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Industry White Paper lays out one vision of real estate's future. Is it yours?

This month in your print publication, REALTOR Magazine, our technology columnist, Michael Russer, takes off his Internet-marketing hat, to explain the potential of a new Internet standard, championed by NAR and the industry, that could streamline real estate transactions. Russer's views on the subject of technology's future in real estate were formed as he was writing a White Paper for computer chip maker, Intel Corp., whose interest is in selling high-powered technology to real estate professionals.

Connected2001 The Transformation of the Residential Real Estate Industry BY MICHAEL RUSSER Winds of Change In the past five years, the Internet has transformed from a relatively dull, complex, network inhabited by techies and academics, to a rich, multimedia, interactive medium available to the masses. Exploding beyond everyone's wildest expectations, sales of goods and services over the Internet are projected to exceed $1.2 trillion by the year 2001.1 A significant chunk of this will be real estate- related commerce. Residential real estate consumers today have almost instant access to rich, multimedia based information on available properties and related data--information which was previously the industry's closely guarded raison d'etre. This is the beginning of a new phenomenon: the Internet Empowered Consumer (IEC). Emergence of the IEC is the primary factor influencing the fundamental shift that is affecting the real estate industry. Within a few short years, current and projected innovations to the Internet will hasten the transition considerably. It will take a dramatic--perhaps ominous--turn for those organizations and individuals who choose to ignore it, or fail to understand its true nature.

This document provides insight into the Net's impact on the residential real estate industry today, and how its look and function will likely be affected over the next three to five years. It shows how key industry players—agents, managers, executives, and organizations—can navigate to this new reality while avoiding the inevitable storms, rocky shoals, and ill winds along the way. Today's Real Estate Industry Shifting economics, demographics, and the advancement of technology have fueled much of the industry's evolution over the past few years. Significant changes such as consolidation and strategic alliances have been incremental at best. They will pale in comparison, however, to Internet-induced transformation. Not known for innovation or long-range strategic thinking, the real estate industry tends to look the other way at the thought of fundamentally changing the way it does business. This is true at all levels, from individual agents to the executive suite. Resistance to Change Among Agents Since the turn of the century, real estate sales associates have been the core of the business. They are still the primary business channel for the industry. But of roughly 1.4 million licensees in the U.S., a large percentage drop out of the business annually, and those who replace them in most cases need only pass a simple test to get their licenses. Most often hired for superior people skills, agents tend to be highly technophobic, stubbornly resisting efforts to adapt technology to their business despite its proven boost to their bottom-line. As independent contractors who deal primarily with people, few see the need to learn new skill sets or adopt new technologies. Given that kind of complacency, it is hardly surprising that fewer agents are doing more of the business. Corporate Myopia Running a successful residential real estate organization is more complicated these days. Aggressive consolidation and the formation of strategic alliances with national consumer sales organizations have opened new channels to access the real estate customer. As a result, maintaining brand awareness within one's market region is more urgent than ever before. Many companies find themselves consumed with reacting to market cycles and wondering how to best strategically align or merge with other organizations. Most still struggle to integrate computer technology into their operations, primarily due to costs, rapid obsolescence, and strong agent resistance. Given these distractions, it is little wonder that many senior managers and executives have a hard time seeing the Internet as nothing more than just another promising technology. They know they have to deal with it for competitive reasons. However, very few recognize the Net as the harbinger of change that will cut to the very core of the current industry business model. Real Estate 2001—On the Horizon The residential real estate industry will experience more change in the next three to five years than it has in the last 100. Internet Empowered Consumers are the new, rapidly growing reality. They will no longer need—or want—the traditional one-size-fits-all services. Without doubt, not every real estate consumer will suddenly become 'Internet empowered.' However, Net-induced stratification among real estate consumers, segmented by their unique needs and capabilities, is occurring. Also, several coming fundamental changes to the capability and infrastructure of the Internet will lock in this trend, eventually enabling most people in their search for real estate services. Ubiquitous, Continuous, Affordable Access Ubiquitous, affordable, high-speed, continuous (no dial up) access to the Internet is already becoming available in major markets around the United States. Within the next few years nearly everyone will have greatly enhanced Internet access via cable modem or some form of DSL (Digital Subscriber Line) through local telephone providers. As a result, these capabilities supported by powerful and easy to use personal computers will allow the consumer to take advantage of increasingly rich, immersive multimedia presentations of real estate related data. Two additional factors will dramatically affect the quality and scope of the information that they tap and how they interact with it: XML enabled intelligent searching and the paperless transaction. XML Enabled Intelligent Searches Where HTML (Hypertext Markup Language) determines how data on a Web page looks, XML (eXtensible Markup Language) determines how the data is defined. It allows standardization of various kinds of data no matter who presents it. Through the use of an industry-agreed-on DTD (Document Type Definition) XML standard for listing data, property information will "look" the same to a Web browser no matter where it resides on the Net. Using greatly enhanced search capabilities, otherwise impossible without XML, consumers will be able to access essentially a nationwide virtual MLS—comprised of listings from any online source around the country. While a tremendous boon to the homebuyer, it also has important implications for the MLS industry. Since listing data will be equally "visible" on the Web, no matter who publishes it (including individual FSBOs), literally anyone can become a MLS. As a result, regional MLSs will need to redefine their value to the broker community. One possibility is to offer innovative means of presenting listing data on the Web using rich interactive and immersive multimedia virtual tours and demographic mapping. The Paperless Transaction The real estate industry is literally buried in hundreds, perhaps thousands, of paper-based forms that make tracking and exchanging data difficult, time consuming, expensive, and error-prone. Certain Internet