In this paper, we will explore the ways in which electronic commerce, the World-wide Web (WWW) in particular, is affecting the real estate industry. Real estate is a promising setting for studying electronic commerce because it is an information-intensive and information-driven industry; transaction-based, with high value and asset-specificity; market-intermediary (agents and brokers connect buyers and sellers rather than buying or selling themselves); and experiencing on-going information technology (IT) related changes. In this paper, we apply a coordination theory framework to suggest where IT might change the process of buying or selling a house. Electronic commerce applications have the potential to drastically change current practices in the real-estate industry, including the disintermediation of agents. Web-based commerce is eroding the long-enjoyed information monopoly of real-estate agents. We illustrate this potential by reviewing a number of existing real estate websites that demonstrate the possible impact of electronic commerce on this industry

Crowston, Kevin

Wigand, Rolf

English

AIS Electronic Library (AISeL)

Association for Information SystemsAIS Electronic Library (AISeL)AMCIS 1998 Proceedings Americas Conference on Information Systems(AMCIS)December 1998Use of the Web for Electronic Commerce in RealEstateKevin CrowstonSyracuse UniversityRolf WigandSyracuse UniversityFollow this and additional works at: http://aisel.aisnet.org/amcis1998This material is brought to you by the Americas Conference on Information Systems (AMCIS) at AIS Electronic Library (AISeL). It has been acceptedfor inclusion in AMCIS 1998 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contactelibrary@aisnet.org.Recommended CitationCrowston, Kevin and Wigand, Rolf, "Use of the Web for Electronic Commerce in Real Estate" (1998). AMCIS 1998 Proceedings. 99.http://aisel.aisnet.org/amcis1998/99-287-Use of the Web for Electronic Commerce in Real EstateKevin CrowstonRolf T. WigandSchool of Information StudiesSyracuse UniversityAbstractIn this paper, we will explore the ways in which electronic commerce, the World-wide Web (WWW) inparticular, is affecting the real estate industry. Real estate is a promising setting for studying electroniccommerce because it is an information-intensive and information-driven industry; transaction-based, withhigh value and asset-specificity; market-intermediary (agents and brokers connect buyers and sellers ratherthan buying or selling themselves); and experiencing on-going information technology (IT) related changes.In this paper, we apply a coordination theory framework to suggest where IT might change the process ofbuying or selling a house. Electronic commerce applications have the potential to drastically change currentpractices in the real-estate industry, including the disintermediation of agents. Web-based commerce iseroding the long-enjoyed information monopoly of real-estate agents. We illustrate this potential by reviewinga number of existing real estate websites that demonstrate the possible impact of electronic commerce on thisindustry.IntroductionIn this paper, we will explore the ways in which electronic commerce, the World-wide Web in particular, is affecting thereal estate industry. Real estate is a promising setting for studying electronic commerce because it is an information-intensiveand information-driven industry; transaction-based, with high value and asset-specificity; market-intermediary (agents andbrokers connect buyers and sellers rather than buying or selling themselves); and experiencing on-going information technology(IT) related changes.Real estate is an information-intensive business. Agents connect buyers to sellers through control and dissemination ofinformation (e.g., via the Multiple Listing Service, MLS). Agents are valued for the information skills they bring to making bothlistings and sales. Since houses are expensive, not easily describable and infrequently bought or sold, most individuals still feelthe need for assistance with this transaction from a professional. As well, these are all factors that tend to increase transactionscosts (Williamson, 1981). Much of the research on electronic commerce has focused at the other end of the spectrum, on low-cost, easily-describable commodity or branded goods, such as music CDs or computer parts, making this research settingespecially interesting.However, agents and real-estate firms are pure market-intermediaries—connecting buyers and sellers but rarely buying orselling themselves. If the value added by agents is merely as a source of information, their position is vulnerable if buyers andsellers develop new ways to find one another. For example, buyers and sellers can now use the Internet to by-pass traditionalreal-estate agents (e.g. Fletcher, 1997). Hundreds of individual websites exist to hawk homes, newspaper advertisements appearon-line and for-sale-by-owner (FSBO) listing registries have emerged. While brokers still control four out of five real estatetransactions, the level of FSBO sales has increased in recent years (Fletcher, 1997). The potential disruption of the Web has been recognized by agents (Harper, 1997; Self, 