Changing Industry by Nick Karris -Gomez.com The Internet is fundamentally changing the real estate industry by enabling consumers to assume greater responsibility and control over their transactions. Since 1996, over 500 new firms have entered the online real estate market, hoping to use technology to make buying, selling, and financing a home faster, easier, and less expensive. The opportunity is significant. As of October 2000, 41 million online consumers had already used the Internet to find real estate-related information, an increase of 18 million since February 2000. In the next two years, 29% of consumers (18 million) plan to buy or sell a home, with over a third (36%) of them having past experience researching real estate information online. The top online real estate brokerage firms meet customers' needs for full information disclosure, choice, convenience and value. In response, fee-for-service, live auction, and agent bidding services are emerging. For example, 38% of consumers want to use the Internet to compare agent proposals, yet traditional listing sites are reluctant to offer these tools for fear of losing listings from brokers. Homegain.com moved first by offering the first agent marketplace that allows consumers to efficiently gather agent bids for their business. In response, Coldwell Banker recently launched its own Personal Retriever Selling Service. Future online home buyers and sellers also demand change in the traditional agent compensation structure. In total, based on surveyed consumer demand and industry feedback, the non-traditional segment of the online home buying and selling markets (e.g., FSBO, fee-for-service related transactions) could represent as much as 75% of total sales by 2005. Already, according to a recent professional survey, 30% of agents discount more than 50% of their commissions. The rates at which consumers adopt will depend on the extent to which the services they seek become available. In addition, some consumers may overstate their future adoption rates. As such, firms should allow that some percentage of these consumers will retreat from the self-directed, online process, however, the general trend is clear indeed. The question remains as to what degree key industry players will resist or embrace these changes. Given the potential market opportunity, a handful of leading traditional firms has already launched new online initiatives. GMAC invested $20 million into SoMa Living, a self-service, online buyer's agency. Countrywide announced in October 2000 its expansion into wireless, as well as its plans to provide insurance, brokerage, and banking services to create a more appealing offering for one-stop shoppers. Coldwell Banker recently announced its plans to test an unbundled fee-for-service program in Q1, 2001. Leading firms will combine the benefits of the Web with the in-person service of the local office to create a "high-tech, high-touch" customer experience. The industry will evolve at a breakneck pace, and new initiatives, such as transaction automation and the transformation of the Multiple Listing Service (MLS), will constantly challenge firms to reinvent themselves. Ultimately, winning firms will provide useful market information and referrals to their clients, thereby building lifelong, trusted advisory relationships and maximizing the client's home ownership experience. In total, the Internet represents a significant challenge and opportunity for leading firms to reinvent current business practices and acquire new customers. It is clear that online consumers want to take a greater lead in the transaction and realize greater value. REALTORS®, brokers, and mortgage providers that adapt will have an incredible opportunity to turn these consumers into clients. "Real Estate a la Carte: Selecting the Services You Want, Paying What They're Worth" is the first comprehensive review of fee-for-service alternatives and is a great first step for consumers and industry professionals alike. Ultimately, these programs will evolve to provide better consumer satisfaction and create loyal clients for life. By Nick Karris, Senior Real Estate Analysist Gomez.com