technologies will make the truly paperless transaction a reality. XML will allow standardization of the data found on all these forms. This will simplify processing and transmission from one vendor or system to another. Digital signatures will become the basis of secure, legally binding, Net-based transactions and contractual commitments. The coming digitization of money will allow easy yet secure Web-based transfers of funds. And finally, the advent of a Universal Forms Description Language (UFDL) standardizes secure, tamper-proof Net-based forms. UFDL preserves both the data and the presentation context of the information (i.e. paragraph formatting, type size, and color). These forms can either be viewed via browser or printed to hard copy with presentation and information intact, thereby alleviating concerns of governing authorities about legally binding transactions over the Net. XML and the advent of the paperless transaction will greatly empower, and hence alter the very nature of, the real estate consumer —how they shop and work with various real estate services. The following scenario (circa 2001 – 2003) offers a glimpse of how these and other Net-based capabilities could be used for the typical purchase transaction. A word of advice—this is just one of many possible scenarios. Suspend your disbelief--the technologies mentioned in the stories below are either already available or will soon be. A Remote Purchase--A Consumer’s Perspective Jane Santor of Arlington, Va., will join a start-up in Mountain View, Calif., next month and needs to buy a home quickly. She's wrapping up current responsibilities and preparing to move but does not have time to travel to California to find a new home. Instead, she begins house hunting on the Internet. Since she doesn't know Silicon Valley very well, she first goes to a real estate channel on the Web where she uses multimedia mapping tools to familiarize herself with the area near her new office. Research Jane is less concerned about how far she lives from work than she is with the actual commute. Using her browser, she enters the office address and specifies that she wants no more than a 30 minute commute at 7:30 a.m. and 5:30 p.m. Almost instantly, a free, advertiser-supported service displays an interactive map highlighting an area that meets her criteria. She refines the area by overlaying demographic, school, crime, community, and economic statistics. She can redraw the borders and segment the selection area into two or more sections if she wishes. By doing this she limits her search to properties that fall within the chosen selection areas of the map, regardless of other criteria. She now defines the type of home she wants: price range, bedrooms, bathrooms, age, square feet, lot size, and style. Intelligent Agent technology allows her to quickly scan all Web listings that meet her property type and location criteria. Instantly, her "agent" returns with three properties. Two existing homes meet 100 percent of her criteria and the third, a new home, rates at 78 percent. To get a better feel for the neighborhoods of each property, Jane returns to the maps and enters the addresses to see the commute routes and times from each home. She can rotate a 3D topographical representation of the map and view the lay of the land from any angle. She also checks historical weather data (rain, sunshine, temperature, and wind) for each property location. Finally, to see what the neighborhoods actually look like, she views zoomable high-resolution photos of each neighborhood. These show the immediate areas, especially the homes on either side of the selected properties. With this information, she eliminates one of the existing homes and focuses on the other two. In addition to Web-based property information and 2D photos, she takes a multimedia virtual tour of the existing home, including 360-degree views of the front and back yards. Clicking on the roof brings up data on its age, construction type, and the number of years remaining on the warranty. She also views results of the last home inspection and termite reports, as well as a graphical representation of the last owner's utility usage in the past 12 months. As Jane manipulates 360° panoramas of the interior she hears the listing agent's voice describe the features and benefits of each room. She zooms in for detailed views, and clicks on images of most of the major appliances and systems to examine the specifications and warranty information for each. Last, she takes a few moments to check out panoramas of several of the parks and schools in the area before she goes on to tour the brand new home. Next, she "walks-through" a 3D model of the new home, and views each room from any point of reference. As she interactively plays with colors, materials, and feature add-ons to design the home as she would want it, the sales price updates instantly to reflect each change. Designing and decorating to her exact taste appeals to her, but she prefers the neighborhood of the existing home and decides to make an offer on that one. Pre-Offer Preparation: Comps and Loans First she requests comps of similar homes sold in the area over the last year. Instead of just listing the basic information (square footage, beds, baths, lot size, garage), the Web-based "Comp Wizard" interprets the results and suggests a realistic offer price range for the property. She uses another intelligent agent to search for the loan that best meets her intended downpayment and closing cost criteria. Almost instantly, it returns three different loan options, which enable her to compare total pre- and after-tax costs during her expected five-year ownership of the property. Loan Approval She takes five minutes to complete an online application for the loan she wants and submits a request for pre-approval. The lender immediately replies that they're processing her request and that her pre-approval (for a loan that meets the downpayment, percent of loan-to-value, and acceptable property requirements) will take about 15 minutes. Although awaiting final approval, Jane uses her online intelligent agent to find an experienced buyer's agent to help negotiate the offer and make sure the transaction closes smoothly. Because she did the work of finding the property and getting pre-approval for the mortgage, she wants an experienced agent who will represent her exclusively, but do it for a fee. While narrowing her search to two agents, her pre-approval comes in. Armed with this, she makes a video call to the assistants of both agents through the Web. The first agent is out showing property and will phone back in the afternoon. The second agent (Sally Walker) will videoconference her later that morning. Jane is impressed with the efficiency, accessibility, and sense of teamwork between Sally and her assistant Lynn. When she and Sally finally connect, she's pleasantly surprised at how much Sally knows about the home in question and impressed with her rich, interactive, and informative Web site. After a brief interview, Jane decides that Sally will represent her during the negotiations and closing process. Offer and Sale Jane is ready to make an offer, and Sally directs her to the section of her Web site that has all the necessary contract forms online. After discussing the price and other terms, Sally helps Jane complete an offer form, which includes a clause making the offer contingent upon Jane's physical inspection of the property within 72 hours of acceptance. Jane signs it with her legally binding digital signature and transfers good faith deposit funds into Sally's broker