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  Web Delivers Win-Win for Buyers, REALTORS®

Web buyers more savvy, buy quicker and more satisfied during transactions, C.A.R. survey shows

By Robert A. Kleinhenz

As any REALTOR® knows, the home-purchase process is a complex and often emotional experience that can be stressful for many homebuyers. Buyers have to process a tremendous amount of information concerning neighborhoods, home characteristics, home loans, and the transaction itself, and as a result, they rely heavily on the expertise of their agents to navigate through the homebuying process.

This January, the California Association of REALTORS® conducted its fifth annual Internet Versus Traditional Buyers Survey to explore buyers’ use of the Internet during the homebuying process. The survey results revealed that more buyers used the Internet than ever before, most often tapping into the Internet early in the process. Moreover, important differences between buyers who use the Internet and those who do not were revealed with regard to their needs and expectations concerning the process and the agents on whom they rely.

Internet Buyers Do More Homework, Save Agents Time
Survey respondents were screened with the following question, “Did you use the Internet as a significant part of the homebuying process?” Those who answered “yes” were classified as Internet buyers, while other respondents were classified as traditional buyers. For the first time in the history of this survey, more than half of the respondents were classified as Internet buyers. The share of buyers using the Internet reached 56 percent in 2004, double the rate of 28 percent recorded in 2000, the first year of the survey. By comparison, traditional buyers have declined through the years, dropping from 72 percent in 2000 to just 44 percent in 2004 (see Figure 1:  Internet vs. Traditional Homebuyers, Proportion of Homebuyers Surveyed).

Consistent with findings from previous surveys, Internet buyers tended to be younger and earn more than traditional buyers. They also moved a greater distance than traditional buyers. The median distance between an Internet buyer’s new home and previous residence was 100 miles, while more than four out of five traditional buyers lived within 25 miles of their previous residence.

But key differences between the two groups of buyers become apparent when buyers described the homebuying process and their relationships with their agents. Internet buyers devoted more time to research before contacting a real estate agent, and ultimately spent less time with the agent as a result. Internet buyers spent an average of 5.9 weeks considering the purchase of a home before contacting an agent, compared to 2.1 weeks for traditional buyers. They also spent an average of 4.8 weeks investigating homes and neighborhoods prior to contacting an agent, compared to just 1.6 weeks for traditional buyers.

Having done significantly more research than their traditional counterparts, Internet buyers moved much more quickly once they began working with a real estate agent, spending just 1.9 weeks on average with their agent, compared to 7.1 weeks for a traditional buyer. In brief, because Internet buyers were better informed about the homebuying process and market conditions, agents spent less time and achieved greater efficiency when they worked with this group of buyers.

How did buyers use the Internet? As expected, they turned to the Internet to find their agent, to view homes, and to explore home-financing options. The most popular site for Internet homebuyers was REALTOR.com® (81 percent), followed by real estate company Web sites (73 percent), and Web sites with listings of homes that were of interest to buyers (63 percent).

While the Internet enabled homebuyers to better understand the homebuying process, consumers generally viewed the information they obtained from the Internet as a complement to, not a substitute for, the agent’s expertise (see Figure 2: Single Most Important Feature of the Internet). Three out of four Internet buyers relied on their agents to find the home they ultimately bought. Ultimately, the expertise, judgment, and interpretation of information that real estate agents provide their clients create value over and above market and property information by itself, even when the buyers obtain that information on their own. This should be particularly apparent given that many agents are involved in more transactions in one year than a typical buyer is involved in over his or her lifetime.

Timely Communications = Higher Customer Satisfaction

nternet and traditional buyers used different avenues to identify their agents, and also based their choice of agents on different criteria. Seven out of 10 Internet buyers selected the first agent they interviewed, while traditional buyers generally interviewed three agents before choosing one to work with. Three out of four Internet buyers found their agent through a home listing on the Internet. In contrast, nearly half of all traditional buyers turned to an agent with whom they had a prior relationship, a quarter identified their agent from a for-sale sign, and 17 percent found their agent through farm literature (see Figure 3: Factors in Selecting an Agent).

Of the Internet buyers who interviewed more than one agent, most cited multiple reasons for selecting a particular agent. Fifty-six percent indicated that the agent was the most qualified, 49 percent reported that the agent was the best prepared, and 36 percent indicated that the agent seemed like he/she would be the most responsive. Significantly, 57 percent indicated that speed of response was a deciding factor in selecting the agent. This finding was the first of many that suggested that speed and efficiency were important to Internet buyers.

