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E-COMMERCE ANDTYPES OFREALESTATEFIRMS 195Table 3E-commerce Models in Real EstateB2B Web Sites B2C Web SitesProject Development Online Mortgage
Supply Management Listing/Matching
& Brokerage
Virtual Community/Marketstools can now provide a firm with data on who accessed
the site, which pages were visited most frequently, from
where and for how long. This information contributes to
improved measures of the results of promotional efforts.
The promotional costs associated with the Internet have
also been very low. For example, in direct mail marketing,
it is generally more expensive to send a one-page color
brochure to 5,000 random addresses than it is to add a
component to an existing Web site.
The third stage is represented by a full-fledged office/
store on the Web with transactions capability. Some firms
have even developed a fourth type of Web site that exploits
the multilateral coordination and collaborative capability
of the Internet. As mentioned earlier, this type of Web site
provides a platform that helps in fine-tuning project re-
quirements, forecasting cost overruns, as well as dealing
with logistics. This is a qualitatively new kind of economic
activity in real estate, and hence a new kind of Web site,
whereas the first three stages of Web sites can be seen as
evolving sequentially.E-COMMERCE AND TYPES OF REAL
ESTATE FIRMS
Real Estate Brokerage Services:
Disintermediation or Reintermediation?
Real estate transactions have relied heavily on intermedi-
aries. Most obviously, brokers use their specialized knowl-
edge to aid buyers and sellers. E-commerce introduces
new opportunities, improving the availability of infor-
mation, reducing transactions costs, and facilitating the
searching and matching process. At the same time, e-
commerce has reduced barriers to entry and these op-
portunities may now be available to new entrants to the
industry, thus increasing competition.
Consider a specific community in which there are 100
homes for sale and 100 households potentially interested
in buying such a home, the potential buyers being scat-
tered across the United States. A key goal of such a real
estate market is to match each home with that household
for whom the home is the best possible fit. A physical
visit of each household to each house, of course, would
be prohibitively expensive, requiring 10,000 (= 100 ×100)
house visits. Instead, both the buyers and the sellers hire
real estate agents, who have special information regard-
ing the particular market, in order to expedite the process
of matching buyers and sellers. Of course, the agents must
be paid, and their fees can easily represent 6% of the value
of the total transaction. Not only is such intermediation
costly, but also it may be imperfect, in the sense that thebest matches may go unrecognized. E-commerce can pro-
vide a substitute for the traditional real estate agent in at
least three forms.
First, Web directories and specific Web pages can be
created with properties “for sale by owner,” allowing such
properties to be listed without the resources of a real es-
tate broker. Properties “for sale by owner,” of course, ex-
isted through newspaper ads even before e-commerce, but
e-commerce provides a much more efficient method for
allowing potential buyers to “view” the property and ulti-
mately to complete an actual transaction with the seller.
So far, however, “for sale by owner” through e-commerce
continues to be a relatively small part of most real estate
markets.
Second, the information traditionally maintained by
real estate brokers can be distributed much more effi-
ciently in an electronic form across all relevant buyers and
sellers. The most important example here is anelectronic
multiple listing service. Traditionally, most real estate mar-
kets maintained and updated a hard copy describing all
properties for sale in that market. This was described as
a multiple listing service, since it represented a coopera-
tive effort of the real estate agents in this market. With
e-commerce, the multiple listing service becomes a Web
page, with a variety of major advantages, including timely
updating, versatile database viewing, selection by param-
eters and much better graphic displays including virtual
house tours. The impact is felt in both shorter, more effi-
cient, search processes and in a smaller number of phys-
ical visits.
Third, e-mail has emerged as the alternative means of
communication between brokers and their clients, substi-
tuting for time-consuming and costly face-to-face meet-
ings, faxes, and snail mail. Constant updates and clarifi-
cations are now much more conveniently made at times
that are individually and separately convenient to both
parties, rather than at moments that are simultaneously
convenient to them.
It appears, however, that most buyers and sellers of
single-family homes continue to need the services of real-
life real estate agents and brokers. These services include
advice on listing prices for sellers and offer prices for buy-
ers, individual advice on house attributes (location and
quality), and referrals to other experts. Interviews with
residential brokers suggest that many have chosen to de-
velop a range of additional services, such as Web links
to reliable contractors, to appliance vendors, and to local
government agencies. The implication is that the Inter-
net and real-life brokers are likely to be complements, not
substitutes, over a broad range of home-buying services.
For commercial and industrial brokers in general, the
immediate advantages of the Web are few, while the chal-
lenges they face appear greater. The residential broker-
age system, as mentioned above, already had a database
in place with shared listings, making the transition to a
Web-based system of sharing information fairly straight-
forward. The commercial and industrial sectors, in con-
trast, had not created any basic systems or databases for
sharing information. Despite this initial condition, the
commercial/industrial brokerage sector is now a major
user of the Web and is helping in the creation of a truly
national real estate market in properties for sale, lease, or