escrow account. The entire process of searching for a property, getting pre-approval, and making an offer has taken about an hour. Most of the services used were free because of support from advertisers. Now that Sally has taken over, Jane can focus on wrapping things up with her current employer and prepare for her new job. That evening Sally contacts Jane to give her the good news that her offer was accepted. Since the sellers have already moved, Jane can close in just five days if she wishes and can track the progress of the closing on the Web. Jane is thrilled and fantasizes about living in her new home as she instructs another intelligent agent to find the best flight to San Francisco within the next 24 hours. While the aforementioned scenario of making an offer contingent on physical inspection may be atypical, it'll be a growing trend. Especially as the immersive, interactive capabilities of the Net mature to offer a more complete home hunting experience while saving the consumer precious time and money. The Net is also changing the way agents, companies, franchises, and service providers work and interact with each other. Internet-Savvy Sally--An Agent's Perspective Sally specializes as an exclusive buyers' agent for high-tech employees relocating to Silicon Valley. These folks typically use the Net to search for both properties and agents. Well-targeted marketing has enabled Sally to identify them and develop a tidy niche that rewards her with 20 to 30 closed transactions per month. No "techno-wizard," Sally understood early that the Internet was much more about people than technology. She realized it represented a new, rich way to connect with clients, prospects, and co-workers. Without it, she couldn't begin to cover the territory and do the amount of business that she does. The Internet, a team of three live assistants, and the supportive company with which she affiliates, enable her to easily handle high volume, and she still has most of her evenings and weekends free. The day Sally "met" Jane Santor, was fairly typical. She begins each day by answering E-mail while fixing breakfast. As a friendly male voice reads her E-mail aloud, she responds to each by simply speaking back to her helpful natural-language, voice-activated software "assistant" as she moves about the kitchen. Virtual Team Marcy, Sally's marketing assistant, is a former employee of a high-tech firm with experience in sales and human resources. She's a new mom and does all her work from home, enjoying her daughter's never ending antics. John, the transaction coordinator, monitors transactions and makes sure they go smoothly. He too works from home, but also runs errands as needed. Lynn, the administrative assistant, keeps Sally on-track both in business and personally to maximize results with minimum stress. Lynn is a retired executive assistant who works from home without the stress of corporate life. This virtual team gives Sally great talent at reasonable rates, and low overhead. Because there's no office, they only meet in person at parties or a nice restaurant periodically to celebrate and reward themselves for their continued success. Otherwise they connect every day via videoconference to discuss the agenda that they each view on a Net-based work group calendaring system. During the morning conference, Marcy mentions a potential new client, Jane Santor. She's relocating to the area from Virginia and already has picked a property. Marcy plans to check the property's showing activity. She will contact two or three agents who have shown the property for their insight into the nuances of the house so Sally can be well prepared for her conversation with Jane. These days, intelligent lockboxes record the ID, date, and time in and out for every showing agent while automatically posting that information to a special Web site. Sally, Marcy, John, and Lynn discuss transactions in process, new business, and their long-term marketing strategy. Lynn reminds everyone of an evening training session on Net-based marketing innovations that Sally's company is hosting. The company also provides ongoing Net-based training that allows agents and other employees to stay on top of the latest innovations, yet learn at their own pace. Sally chose the company for its marketing and operational use of the Internet, support for its agents, and its minimal demands on her time. She especially appreciates the support and coaching she receives from her local manager, Jack O'Neal. In addition to great training and support, she also was impressed with ongoing company innovations, like the legally binding online forms that simplify transactions and minimize processing time. Sally winds up her team meeting and spends the rest of the day talking to new clients (including Jane Santor), making offers, and closing transactions. Two closings, four offers, and three new clients later, Sally sends an E-mail to Jack O'Neal confirming her attendance for that evening's live online training session, and then she relaxes, looking back on another successful and satisfying day. A New Class of Captain For any marketing endeavor to be successful on the Net, it needs to be highly targeted. Sophisticated real estate consumers with Net access to incredibly detailed property information will demand services and fee structures tailored to their specific needs. In this context, corporate branding and marketing efforts can only go so far in reaching these consumers. Effective strategies will necessarily include leadership that supports highly professional, Internet-savvy agents in their front line position as the main originators of business. Successful companies will understand that their primary customer is not the consumer, but rather the successful agents who work directly with the consumer. They will need smart, Internet capable managers who can anticipate and respond to agents' needs rather than "riding herd" on them as in the past. Jack O'Neal recruited Sally and has managed to retain her by creating and maintaining excellent support and services that are uniquely tailored for her. Jack O'Neal (Sally’s manager) Uses the Net--A Manager's Perspective Jack was a manager in the "old" days but he didn't like his job very much. Stress, long hours, high turnover, and a lack of appreciation among traditional agents took away the fun. Today he loves what he does and is well rewarded. Jack manages or supports about 50 agents scattered around Silicon Valley and the South San Francisco Bay Area. Almost all his agents are mobile, Internet connected, and maintain their own home offices. They rarely come to the branch location where he and four traditional agents have offices and two multimedia conference rooms. Ironically, synergy among his agents is even more effective and focused than in the old days. This is because the Internet's collaborative videoconferencing tools allow them to meet with each other in any numbers, at almost any time, regardless of their physical locations. Jack's primary function is to support his current sales associates and to recruit highly experienced Internet-savvy agents. He targets agents specializing in various types of services--exclusive buyers' agents, property marketing specialists, relocation specialists, and several subcategories of each, including those willing to work for a fee only. Recruiting on the Net The Internet is Jack's primary tool for finding potential new sales associates. Using his company's proprietary intelligent Agent Finder, he scours the Net for real estate licensees who best meet the criteria for the specialty he currently