Realtors Celebrate, but Cautiously
Realtors have much to celebrate as 20,000 of them gather this weekend at the National Assn. of Realtors convention in New Orleans.
Take the two fundamentals of measuring a real estate market: interest rates and home sales.
With 30-year fixed-rate mortgages at 7.25%, interest rates are at a seven-month low. And sales of existing homes reached near-record levels across the country during the second quarter, according the Realtors association.
The sales pace stood at an annual rate of 4.79 million units, up 5.1% from 4.56 million units during the third quarter of 1996. This marks the highest quarterly resale home rate ever posted.
But as the Realtors gobble up jambalaya and oysters in the Big Easy, the future of the Realtor is muddled, giving some in the industry indigestion.
And the worst-case scenario in this murky future can be found in a new study, which proclaims that online public records, appraisal software, digital photos and Internet home listings will drastically reduce the legwork of the average real estate transaction and cut consumer fees more than half.
The result: four or five real estate-related service people will do the work of 16 today.
So says John Baen, a real estate professor at the University of North Texas, who with his colleague Randall Guttery recently wrote “The Coming Downsizing of Real Estate: Implications of Technology.”
The report, featured in the fall issue of the Journal of Real Estate Portfolio Management, says that the transaction cost of buying a $120,000 home (with 20% down) will fall from $10,750 to $4,900.
Among the big cost savings in the “cyberfuture” are the agent commissions, which will drop from $7,500 to $4,375, and title costs, which will go from $1,200 to $300.
“The seller of the future lists his or her home on an Internet listing service, interested buyers search out such sellers and showings are arranged via telephone and e-mail,” the report says.
“If the parties wish to employ the services of a real estate participant, this facilitator can be hired for a nominal fee, perhaps $500 to $1,000 (per transaction).”
Of course not everyone is embracing the conclusions of the report.
“The observations made by professor Baen are based on partial information and are misguided, at best,” said technologist and Realtor Jack Harper, who publishes information on the Internet.
He predicts that “Internet-savvy consumers will be much more informed (about the home-buying process) in the cyber-real estate culture,” but regardless, “they are far better off with an intermediary (a Realtor) placed firmly between the buyer and the seller.”
Indeed, many of the predictions about computers replacing people in the real estate transaction have underestimated how complicated a home sale can be. Another faulty assumption is that the adoption of technology will be swifter than it actually is.
In 1980, soon after the NAR convention 17 years ago, Miami Herald writer Wayne Markam wrote a lengthy story about how personal computers would be used to compile home listing data.
Headlined “Will a Computer Pick Your Home?,” the article discussed how real estate organizations would use technology to give consumers access to home listings.
At the time, association President Ralph Pritchard said, “home listing books are a waste of energy.”
The fact is, it took 15 years for home listings to finally move to the home computer.
Inman News Features writer Warren Lutz contributed to this report. Copyright 1997, Inman News Features.
