic mortgage standards and enable e-mortgages within the industry.
How has the technology impacted the working relationship between practitioners and their clients?
WIGAND: The real estate professional now enters the picture a little later in the process compared with the days of MLS books. But relationships and services are just as important as always. The practitioner plays a very important role in this process and can provide the consumer information that no one else may have: Who are good lawyers (and contractors) to consider?
Does your research provide insights that enable you to project ways the buying /selling process could evolve over the next few years?
WIGAND: Homebuyers already have moved in sizable numbers from consulting real estate professionals and other traditional sources of information about available houses to the Internet. It seems that the Internet will continue to penetrate the buy-side of this industry at a strong pace.
Considering that in a typical transaction, a piece of paper is required to pass through as many as 128 different checkpoints before a house is sold, bankers, brokers, lawyers, and mortgage specialists—everyone involved in today’s fragmented real estate value chain—would welcome tools that enable them to cooperate, collaborate, and conduct business over Web portals.
For now, paper documents must be sent to the lender—even online lenders. Buyers probably won’t switch from the current methods until the document process is much more automated than it is now and when digital signatures and electronic document delivery actually make it possible to close a mortgage or purchase a house online.
Do you foresee technology creating entirely new roles for real estate professionals?
WIGAND: The role hasn’t changed for traditional real estate practitioners, but the situation has changed for consumers who turn to one of the new online practitioners, such as a Zip Realty. That’s a development I think is worth watching.
If a consumer chooses an online broker, he or she isn’t likely to see the practitioner often, and the online practitioner is likely to stress this fact. They may claim much of the work a real estate professional does can be automated and streamlined or accomplished via e-mail and phone calls. As a result, they charge sellers a lower commission than more traditional real estate professionals and may even offer buyers a rebate.
Many sales associates working for online brokerages are salaried staff members, eliminating the incentive of a commission based on the sale. In that sense, online practitioners don’t need to be as worried as traditional practitioners in securing the next deal. Typically, a separate marketing department focuses on soliciting new listings.
As you might expect, traditional practitioners criticize these developments, arguing consumers won’t receive adequate and appropriate service. Moreover, they maintain that online buyers and sellers are likely to be treated like commodities and that no one will be around when problems arise.
If this is true, then online practitioners simply won’t survive over time. Today, online practitioners represent a tiny fraction of the residential real estate market—less than 1 percent of sales. But if their share of home sales does grow significantly, it could change the traditional role of real estate professionals.
Any surprises from your research?
WIGAND: Early on in our research, we somewhat naively assumed that the days of the traditional real estate professional as we know him or her would be numbered due to the advent of the Internet. The real surprise in our findings may be how well and how nicely real estate practitioners adjusted to what were once considered threatening developments, especially online public access to MLS data they once controlled exclusively.
In general, I think these developments are a win-win situation for all involved. Consumers enjoy more transparent information, can do their own property searches on the Web, and are less dependent on a real estate professional initially.
Conversely, this frees up practitioners in the search process for suitable homes, enabling them to sell more homes.
Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.