seeks. The Agent Finder locates licensees who are active on the Net, and compiles a preliminary sales and psychological profile of each candidate based on the content of their Web sites. An intelligent Compliance Agent checks possible recruits' Web sites for potential regulatory problems. It also queries the Department of Real Estate for a complete report on their respective real estate license histories. When Jack enters into serious discussions with recruits, each will complete several comprehensive online personality profiles. These will give him a clear picture of the candidate's suitability, measuring many factors including adaptability to ongoing change and innovation. Managing Jack occasionally hires someone new to the business, but fledgling agents apprentice for one to two years as paid assistants to one or more of his seasoned sales associates. Recruiting and training totally inexperienced agents tends to be time consuming, frustrating, expensive, and unrewarding. Jack's careful recruiting methods and support of his current team members has resulted in less than a 10 percent turnover per year. Also, Internet-based marketing and operational efficiencies have resulted in an average of five to seven transaction sides per agent per month. Of course, there are superstars such as Sally Walker who do considerably more than that. High averages are a direct result of the Net enabling fewer agents to complete many more transactions. Because of the emergence of fee-based services, many of these transaction sides will not result in traditional full commissions. However volume and Net-based operational efficiencies more than offset reductions in gross commissions paid per transaction. Supporting In addition to recruiting, Jack uses the Net to support his associates. Almost all corporate information and operational processes are accessible via the company Intranet. Jack can tap into the company's Internet sales tracking and reporting system to see a real-time picture of any agent's productivity. Jack can also profile assistant turnover rates, vacation frequency, and progress with the company's continual learning programs. Armed with this information and productivity figures, he can see the beginning signs of stress and potential burnout well before the agents themselves. When Jack sees someone getting a little out of whack, he makes a personal effort to help them get back on track. Jack treats each of his 50 agents as unique clients with specific needs, and maintains this support (vs. control) because of the tremendous operational leverage the Net provides. Agents depend on him and the company to help them stay up-to-date and on the competitive edge without becoming overwhelmed. Videoconferencing, Net-based, self-paced training programs, real-time Intranet reporting systems, and proprietary Web applications are invaluable for this purpose. Despite this level of support, costs per agent are far below traditional offices that still house personnel in offices or cubicles. Senior Management Keeping an Eye to the Future Visionary senior managers know that in the fast-paced world of the Internet, business models need to adjust more quickly than in the past. The winners will recognize and adopt Internet innovation, sniff out new trends and plan strategically for the best ways to adapt their business model to take maximum advantage of evolving conditions. Successful companies will strive to continually build Internet-based brand awareness while providing unique and attractive support services to recruit and retain the best agents. Web-based back room applications will allow executives unprecedented control over the entire company using a simple Web browser--from anywhere in the world. The bottom line is that commitment to continuous innovation and supportive leadership will lead to Net-enabled increased profits and successful competitive positioning. Knowing exactly what products or services will be available to enable these possibilities is not as important as realizing that a dramatic, consumer-driven shift is under way. The biggest risk for anyone serious about their longevity in this business is to ignore the Internet as both an agent and tool for change. The views expressed in REALTOR Magazine Online aren't necessarily endorsed by the NATIONAL ASSOCIATION OF REALTORS®. The information contained within should not be construed as a recommendation for any course of action by the NATIONAL ASSOCIATION OF REALTORS®, REALTOR®Magazine, REALTOR®Magazine Online, or its authors. Footnotes: 1. ActiveMedia, April 1998 Back to top Hazards of the Journey There's a huge gap in the way business is being done today, and our vision of the future. Before discussing how to best get from "here" to "there", it's helpful to look at potential issues that could make the journey cumbersome, expensive, even treacherous. Agents Want to Stay in the People Business A smooth, successful transition to a fully Net-integrated future in real estate first requires overcoming agents' resistance to technology and change. Agents resist change for the same reasons as most people: uncertainty and discomfort. Depending upon current market conditions, many rationalize they don't need to change because "my business is fine without that new stuff, thank you!" The issue of why agents resist technology is more complex. For years, management has scratched its head trying to figure why their agents "just don't get it"—that technology will substantially increase their productivity. It's not that agents don't "get it." They certainly understand the benefits of using technology. The problem is that productivity enhancement alone does not and will not motivate most agents. It works for the more entrepreneurial agents (the "adaptive learners" like Sally, mentioned in Part 1), but these represent a small fraction of today's overall agent population. Most fear that they will be working less with people and more with computers. Agents are "people-people," and no matter how grand the technology payoff, the trade-off of working with machines vs. people is unacceptable. Management Needs to Check Its Bearings Management has its own issues. They tend to see the Internet as "another costly technology" with major implementation headaches. Most would prefer to "write a check and get back to the business of real estate." But this attitude fails to acknowledge that the Internet represents a fundamental shift to the very nature of the business itself. As a result, most companies end up asking: "How can we adapt the Internet to our business?" when the question should be, "How can we adapt our business model to take best advantage of the Net?"The very future of the company can ride on which question gets asked and the resulting strategic initiatives that follow. Another limiting factor for management is the control-based style that has ruled corporate real estate for decades. This desire to "encapsulate" ignores the very nature of the Net. The Net is Uncontrollable. No One Does or Can Control It To stay on top of the Net requires a continual learning process; the Net has a highly unpredictable evolutionary path—necessitating the need to adapt and change quickly. Each of these agent- and management-based obstacles can be overcome to ensure a smooth, profitable, and strategically competitive transition to the industry's Internet future. The key is understanding the nature of the Net and leveraging human nature to work for us, rather than against us. 11 Navigating from Here to There The centerpiece of any company's successful Internet transformation is the establishment