Internet is transforming residential real estate industry

October 31, 1999

University Park, Pa --- Realtors' tight control over residential real estate sales have been weakened by the posting of houses for sale on the Internet but the average home buyer or seller probably still needs an agent as a guide and hand-holder to get through the sale process, according to a Penn State researcher.

Dr. Steve Sawyer, associate professor of information sciences and technology and associate professor of management science, is a principal author of a recent study on the effects of new information and communications technology on the real estate industry.

"Real estate agents' traditional role as an information intermediary is being contested. Until recently, the only way a potential buyer could easily identify houses for sale was by working with an agent who could search the multiple listing service (MLS). This database was an important resource and source of power for the agent and, therefore, closely held. However, for many regions, MLS data are now publicly available on the Web," he says.

Sawyer recently detailed the findings in a paper presented at the Americas Conference on Information Systems in Milwaukee, Wis. His co-authors are Kevin Crowston and Rolf Wigand of the Syracuse University School of Information Studies. Sawyer joined the Penn State School of Information Sciences and Technology faculty this summer and was a faculty member at Syracuse when the study was conducted.

The researchers also observed that, since the Internet was undermining real estate agents' power, they were increasingly becoming guides in the sale process.

Sawyer says, "The legal, as well as financial, implications embedded in the sale process are not always clear and agents and brokerages are still trying to define and specify these changes. Since most buyers and sellers participate in the sale process infrequently, real estate agents are increasingly guides and hand holders and it appears that the real estate business still needs this support to run smoothly.

"Basically, buyers and sellers consider a home sale or purchase a major investment and are risk averse. They want someone around to make sure something doesn't get messed up," he says.

While some information and communication technology changes have negatively impacted the industry, the researchers also found that real estate agents could use them to enhance their social network of buyers, sellers, banks, lawyers and other service providers. For example, agents can use voice mail, pagers, and cell phones to develop their social network and get more listings via acquaintances and be able to point prospective clients to value-adding service providers such as lawyers and lenders. In addition, agents are increasingly being expected by prospective sellers to provide a Web presence for their listing. Those who can do so provide an added service and strengthen their client ties.

On the other hand, agents who used new information technologies to buffer themselves from their social network by not returning calls, not checking and responding to e-mail, and not maintaining a current Web site, weakened their social relations and decreased their value to buyers and sellers.

The researchers' study was conducted with data from one local market in a medium-sized city and its suburbs. A series of interviews and observations were conducted from September 1998 through December 1998 with agents, brokers, brokerage owners, and the local realty association president who is also president of the local MLS and those they recommended. The researchers also collected and analyzed all memos, correspondences and other printed or written material from their informants.

Sawyer says this initial study was designed to get a general sense of the issues involved in the use of ICT in the real estate industry and to develop set of research questions. The researchers have just completed collecting data for the next phase of the study and more results will be available by winter.
EDITORS: Dr. Sawyer is at 814-865-4450 or by email.

Penn State

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