1997; Bottenberg, n.d.). To maintaintheir position, agents are stressing individual service but also creating other value-adding mechanisms, such as buyer-brokerrelationships, connections to other house-buying services, buy/sell deals, and guarantees. New forms of brokerage are evolvingand rapidly changing the structure of the real-estate industry (e.g., “The new world…”, 1997). Moreover, a trend seems to be to unbundle services typically offered by real-estate agents. For example, for a discount inthe commissions, some agencies have their customers deliver certain services themselves, including, e.g., using their homecomputers to advertise their homes on the Internet, using desktop publishing software to make fliers as handouts, organizing theirown open houses, and various advertising efforts. This shift in service delivery from the agent to the home owner will resultsavings to the home owner in the form of discounts on commission payments to the real-estate company. One such firm offershome owners who sell their house within 45 days a discount of 32.5 percent discount off the realty's commission. Sellers may,e.g., use their home computer to list and advertise their houses on the Internet or search there for prospective clients (Peters,1997). Such developments challenge us as researchers to better understand how electronic commerce might affect this industry.Steps in a Real Estate Transaction ProcessBefore we consider how the Web is and might be used, we will give a brief overview of how the real estate industry operatesin the United States, focusing on residential transactions (although the Web is being used for commercial real estate as well, e.g.,-288-Kirkpatrick, 1997). The real estate transaction process can be divided into five distinct stages, which we call listing, searching,evaluation, negotiation and execution.  This general outline probably applies in other countries as well, although the details willdiffer.Of course, there are many possible variations in the process described above depending on the particulars of the market. Forexample, in a very tight market, buying might involve searching for information about houses about to be offered so as to geta bid in more quickly, while in a weak market, pricing and positioning might be revisited after some time on the market. Theoretical BasesTo analyze the possible effects of electronic commerce in this industry, we apply the framework of coordination theory(Malone and Crowston, 1994). According to coordination theory, actors performing a process face coordination problems arisingfrom dependencies that constrain how tasks can be performed. Coordination problems are managed by activities that implementcoordination mechanisms.The way IT can be used to disintermediate the traditional agent and broker is of focal interest here, as it potentially threatensthe traditional relationship between agent and home owner. Disintermediation is the elimination or displacement of marketintermediaries, enabling direct trade with buyers and consumers without agents (Wigand, et al., 1997, p. 4). Traditionallylinkages between buyer and sellers have been managed by a host of intermediaries—agents, wholesalers, retailers, distributors,warehousing operations, forwarders and “jobbers”—who reduce the number of customer or suppliers with which a principaldeals, thus avoiding information overload for the principal. Today, examples abound in which these mediating roles have beenreplaced or eliminated because information technology permits the principals to manage the relationship directly (e.g., Benjaminand Wigand, 1995; Wigand, 1997; Wigand, et al., 1997). For example, Benjamin and Wigand (1995) and Wigand et al. (1997)show how entire levels within a market hierarchy (e.g., wholesaler, retailer) might be replaced by direct communications betweena manufacturer and customer. More generally, they suggest that an evolution from single-source channels to electronic marketsis already underway. Similarly, it is possible today to link seller and buyer of a house directly without intermediaries, as we willdiscuss in the following section.Exemplary Uses of the Web to Support Real EstateThe growth of commerce on the Internet has attracted special interest. Since the Internet is a public network, and increasinglyubiquitous, it neatly addresses the problem of connectivity between potential trading partners (Neches, et al., n.d.), extendingeven to the general consumer. Of particular interest for this research are the numerous websites being developed to supportvarious aspects of the real estate sales process. WWW sites that support the different stages (listings, searching, evaluation,negotiation, closing) in a transaction have been identified by the authors. ConclusionsAs the IT cost performance continues to improve, the unit cost of coordinating transactions continues to decline,approaching, relatively speaking, zero. These developments suggest that we can conceive of processes based on an essentiallyinfinite number of coordinating transactions. The metaphor of zero-cost transaction serves as an analytic device for looking atthe future of work, as well as firms and their processes much like the sought-after frictionless body by