of an Elite Core Group (ECG) of agents who are excited, willing, and able to learn and use the Net for their business. They become the company's Internet "Skunk Works"—left alone yet supported. With proper management support and leadership, they become the fertile soil from which a company will grow its transition to full Internet integration from the inside out. A Few Good People Five percent to ten percent of the agents in most real estate sales organizations fit the "Adaptive Learner" profile of an ECG member. In addition to being well-organized "people-people," they tend to embrace change as a strategic opportunity, using technology as a tool that they may or may not like. A well-designed survey can be used to effectively determine which agents best fit the ECG profile, including the necessary commitment level in terms of time, energy, and money to learn and use the Internet for their business. Once identified, the organization can create a special relationship with the ECG member through a written agreement that outlines the benefits and responsibilities of being part of the elite group. Being difficult to get in, and easy to be kicked out (due to non-compliance), will only enhance the desire of "borderline" agents to participate. Companies will save themselves a great deal of frustration, grief, and money by focusing their high level Internet training and support efforts only on ECG members who, by definition, are willing to commit the time, pay for training, and buy the equipment necessary to work on the Net. It's About People—Not Technology The biggest mistake organizations can make when introducing the Internet to sales associates is to position it as "another great technology" that promises the usual productivity benefits. Been there, done that. The Internet is far more than a tool. It is a sociological phenomenon that is enabled by technology rather than being about it. Management can reposition the Net to agents by showing how it leverages their natural tendency to work with, and be around, people. Instead of seeing the Internet as part of some cold, heartless machine, agents can be taught to see it as a window to an incredibly rich world filled with more people, places, and opportunities than they ever dreamed possible. Now this is something they can be excited about. Rich, multimedia, live online presentations can be carefully crafted to emphasize the "people" side of the Net in addition to bottom-line results. This will create an exciting sense of adventure for them. Once agents "get it" about the Internet, they become open to learning the "vehicle"—computer hardware and software— that they need to take them on this great journey. Let Them Run Free—but Within Boundaries For the foreseeable future the Internet will continue to be freewheeling and rapidly evolving. ECG members should have the encouragement and freedom to learn, stumble, and innovate, but within boundaries. The Net is so new for most organizations, that little if any thought has gone into establishing effective Internet risk managementinitiatives. The risks are real, as evidenced by recent cases and regulatory actions within the real estate industry. The best defense against Net based liability is a comprehensive Internet policies and procedures manual that will effectively guides agents' behavior on the Net while allowing freedom to innovate. Total compliance with an organization's Internet policies and procedures would be an appropriate necessary condition for any agent's continued membership within the ECG. Transformation from the Top Down An ECG will grow within an organization two ways: Internally:Agents make the commitment after witnessing others' success Externally:Recruiting experienced Net-savvy sales associates from competitors Properly nurtured and supported, a company's ECG will ultimately comprise most if not all of their agent population. Those agents who fail to get on board will eventually leave through natural attrition and their own lack of success. When it reaches this point, the organization will have successfully negotiated the transition to full Internet integration. To successfully create, support, and continually grow an Internet ECG that spins off increased profits, innovation, and reduced overhead, requires a shift in the way most management views the Internet and its impact on the business. It also requires an alignment within the entire senior management team. It won't work if the vice president of marketing sees the Net as just another marketing channel; the director of training sees it as another "doomed for failure" attempt to teach technology; the information services manager sees it as an infrastructure and support headache; the CFO sees it as just another excuse to spend money that could be better put elsewhere; and the CEO doesn't see it at all and prefers that others would just handle it. It is critical that everyone sees the same Internet big picture and then works together accordingly. Management will need to commit to two fairly simple ideas: 1. Understand the true nature of the Internet 2. Create the necessary environment within the organization to support a successful ECG. These are the minimal keys to a successful and competitively well-positioned transition to the 21st century world of residential real estate. Despite all the changes expected in the residential real estate industry over the next few years, it will unquestionably remain a people business with largely the same players it has today: consumers, agents, and organizations. What will change, and dramatically so, is the interaction of those players, the goods and services exchanged, and how everyone is compensated. For those individuals and organizations that can adjust to this new realty-reality, opportunities will abound. History teaches that this kind of fundamental shift will always result in an expansion of goods and services, and more jobs—not fewer—to handle them. If this is hard to imagine now, think back to the time when everyone was content using carbon paper to duplicate documents. Along came a messy, hard to operate machine that broke down a lot, cost thousands of dollars, and did essentially what that two cent piece of carbon paper did. It took about 12 years for people back then to see the possibilities of the Xerox machine. Thanks to the accelerating pace of Internet-bred innovation, supported by ever increasing computational capacities of the computer industry, we don't have 12 years to think about it. The consumer demands that we set our course now. The next three to five years promises to be a thrilling ride. Just how profitable (or even survivable) this adventure turns out for you will depend on how well you can adapt to the inevitable high speed pitching and rolling that is the nature of this coming transformation. Back to top Case Studies RE/MAX Goes to Mainstreet for Online Communication, Collaboration RE/MAX International Inc. has discovered the power and business benefits of the Internet. Real estate consumers have greater access to agents and information. Agents, field offices, and folks in the corporate offices have more ways to communicate and collaborate. Back in 1994—ancient history in the Internet Age—the company established a Web site that's been attracting 30 to 60 E-mail requests resulting in 10 to 20 solid leads every day from consumers seeking agents. Mainly targeting buyers and sellers of private homes, the site lists more than 75,000 homes though relationships with CyberHomes and other sites. The site also boasts an agent referral feature that includes agent photos, short bios, and