CitationDownload as .RIS
Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
Now you can buy real estate online … almost
As the internet continues to mature, its capabilities grow more robust. Concurrently, consumer expectations have also matured. Now, advances in computer processing, computer displays, e-commerce and high-speed infrastructure have revolutionized the online experience. Today, it is common for consumers to make complex purchases from home. One can order a bewildering variety of consumer goods in a plethora of sizes, price points, and styles and arrange payment and delivery with a few mouse clicks. As complex as those purchases are, they are still relatively simple. They involve standardized products with few external complications. For example, a Rolex watch may embody a number of features, have a case made of gold and provide a lifetime warranty. Its price tag may be massive, and yet buying one is straightforward. As long as the customer’s credit card limit will accommodate the price, he or she can order online using an automated order processing system.
In examples similar to the above, the price and buying situation are clearly known. Delivery and warranty are also usually known. However, the internet has grown to accommodate flexible pricing, the prime examples being auction sites like eBay.com or the name your own price web site, Priceline.com. What has not evolved yet is the ability to satisfy complex external buying requirements, such as compliance with governmental regulations. However, an emerging web site combines the best of consumer driven e-commerce with professional service. On the service level, it is analogous to the “bricks and clicks” companies that maintain both online and bricks and mortar retail choices, and it focuses on real estate.
Buying and selling real estate in the USA requires one of the most complex consumer transactions. Recently, web services like Zillow.com have emerged to aid buyers in finding homes in particular neighborhoods. It also aids sellers in pricing their property appropriately for the neighborhood. Zillow integrates satellite imagery with real estate listings to value property and show the geography of neighborhoods. Zillow represents a giant leap forward in consumer real estate empowerment. While Zillow can help buyers find and value property, it cannot help consummate the sales transaction. For that they need real estate professionals. Thus Zillow.com has reached the limit of online technology’s value in this very specific industry. Prospective buyers must go outside to find the help they need to complete their purchase.
A shifting tapestry of real estate rules, regulations, laws, building codes, as well as governmental and commercial organizations are involved in the real estate industry. The rules are so complex that few private individuals can buy and sell property without expert help. In some states the rules are so codified that real estate professionals must be part of the transaction. That requirement reflects not only the high value of a real estate transaction but also the safeguards that local governments have placed on buying and selling real property to protect the buyer and the community. For example, there are a host of safety-related issues that must be addressed before governments will allow a seller to transfer title to a buyer. Those issues range from the safety of the structure to the functioning of the building’s mechanical services. In addition, the immense expense of property involves a list of financial requirements including mortgage approvals, property value assessment, property insurance, title search and other legal items. Clearly, intense personal service is vital for a successful transaction.
Finally, a hybrid online and bricks and mortar company has emerged as the right combination of tools for the consumer and professional help to finalize a transaction.
Redfin.com – now you can buy real estate online … almost (www.redfin.com)
Redfin.com is the web site for a company with a presence in eight major American real estate markets. They include: Los Angeles, Orange County, San Diego, San Francisco, Seattle, Baltimore, Boston, and Washington, DC. As the company grows it will add more markets. At start up it entered some of the hottest in the nation. They represent geographic areas whose economies are robust and growing. Noticeably, the New York City area, and Chicago are missing.
What Redfin.com does is allow consumers to search for houses in neighborhoods using satellite imagery like that used in Zillow.com. However, once a consumer finds a property, a mouse click pulls up a picture and the lengthy and standard information used by professionals, called multiple listing service (MLS) descriptions. The listings cover details such as the asking price, days on the market, the size and location of every room, the appliances, utilities, amount of property taxes, size of the house and its land and numerous other details. MLS listings are like gold that makes Redfin.com very valuable. Traditionally, MLS information was restricted to real estate professionals and remains their most valuable tool. Gaining access to the MLS database was a legal dogfight since real estate companies saw a serious threat to their business and fought to block Redfin’s access.
Enhancing the MLS information, most listings also include a video virtual house tour. The tour exploits the multimedia capabilities of modern computers and offers the next best thing to visiting the property. For tired prospective buyers, the ability to experience the inside and outside of a selection of available houses helps narrow down the search and allows taking notes for each listing to avoid information overload. Actually visiting just the top choices instead of the full set of possibilities is invaluable.
Sellers have an advantage also. Redfin offers a flat-fee home-selling service that combines e-commerce with the support of a local Redfin agent. Redfin lists the property in the multiple listing service (MLS), give sellers a yard-sign and a lockbox, then handles all the negotiations and paperwork. Uniquely, Redfin avoids the commonly used 6 or 7 percent commission system and instead charges a fixed fee of $3,000. Redfin charges a seller’s credit card upon submitting a listing request via its site. However, and this is important, it refunds the entire amount if the seller decides not to sign the listing agreement, or later on if the seller is unsatisfied with the service. This is almost incredible. Moreover, cash strapped sellers can opt to pay $4,000 at closing instead of $3,000 up front. Redfin assumes the risk. Sellers who opt to pay the higher fee at the end do not have to pay unless the property sells.
To assure sellers of their potential for success, Redfin uses experienced agents who have sold at least 20 homes and know the ropes. It provides another helpful service: online marketing and in doing so, it promotes the property on sites beyond the MLS. Redfin provides negotiations and paperwork support and handles the entire closing process. To put things in perspective, the company’s $3,000 flat fee, saves a typical customer over $12,000.
Redfin targets a specific market segment, the educated, computer savvy, customer who is interested in taking charge and saving money. It combines the information search and retrieval strengths of the Internet, with the professional expertise of licensed real estate agents. By providing complete support and the 100 percent satisfaction guarantee, Redfin has leapfrogged its competitors and offers a clear and immense value proposition.
This site provides a glimpse of the potential of future “virtual vertical marketing systems” (VVMS). VVMSs provide open internet access to some company services to educate and attract a target audience, making follow on professional interaction more effective. When necessary, prospects can become customers when they contract for a face-to-face bundle of benefits, all under the same corporate roof. Those customers will benefit by sharing some of the economies that the single VVMS provides. The entire system functions better than disconnected elements like Zillow.com and a random group of realtors.
In our next issue, we will investigate other informative sites and invite readers to submit their favorite internet sites for our consideration.
Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: email@example.com for prompt attention.
Edited by Dennis A. Pitta University of Baltimore