physicists in the MiddleAges and providing Galileo an analytic device for looking at the world of mechanics.Real estate is an information business. Consequently, it is deeply impacted by information technology and resulting change,including the assembly, analysis and transfer of information. This escalating change appears to alter the structure of the real estatemarket when (a) studying the firms that serve it, as well as (b) the consumers it serves. The information revolution that isinescapably penetrating all facets of industry is propelling the real estate industry as well into territories unknown. The structureof the industry has evolved toward small, clearly identified, specialized firms and large market-share brokerages. The middle-sized firm has been shrinking and appears to continue doing so. The technology enabling the understanding and conveying of information expands in speed, efficiency and boundary-spanning daily. This, in turn, may throw entire industries into turmoil, some become redundant while completely new onesemerge. Markets tend to reward those individuals and firms familiar with the new information technology; they penalize others.New approaches to work, knowledge, information, IT and organization structure are essential prerequisites to survive in this newenvironment. Current advances in computer technology, near friction-less, low-cost transmission of transactions easily crossingcontinents in seconds, as well as the growth of the WWW, have placed pressures on the real estate industry as never before andchallenge traditional assumptions about real estate transactions. Due to the pervasiveness of the Internet, we anticipate an erodingpower position of real estate professionals, as they adapt to the loss of exclusive access to the MLS. Future research may permitus to demonstrate how the influence, monopoly position and role of the real estate professional in the transaction processchanges.One might question if the value-added reduction by this professional results in a mere source of information while givingmore and more control over the transaction to the consumer. These developments challenge the real estate establishment andmay force real-estate agents to look for other ways to add value to the consumer. Information technology may, in turn, providea means (e.g., data visualization, broad-band telecommunications, interactive communications, dispersion of jobs and work,-289-relationship marketing, use of intelligent agents) to make this possible. Will it be possible to utilize information technologiesto serve again as the one-stop shop and in a central role for all real estate transactions? Will real-estate agents be able to capturethe consumer first in the provision of the large number of central and related real estate services as a settlement services provider?With these unknowns and more change looming, unquestionably the real-estate agent and brokerage of the future must becomeflexible, responsive and information technology-savvy.ReferencesThe new world of real estate.  (1997, September 22).  Business Week, pp. 78-87. Benjamin, R. and Wigand, R. (1995). Electronic markets and virtual value chains on the information superhighway. SloanManagement Review (Winter), 62–72. Bottenberg, T. A. (n.d.). Making the Internet Work for REALTORS® or, Getting Serious about the Web! (URLhttp://www.ired.com/news/web-biz/abc0.htm). IRED. Crowston, K. (1996). Market-enabling Internet agents. In J. I. DeGross, S. Jarvenpaa and A. Srinivasan (Ed.), Proceedings ofthe International Conference on Information Systems. Columbus, OH: ACM Press. Crowston, K. (1997). A coordination theory approach to organizational process design. Organization Science, 8(2), 157–175.Fletcher, J.  (1997, June 6).  Touring the tangled web of For-Sale-by-Owner homes. The Wall Street Journal, pp. B12. Harper, J. (1997). How to Fix the Real Estate Web (URL http://www.retechtrax.com/today.html, today2.html, today3.html,today4.html). TechTrax. Kirkpatrick, D. D.  (1997, September 10).  Prudential selling real estate on-line. Wall Street Journal, pp. B10. Malone, T. W. and Crowston, K. (1994). The interdisciplinary study of coordination. Computing Surveys, 26(1), 87–119. Neches, R., Neches, A.-L., Postel, P., Tenenbaum, J. M. and Frank, R. (n.d.). Electronic Commerce on the Internet (URLhttp://info.broker.isi.edu/fast/articles/EC-on-Internet.html). USC Information Sciences Institute. Peters, K.  (1997, November 6).  Realtor offers homesellers a cheaper option. Post-Standard, pp. C1. Self, T. (1997). The Agent and the WEB (URL http://www.ired.com/news/web-biz/agents0.htm). IRED. Wigand, R. (1997). Electronic commerce: Definition, theory and context. The Information Society, 13(3), 1–16. Wigand, R. T., Picot, A. and Reichwald, R. (1997). Information, Organization and Management: Expanding Markets andCorporate Boundaries. Chichester, England: John Wiley & Sons. Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American Journal of Sociology, 87(3),548–577.

Use of the Web for Electronic Commerce in Real Estate

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Use of the Web for Electronic Commerce in Real Estate

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