links to E-mail and personal Web sites. Bruce Benham, vice president of information technology, says the company intends to expand its Internet outreach with more listings, and is continuing to push technology initiatives. More than 200 computers on the corporate network currently run Intel Pentium processors and Intel Pentium II processors. Most RE/MAX agents either use Pentium processor-based systems or will move to them as they upgrade. Soon Mainstreet, a new Internet-based private network, will link everyone in the RE/MAX family through an extranet, which will include people within the corporation (intranets) as well as outside suppliers. For a $7 monthly fee, associates will receive a password for logging onto the network to contribute information, share ideas, ask questions, get educated—basically collaborate online. "It's the place to find out about all things going on at RE/MAX," Benham says, "and it's much more than chit-chat. People are really doing business as a result of these online relationships." There's also a place for associates to receive online support for RE/MAX software, and a library for downloading company forms, computer templates, and presentations. Another Mainstreet benefit: All members receive a REMAX.NET E-mail address, a perk that makes the E-mail address independent of the Internet service provider. Phase one of Mainstreet covers just the associates' intranet. In the second phase the extranet kicks in, where approved suppliers such as hardware and software companies, printers, and sign painters will be online in a kind of mall. This will let associates shop for products and even place orders via an e-commerce engine. RE/MAX expects this will speed the buying and selling process while making it easier to do business. Mainstreet will also allow RE/MAX associates to register for conventions, exchange referral data, and alter their membership profiles. RE/MAX executives have seen the collaborative power of a strong electronic community, and they expect it to become even better. "The Internet provides something that draws the whole family together and increases their identity with RE/MAX," Benham says. "It's a tool that can only increase the value of the RE/MAX relationship." Bruce Benham, vice president of information technology RE/MAX International Inc., Greenwood Village, Colo. 303/796-3636 E-mail: babenham@remax.com Web site: www.remax.com Page 16 Mollie Wasserman: The Agent of the Future Mollie Wasserman, a salesperson with RE/MAX--Executive Realty in Holliston, Mass., is still a rookie, having moved to real estate only three years ago from another profession. These days Wasserman runs a thriving business as a buyer's agent anchored by a creative Web site that complements her "unconventional philosophy" of real estate sales. One traditionalist manager once told her, "Stop messing with computers and go sell houses!" She didn't take his advice; she switched companies instead. "Some people don't believe it," Wasserman says. "I've acquired half my business from the Web site in the two years I've had it." In 1996, her second year, she tripled her business from the year before. And in 1997, it doubled again. From the beginning she's been computerized, using a Dell Pentium processor-based system which she will upgrade soon. Wasserman's Web site is based on simple reasoning—buyers and sellers need information. Many are often intimidated by what they perceive as hard sell tactics by many real estate practitioners. Wasserman loads her Web site with content, giving consumers the information they hunger for without having to talk to a live person. "Most practitioners' Web sites tend to consist of their resumes and listings. Mollie's site has sections on buyer representation, an introduction to the buying process, featured homes, information about the area, two active buying clubs, services for sellers, and much more. "First they want to get educated," says Wasserman, "then they want to get a practitioner involved." But why choose Wasserman as their agent if they already have so much information? The key is developing relationships. "If I can capture them while they're getting their feet wet and build up a trust, then I've got them later on," she says. Her Web site is light, friendly, whimsical, and even starts out with an amusing caricature of Wasserman herself. "It's not your typical Web site," she admits, "But customers like it. After finally meeting them in person, they often say, 'Mollie, I feel like I already know you.' " Forms to reply via E-mail bring in five leads per week, one of which will become a buyer or seller. Wasserman expects her Internet business to grow, while many traditional industry elements struggle. "One-third to one-half of the brokers will be out of business by the year 2000," she predicts. The reason is wide dissemination of information on the Internet. Traditionally, practitioners have seen themselves as the keepers of the information--particularly the MLS. "The emphasis on real estate has always been on the listing side, on the seller's side, but I believe the future is with the buyers." Sellers can put the information out there on their own, but buyers need hand holding. Despite this view, Wasserman has seen an uptick in the sellers' side since her Web site began advertising a fee-for-service program for sellers—another area the traditionalists frown upon. "As good as this program is, I've been told by my managers that I can't advertise it or I'd be lynched," she jokes. "It's there on the Web, but only a small percentage of brokers even know what the Web is." Interestingly, Wasserman has gotten three listings from the Web, but none of them have been fee-for-services. "It's put my name out there and gotten me the business," she says. As befits an agent of the future, Wasserman has a positive outlook on the Internet and computer automation in general. "I love it because it takes the ticky-tacky stuff out of my job and helps me do what I really love—matching homes with buyers. A lot of my colleagues are so afraid of the future, but I don't feel that way at all." Mollie Wasserman, salesperson RE/MAX--Executive Realty, Holliston, Mass. 508/966-1408 E-mail: mollie@molliew.com Web site: www.molliew.com The Corcoran Group: An Early Internet Adopter Pushes Ahead The Corcoran Group believes in the power of technology to improve their business, and it can prove it. A 23-year-old residential real estate company [they are not a member of NAR] with six offices in Manhattan, N.Y., three in Brooklyn, and 380 agents, Corcoran has been tracking sales generated by its Web site for the last two and a half years, comparing them with non-Web sales. The results are startling. Customers who come in via traditional advertising typically work with an agent for three to four months and look at 23 properties before buying. Those who contact agents through the Web work with agents for about one month, and look at only 7 to 8 properties before buying. Why the disparity in the Web's favor? "Our Web site puts control and information in the hands of the consumer,” says Alfred Renna, vice president of Internet marketing. "With the Web we've made enormous amounts of information available to consumers without them needing to talk to anyone." This includes 650 exclusive listings—New York City has no MLS—with full home descriptions, color images, floor plans, and information about the neighborhood. Customers can even find agents by language spoken, a real benefit in cosmopolitan New York. Renna jokingly compares this rich offering to the typical newspaper ad: "West 70's, low $400s, call