Looking at the overall market for U.S. real estate, it's hard to imagine how the Internet -- and the massive stores of data the Web provides on residential property -- has done anything to erode real estate agents' profits.
After all, in the past three years, average home prices have continued to climb even as the general economy has remained mired in recession and sluggish recovery. If anything, the excesses of the dot-com boom and bust prompted cautious investors to shell out more for homes, viewing real estate as a less risky place to park cash.
Real estate agents, who earn a percentage commission for handling transactions, have reaped some of the rewards of higher home prices, too.
Nonetheless, the boom hasn't all been a boon for brokers.
While Americans are buying more homes at higher prices, brokers are seeing the average percentage they earn on sales decline. As their percentages shrink, they're also facing heightened competition from Internet-based agents that attempt to beat the traditional agents' rates.
Responding to competitive concerns raised by the spread of so-called virtual office websites, or VOWs, which post online listings from multiple brokers, the National Association of Realtors this week adopted a new policy governing how properties can be listed online.
The policy, effective in January, would allow VOWs to publish real estate listings that are publicly available, but would allow individual Realtors to keep properties they represent out of the online database.
According to Steve Cook, the association's spokesman, the new plan will "make a great deal more information available to more consumers than ever before" and will help Internet brokers by establishing a concrete set of rules to follow.
But upstart virtual real estate agents had the opposite reaction. If Realtors can opt to keep listings off the Net, operators of the virtual office websites say home buyers will in effect have fewer choices.
"They went out of their way to make it as consumer-unfriendly as they possibly could," said Patrick Lashinsky of the new policy. Lashinsky is director of marketing for zipRealty, a VOW in Emeryville, California, that provides listings to Yahoo Real Estate. He said the rules will make it more difficult for an online service like zipRealty, which lures real estate buyers by offering a 25 percent rebate on standard commission costs for property transactions, to provide a thorough set of local listings.
At the heart of the debate is the distribution of data from the Multiple Listing Service, or MLS, the system used by most real estate firms to share information about homes that are for sale. While Realtors already make some sales information available on search sites like Realtor.com, Cook says the MLS offers far more detailed information on individual properties.
Mark Hayden, marketing director for Houston-based VOW eRealty, said he is fearful the association's new policy will harm his business.
"Because we deliver the client's MLS information via Web browser, it could make the data that our clients see incomplete," Hayden said. He blames the decision to allow withholding of listings on large brokerages that were worried about losing business to Internet real estate agencies such as eRealty.
The National Association of Realtors' Cook denies that this was the case, noting that many of the most prominent VOW sites are actually run by licensed Realtors. Moreover, Cook said, publishing real estate listing data over the Net is generally helpful for Realtors since it allows customers to do more research on their own, saving agents' time and resulting in more informed purchases.
As it is, real estate buyers who shop online can choose from sites with a broad range of business models. In addition to traditional real estate agents who list properties of sellers they represent, buyers can turn to so-called real estate "portals" like Realtor.com and Yahoo Real Estate, which provide information on properties but don't handle transactions.
VOWS, which represent buyers but list properties from multiple sellers, are yet another option. Currently, VOWS generate only a small portion of sales, but according to Lashinsky, their popularity is growing rapidly.
He said the number of property transactions they handled "more than tripled" in 2002 compared to 2001.
Although it's not clear whether VOWs are responsible for contributing to lower commissions for traditional real estate agents, percentage fees are declining.
A survey by Real Trends, a trade publication for the brokerage industry, found that the average brokers' commission fell from 5.4 percent in 2001 to 5.12 percent in 2002, capping several years of consistent declines. In the past, brokers' commissions have averaged 6 percent or higher.
Hayden attributes a good bit of the decline in commissions to competition from discount online real estate agencies. However, Thomas Davidoff, a real estate professor at the University of California at Berkeley's Haas School of Business, said this isn't necessarily the case.
Particularly in hot real estate markets, where high-priced homes manage to sell quickly, lower percentage commissions still can provide huge fees for real estate agents on relatively easy sales.
"You don't need the Internet for it to make sense for commissions to be lower than they are," Davidoff said.