Traditional buyers based their selection of an agent upon somewhat similar criteria. Nearly two-thirds of traditional buyers identified the qualifications of the agent as a determining factor, while 48 percent reported that the agent was the best prepared. However, the speed of response was decidedly less important, as none of the traditional buyers selected an agent because he or she was the first to respond.

As expected, speed of response ranked highly among Internet buyers when asked for their reasons for satisfaction with agents. Eighty-seven percent indicated that their agents were “always quick to respond.” Other reasons for satisfaction derived mainly from business aspects of the buyer-agent relationship. Seventy percent stated that their agents “worked hard on my behalf,” 57 percent indicated that their agents “found the best home for me,” and 49 percent indicated that their agents “negotiated the best deal on my behalf.”

By comparison, traditional buyers placed less emphasis on response time and more emphasis on interpersonal communications with their agents. Sixty-eight percent of traditional buyers indicated that their satisfaction stemmed from the fact that “the agent listened to what we needed,” 61 percent stated that their agents “helped find the best home,” and 42 percent said their agents “kept me up-to-date on the transaction.”

Regardless of whether an agent works with an Internet buyer or a traditional buyer, customer satisfaction with the agent and the homebuying process depends on an agent’s qualifications as well as the ability to deliver timely communications and meet client expectations. Once again, differences between the two groups of buyers emerged with respect to both the expected and actual communications. With the ease-of-use and speed associated with e-mail communications, Internet buyers generally expected faster response times from their agents than traditional buyers. For example

    • One-fourth of Internet buyers expected an instant response from their agents, compared to 2 percent of traditional    buyers.
    • Half of all Internet buyers expected a response within two hours, compared to one-quarter (26 percent) of traditional    buyers.
    • Almost two-thirds (65 percent) of Internet buyers expected a response in four hours or less, compared to 40 percent of    traditional buyers.
    • Eighty-four percent of all Internet buyers expected a response before the end of the day, compared to 73 percent of all   traditional buyers.
Did agents meet their clients’ expectations? Generally, yes. Most clients reported that their expectations concerning response time were met. However, over half of all Internet clients indicated that agents’ response times exceeded expectations, compared to less than a third of traditional clients.

While the majority of Internet buyers and traditional buyers expressed some level of satisfaction with their agents, Internet buyers generally expressed much higher levels of satisfaction with virtually all aspects of the homebuying process and the services provided by their agents compared to traditional homebuyers (see Figure 4: Satisfaction with Select Aspects of Process).  Specifically:
    • Eighty-eight percent of Internet buyers were “very satisfied” with their agent compared to 30 percent of traditional    buyers.
    • Ninety-five percent of Internet buyers were “very satisfied” with the process of finding a home, compared to 32 percent   of traditional buyers.
    • Seventy-six percent of Internet buyers were “very satisfied” with their understanding of the homebuying process,    compared to 28 percent of traditional buyers.
    • Seventy-six percent of Internet buyers were “very satisfied” with the assistance provided by their agents in searching    for a home, compared to 33 percent of traditional buyers.
    • Eighty-seven percent of Internet buyers were “very satisfied” with how well their real estate agents kept them informed   during the homebuying process, compared to 27 percent of traditional buyers.
    • Seventy-eight percent of Internet buyers were completely satisfied with their agents’ negotiating skills, compared to 41   percent of traditional buyers.

Overall, Internet buyers typically viewed their agents as a peer or team member in the homebuying process. Because they spent more time learning about the process before contacting an agent, they held a better understanding of the process and the role of the agent, and worked more efficiently with their agent. By contrast, traditional buyers generally relied upon the agent to lead them through the homebuying process, having spent considerably less time doing background research.

The agents who served Internet clients also differed from their traditional counterparts. In general, Internet clients perceived their agents to be fast and efficient professionals who worked hard on their behalf. They did a better job of meeting buyer expectations concerning the number and frequency of communications throughout the homebuying process. As a result, Internet buyers generally reported much higher levels of satisfaction with their agents compared to traditional buyers.

Given the growing use of the Internet by households in general, and because 60 percent of traditional buyers in the survey reported that they used the Internet to shop online with some degree of frequency, there is tremendous potential to direct traditional clients to the Internet for information at various stages of the homebuying process. That information may be found directly on a real estate agent’s own Web site or accessed through links, and would include the information that Internet buyers value: information about specific properties, market conditions, and assistance in understanding aspects of the homebuying process. Indeed, many traditional homebuyers knew that their agents had a presence on the Internet and that their agents had e-mail access. Thus, it may be possible to increase the efficiency of an agent’s time spent with traditional buyers by transforming a would-be traditional buyer into an Internet buyer.
Robert A. Kleinhenz is C.A.R.’s deputy chief economist.
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