today!" This immediately sets the agent up to be defensive and the buyer not as trusting. The Web's communication capabilities are a strong incentive for many customers. Renna says the average buyer is a 36-year-old man who works on Wall Street. He hits the Web site during the day and communicates via E-mail because that's how he does business. "He values us when we respond to him that way since there's not a lot of time wasted on phone calls." Still, it's early in the Internet game. In 1997, only three percent to four percent of Corcoran's gross sales originated on the Net, but since 1995 they've tripled every year. "People are thinking about buying things in general from the Web and they're communicating via E-mail," Renna says. "We have positioned ourselves right in the middle of this cultural change." To keep the momentum going, it's imperative that agents become more comfortable with the technology. Many Corcoran agents are already Internet savvy, but with more than 300 agents in age from their mid-20s to 70, it's inevitable that some would resist change. That's why Corcoran is so aggressive with technology dissemination and training. "Our training program is completely interwoven with technology and correct marketing of properties via the Web," says Shelby Goerlitz, Corcoran's director of information systems. His department has installed Intel-based PC's (200 and 233 MHz Pentium processors with MMX ™ technology) on every agent's desk—nearly 400. And 12 Intel Pentium II processor-based servers run the company's network with Windows NT and Microsoft BackOffice. Corcoran has also installed fast T1 phone service to the Internet and between the five branch offices. Fast office-to-office service is essential because more and more agents are using E-mail for basic business communication. "It lets people chatter back and forth," Goerlitz says, "like a big virtual office." Corcoran is steadily converting all proprietary company applications to be Web-based. To help everyone learn the technology, the company offers 15 training classes a week attended by 150 people. These cover everything about computers, including how to use E-mail and the Internet. The information systems department also runs a computer help desk to answer questions about using the company's software and the Internet. This helps upgrade the agents' computer and Web literacy. "If certain people come to the help desk frequently, we push to get them into classes," Goerlitz says. "We have to get everyone up to speed because that's the direction the industry is going.” He's also rewriting the company's real estate software to work from a Web browser. Corcoran is one of very few companies in the real estate industry that are aggressively moving toward the Internet, but it's still behind corporate America in general. "We're an early adopter in real estate," Renna says, "but we're just mainstream in business outside of real estate. We had to go outside our industry to find models for doing business on the Web." Alfred Renna, Vice President of Internet Marketing E-mail: alr@corcoran.com Shelby Goerlitz, Director of Information Systems E-mail: sbg@corcoran.com The Corcoran Group, New York City 212/355-3550 Web: www.corcoran.com Pacfic Union Gets in Front with a New Business Model Bill Jansen, executive vice president at the Pacific Union Real Estate Group, Ltd., sees a dramatic transformation in the real estate industry today, resulting from technology, consumer demand, and pressure within the industry itself. He and his colleagues aren't waiting to see what might happen. In a joint venture with NoorVision Inc., they're getting out front with a new approach that combines the power of online technology with a full-service team of professionals to deliver marketing and property information to buyers. Extensive market research using focus groups and quantitative analysis showed that real estate consumers want to understand value. Jansen says, "They want to know what they're paying for and what they're getting. The traditional real estate model, the one we've used for the last 50 years, has to change." Cost Effectiveness, Convenience, and Control Led by President Karl Sopke, Pacific Union's management team concluded that they needed to access the consumer "early in the buying cycle" with both information and a more congenial, less aggressive sales approach. The result is a three-pronged solution. Cost effectiveness through an integrated online and retail infrastructure. Convenience through access to information, resources, and comprehensive customer service. Control through technology that empowers homebuyers to educate themselves with the information they need to make all key decisions. It all comes together in SOMA Living, a combination of online services and a retail store. SOMA Living In addition to a new significant presence at www.somaliving.com, Pacific Union and NoorVision introduced a prototype retail model, the SOMA Living Store, in San Francisco's South of Market neighborhood. Screen-based kiosks in the front room present a wealth of free information, "more than anything they can get on the Internet," Jansen says. An impressive array of technology serves the customers. The SOMA Living Store is using two 233 MHz Pentium II processors—one for the file server and for the database server. Five 266 MHz Hewlett Packard Vectra Pentium II processor-based computers with 17" monitors are for use by customers in the kiosks. There, the database-driven intranet supplies information about every available home in a neighborhood whether it's listed on the MLS, for-sale-by-owners, newly constructed, or soon to be built. Three buyer agent offices have 133 MHz Pentium processor-based laptops connected to a 21" monitor for making online, in-store presentations to buyers. Not only can they feed information to customers in the store, they can videoconference with UT Mortgage Services for the latest information on mortgage rates and pre-approvals on loans for prospective buyers. They can also feed HTML-based information to the Web. What's unique about the store is that the consumer sees no salesperson at the beginning. Free information as well as advice and guidance from a salaried resource coordinator or a loan counselor is available to anyone who walks in the door. They can take virtual tours of homes and neighborhoods on screen. Information is available about market conditions. Only when they're ready to actively seek a home do they select a buyer's agent and sign a buyer's agreement. Now they can arrange for pre-approved financing and visit the homes they want to see. Full Service If prospective buyers do not find homes they like on the first tour, SOMA Living keeps them in their database and constantly searches for homes that meet their criteria. Regular E-mails and other messages keep buyers up to date on the latest listings. When homebuyers locate the home they want, the buyer's agent brings in the managing broker who helps craft an offer, and negotiate the best deal possible. After the offer is accepted, the full-time, salaried transaction coordinator, in conjunction with the rest of the SOMA Living home team (managing broker, buyer's agent, and loan counselor) help the buyer through property inspection, title search, insurance, mortgage, moving, and anything else connected to that sale. Even after the papers are signed and buyers settle in, SOMA Living active home is available online and in person to help the homeowner access and retrieve pertinent documents, as well as information about maintenance, redecorating, and renovation. SOMA Living is the