Focus On: Real Estate (Residential)
Top business challenge: Staying competitive in a slowing real estate market
Solution: Differentiate with online offerings; enhance agent capabilities
How IT can help: Provide advanced website search technology for consumers; use CRM and document/transaction management systems to streamline transactions and centralize information
In January 2005, seasoned property investor Greg Richart launched into a search to buy his own home. He spent two weeks researching properties on the ZipRealty Inc. website, identifying desirable properties at the right price. And after only one day of home viewings, he made an offer on a Marina del Rey, Calif., two-bedroom house with a loft and a view of the beach. "Using Zip's tools and database allowed me to do an apples-to-apples comparison of properties based on price," Richart says.
Zip's Price Track feature also indicated that the property had been reduced in price after being on the market for several months. "I identified a seller who was motivated to sell and who would be receptive to a lower offer," he says.
Richart's use of the Internet to research property is now widespread consumer practice. According to a recent survey by the National Association of Realtors (NAR), 77% of home buyers conduct real estate research online. And that poses distinct challenges for real estate brokerages. Now firms must offer robust Web sites with access to home listings, extensive neighborhood information, mapping tools and other features. But the move online has also elevated consumers' expectations for better, more immediate service. According to an NAR survey, two-thirds of online consumers say they expect an agent to respond to an inquiry within four hours.
Yet the industry shift online is not the only dynamic at work in real estate. After five years of steady gains, home sales are weakening as interest rates rise, increasing competition among brokerages and making every sale count. In July, NAR reported that pending home sales were 10.1% lower than for the same time period in 2005.
So satisfying consumer demands has become central. "Consumers are driving the way the market is going in terms of getting their needs served," says Mark Lesswing, vice president of NAR's Center for Realtor Technology. Increasingly, consumers are turning to Web-based upstarts, which offer cutting-edge features and sometimes lower commissions. ZipRealty, for example, allows consumers to track home price reductions and offers a discount; on Zillow.com, consumers can determine the value of every home in a neighborhood; and at Redfin, consumers can negotiate offers and coordinate home closings online. Such new functionality is emblematic of what brokerages must offer, and compete with, as they shift from "information deliverers" to "true service providers," says Michael Rahmn, vice president of technology at midmarket Windermere Real Estate Services Co. in Seattle. Windermere, with 10,000 agents serving the Northwest, has invested in sophisticated search capabilities, including PropertyPoint, a homegrown mapping system.
And as in any industry under fire, real estate companies must improve efficiency and service. Customer relationship management (CRM) systems, as well as document and transaction management systems, assist brokerages in their efforts to remain competitive.
This was first published in August 2006