Uses of Information Technology in the Real Estate Brokerage Industry

Article excerpt

INTRODUCTION

It is now possible for someone working at their computer to tour a property and its surrounding neighborhood and/or get approved for a loan without using a real estate broker or banker directly. With this kind of service available on the Information Superhighway a commonly asked question has become, "Who needs real estate agents if anyone can access property information online?" A group clearly interested in the answer is the residential and commercial real estate brokerage industry. Indeed, the dramatic increase in technology in the last 15 years has been geometric in scope and real estate professionals who ignore these megatrends do so at their own peril.

The purpose of this study was two-fold. First, the study involved determining what types of technology are currently being used in the real estate brokerage industry. Identifying and summarizing how the real estate brokerage industry currently uses and plans to use technology in its businesses is a matter of interest not only to the industry, but their trade groups, and to government agencies related to the real estate brokerage industry as well. Second, previous research has suggested that there may exist a "size effect" in the real estate brokerage industry, although the results are mixed. This study will determine if there exists a size effect as it relates to the current and future use of technology.

There are several potential beneficiaries of this research. First, the real estate brokerage industry will have detailed data on the current use of technology in their industry and plans for additional uses in the future. This will allow firms that are "behind the curve" on uses of these innovations to examine the various technological options that are open to them and decide which of these are the most value-added for their businesses. Second, the computer software, computer hardware, and database industry will know what types of technology are being used in the brokerage industry. Once they have information on some of the plans for future uses of technology by real estate brokerage firms, they can target a portion of their research and development in those areas. Third, local, state, and national real estate trade groups and associations will be informed as to uses of technology by their members. This will allow them to disseminate to their members new and relevant information concerning technology and its potential for employment in the industry.

LITERATURE REVIEW

Smith, Rosen, and Fallis (1988) state that residential real estate composes roughly 38 percent of the country's wealth. Of this 38 percent, real estate brokerage firms are responsible for the sales of 81 percent of single-family dwellings (FTC, 1983). Hence, understanding the role of the real estate brokerage industry is critically important.

Much research has been devoted to examining the efficiency of the residential real estate market (Turnbull 1997, Yavas 1995, Greer and Farrell 1993, Micell 1992, Case and Shiller 1989, Zumpano and Hooks 1988, Guntermann and Smith 1987, Linneman 1986. and Gau 1984). Although the results concerning the degree of market efficiency are mixed, it is clear that intermediaries, (specifically the real estate brokerage industry), improve efficiency (Baryla and Zumpano 1995, Turnbull and Sirmans 1993, Jud 1983). Two of the ways they do so is through 1). the use of technology, and 2). economies of scale.

Increases in the use of improved technology reduce the search time for buyers. This reduction in buyer search costs (time) in turn increases efficiency in the residential real estate market. One such example is the advent and increased use of the Internet for real estate purposes (Kabatim 1996, Royal 1995). Rodriquez, Lipscomb, and Yancey (1996) provide a comprehensive discussion of how the Internet affects the residential real estate brokerage industry. In short, the Internet offers a seemingly endless number of free sites that list (and picture) homes for sale across the country. …