prototype for an expected 400+ similar retail outlets throughout the nation. "Response so far has been extraordinary," according to Jansen. New leads and prospective buyers appear every day. The most technologically advanced real estate idea has started well and the management team anticipates a bright future. Bill Jansen, executive vice president Pacific Union Real Estate, San Francisco 415/929-7100 E-mail: bjansen@pacunion.com Web: www.somaliving.com Judy McCutchin: Not a Techno Wizard, But an Internet Success Story The numbers tell it all for Judy McCutchin, who posted her own Web site four years ago. A top producing agent in Dallas, McCutchin has five people working for her, and 10 computers networked in her home office. Her Web site brings in five to ten leads a day via E-mail, from an average of 160 daily visitors. Of $24 million in sales in 1997, $5 million was from the Internet. McCutchin expects that to grow to $10 million this year--not bad for someone who describes herself as "no techno wizard." An expert at innovative marketing and advertising and a risk taker, McCutchin saw the Internet's potential to reach buyers around the world. Her targets are relocating to Dallas. After six months of "blood, sweat and tears," her first homespun Web site was one of the first real estate sites anywhere. Aside from Chamber of Commerce-type information about Dallas, she included stories written by her dog, Chester B. (Barker) Chatsworth for a light, entertaining touch. Her site also showcased her personal listings, and the rest is history. The key to McCutchin's Internet success has been the value added content of her site, though Barker is still the star. Her site features slide shows of listings, general information about the area, links to the online Dallas MLS, and interactive forms such as a "request for a free relocation packet" that buyers can submit via E-mail. Rich graphics, animation, and audio are used as a kind of demographic screen. "People who come in via the Web are savvy, intelligent buyers. They can afford high-end computers and they've done their homework on the Web," she says. McCutchin pre-qualifies all leads by phone and then refers them to a lender for further pre-qualification. When she finally meets them in person, they're well along in the buying process. McCutchin is doing so much business via computer, it's not surprising that her company is truly wired. She herself uses a sub-notebook with an Intel Pentium processor which connects to a fast 266 MHz Intel Pentium II processor-based network server in the office. When she's out of the office she connects via PC Anywhere. (She has a great story about writing a contract while in the Cayman Islands using PC Anywhere). Her associates use three notebooks, a 133 MHz Pentium processor, 166 MHz Pentium processor, and one "old dog of a 486." All the computers run Intel processors, McCutchin says. What's the future of the Internet in real estate? "It's a wonderful, global medium for advertising, and will continue to enhance our industry," McCutchin says. "It's only a problem for the inexperienced, the not-so good agents. They're the ones who're terrified of the Internet, and it will drive a lot of them out of business." Judy McCutchin, salesperson RE/MAX--Preston Road North, Dallas 800/788-7629 E-mail: judy@dallashomes.com Web: www.dallashomes.com At John L. Scott Real Estate, The Internet Means Instant Processes "In real estate, personalized service is still the key, but the Internet is bringing instant processes to the equation," says J. Lennox Scott, president of John L. Scott Real Estate in Seattle. "When you combine personalized service with instant processes, it creates quality customer service." With 35 company owned offices and 46 franchises in Seattle and Washington manned by 2,300 agents, Scott is in a position to know. The company's Web site is now in its fourth iteration and receives 150,000 visitors a month. Scott's instant Internet processes offer several advantages. Buyers receive instant information from the Web, and sellers get instant marketing—houses can be listed on the Internet within one day. E-mail enables instant communication between agents and customers. And the Internet speeds many transactions associated with every sale. Computer technology will soon reduce the process of getting a home loan to five days or less. Says Scott, "If it isn't instant, it's not fast enough." The impact of all these instant processes? "Customers are coming in more motivated and qualified." Scott says, "They've seen the homes and they're aware of the community from information on the Web site. This shortens the buying process." To help buyers get up to speed, every house John L. Scott advertises in print contains a code, which buyers use to call up photos on the Web. "That's huge," Scott says, "because it brings our ads alive." The site emphasizes this unique feature, as well as 26,000 listings and general information about the area. Scott's Web presence also caters to the needs of agents. Every agent has his or her own homepage with E-mail, photos, and a system that keeps the agent's frame in front of users as they navigate around the site. "The Internet is bringing all our marketing programs together," Scott says, and they market the site everywhere—banners at the bottom of print ads, business cards, and all their signage. Aided by the Internet, each agent is doing more business, which, according to Scott, means fewer agents in the industry down the line. To ensure his agents are among the survivors, Scott is investing in technology to the tune of $500,000 a year. The current program includes, at the minimum, a 200 MHz Intel Pentium processor-based system on every desk, equipped with high-speed digital access. The company also has a legacy mainframe, and four Windows NT networks running a variety of Pentium and Pentium II processor-based servers. Internet access includes a fast T1 connection from corporate headquarters and several separate arrangements with ISPs at the branch offices. All agents have E-mail, and soon will have pager notification of E-mail messages. For the personal touch, Scott uses voice on the Web site and agents' individual home pages Soon online video will allow customers to take virtual tours of the listed homes. To help everyone take advantage of all this technology, the company has hired a technology trainer for agents, support staff, and managers. Despite the high technology expenditures, Scott reports good return on investment, especially since he's aligned all marketing activities with the Internet. "Our agents like it, but they would not have access to these programs without being aligned with a large regional company," he says. J. Lennox Scott, president John L. Scott Real Estate, Seattle 206/230-7600 E-mail: lennox@johnlscott.com Web: www.johnlscott.com The views expressed in REALTOR Magazine Online aren't necessarily endorsed by the NATIONAL ASSOCIATION OF REALTORS®. The information contained within should not be construed as a recommendation for any course of action by the NATIONAL ASSOCIATION OF REALTORS®, REALTOR®Magazine, REALTOR®Magazine Online, or its authors. Michael J. Russer is an internationally recognized Internet speaker, trainer, author, and consultant. He's dedicated to helping real estate professionals leverage their people skills into profit on the Internet. You'll see his column in REALTOR® Magazine Online every month and in the print magazine quarterly. Copyright 1998 Intel Corp. All Rights Reserved. No part of the article can be reproduced without the permission of Intel Corp. b> ]