SAN FRANCISCO–The real estate industry is experiencing a deep disconnect, and the proof is obvious.
Unlike in other industries, consumers are fairly consolidated, yet real estate professionals are very fragmented. Additionally, consumers are online, but the real estate industry hasn’t kept up with that move.
“Old habits die hard,” said Mike Long, CEO of Homestore.
Long presented those and other views Thursday morning at a discussion of “The future of online real estate,” at Inman News‘ Real Estate Connect 2004.
“I think we as an industry need to be having a very dynamic, deep talk about the future of online real estate,” Long said. Homestore operates Realtor.com, which he said is the most visited real estate site on the Web.
Long presented various statistics to back up his view of the growing disconnect, including numbers that show 71 percent of consumers are online, yet 96 percent of real estate advertising dollars go toward offline ads.
At one point, he showed the actual breakdown of a $1.1 million advertising budget for a large, unidentified broker. Of that total, only $10,000, or less than 1 percent, was spent for online advertising.
He said common reasons for continuing to spend such a large portion for traditional advertising channels range from the idea that it’s always been done that way to an assumption that consumers expect it to a fear that competitors will continue with it even if they pull back.
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And yet, Long said, quite a lot of information is known about consumers who use the Web when looking to buy real estate. He used data from a recent survey by the California Association of Realtors to show that online consumers use the Web to become incredibly well informed before they ever contact an agent.
Most spend about six weeks doing research before finally getting in touch with an agent. After they do pick an agent – which they tend to do more quickly than traditional real estate consumers – they spend only about two weeks before they decide on a house. They typically view six houses, compared with the 15 a traditional consumer visits.
“This is the guy I want to sell to,” Long said.
Of those online consumers, 77 percent of them find their agent from an online home listing, he said. He used that figure to ask the audience to think of how much money they spend on offline advertising.
Online consumers also have high expectations about responses from agents, which is the No. 1 reason they express satisfaction with an agent. About 25 percent expect an immediate response to e-mails inquiring about an agent. Fifty percent expect a response within two hours.
Each month, Realtor.com generates about one million requests for information from Realtors. A full 50 percent of those are never responded to, Long said.
“The online consumer won’t put up with that,” Long said.
The bigger issue, Long said, is that most real estate professionals are not good at marketing themselves on the Web. Most need some sort of intermediary to help them reach online consumers.
He said intermediaries can take three forms: preemptors, profiteers and partners. Preemptors believe consumers are overcharged, agents are overpaid and that buyers and sellers can transact with limited agent input. Profiteers recognize the disconnect and believe they can offer a service that fills that void. They understand online consumer traffic can be intercepted before it reaches agents.
Partners believe consumers are well served by agents, but that agents need help in working with those online consumers, he said. In selecting an intermediary, real estate agents need to be aware of the different types and that some companies can take more than one form.
In reference to the figures on e-mail response time, one audience member asked what the response time is for more traditional communication means such as phone calls. Long said it’s difficult to track that information, but that the industry tends to view telephone calls as more qualified leads than e-mails, so they’ll return those more quickly.
“I think that’s wrong,” Long said.
He said that’s just one example as to why agents and brokers need partners to help them sort through all those e-mails, especially since online consumers greatly value quick responses.
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