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.
At $1.1-billion Long & Foster Cos. in Fairfax, Va., a brokerage with 16,000 agents serving the mid-Atlantic region, keeping pace with consumer demands led to a Web site relaunch in June. The 90-person IT department combined search tools and document management capabilities into a customer-facing online planner that allows consumers to manage a host of activities through one interface, from searching to selling, says CIO Michael Koval. Users can save property searches, schedule home showings and sign up for new-property alerts. "It's a unification of all the different processes in a simple presentation to the customer," says Koval.
ZipRealty, a $100-million brokerage in Emeryville, Calif., with 1,500 agents in 18 markets across the country, seeks to differentiate itself through a hybrid service model, which combines traditional agent service with extensive online research tools for consumers. Because consumers can do so much work up front, Zip has challenged the established realtor fee structure by offering buyers 20% and sellers 25% off the commission Zip collects. Zip's operating costs are kept low because agents work at home. And agents use the homegrown ZipAgent Platform, a CRM system that is standardized throughout the company -- an anomaly in a sector made up of independent contractors who often use their own manual systems. "The platform is centralized. That's a key differentiator for us," says VP and CIO Joe Trifoglio.
As more consumers conduct property searches on the Internet, other brokerages are using CRM to improve service and capture client information. At Long & Foster, agents use the elective My System, a homegrown system that entitles agents to online leads and allows them to manage client interaction through a personalized website. Windermere also uses a lead management and CRM system.
The Next Big Thing
Transaction management systems are the next tool to bring back-office efficiency and meet customer demands. These Web-based systems store documents and streamline workflow associated with a home sale, such as the purchase-and-sale agreement and inspection report. Checklists and alerts help agents complete each step of the home-closing process. And consumers and third parties can access documents electronically. While these systems help cut costs by eliminating paper and mailing fees, they also satisfy consumers' demand for centralized information and efficiency. "Customers want a paperless transaction," says Koval. "They want a standardized, simpler process."
Windermere is implementing a homegrown transaction management application. Now in phase one of a pilot deployment in five offices, the brokerage has begun scanning contracts and other documents related to the purchase-and-sale process as PDFs. "It's a ridiculous number of documents. So you get a huge gain by having everything centralized and standardized; less falls through the cracks," says Rahmn. Third parties and consumers will become part of the process by the end of 2007. The ultimate goal is an end-to-end system that extends from client search to transaction closing.
Long & Foster is using its online planner to move toward transaction management as well. Clients can upload and store documents such as the sales contract and loan applications, even birth certificates. The system also supports digital signature (though many third parties don't yet), allowing for a totally paperless transaction. "This is your biggest transaction, so we want to support it completely," says Koval.
While consumers may be driving the real estate market, persuading agents to adopt new technology is another story -- a task made more difficult because many real estate offices are individually run and agents work as independent contractors rather than salaried employees. For CIOs, a big part of the job is selling agents the value proposition of standardized systems. "There are a lot of agents out there doing things the traditional way," says Koval. "We need to help these agents move along." So for agents and brokerages that want to remain vital in the real estate process, adopting standardized technology and process is the essential next hurdle. "All these technologies," says NAR's Lesswing, "are enhancing the human relationship, not detracting from it."
Lauren Horwitz, former managing editor, production, for CIO Decisions, is now managing editor for TechTarget's Data Center Media Group. Write to her at [email protected].