Real Estate Products, Services

One of the great puzzles of our time is the matter of productivity. We like to think that the electronic revolution has made us more fruitful, but where is the evidence when it comes to real estate brokerage?

The brokerage community is often criticized because it is assumed that huge numbers of brokers mean that the provision of real estate services is needlessly expensive. As a result, there have been continuing efforts to make real estate brokerage more efficient and productive, suggestions which typically mean somehow reducing the number of real estate licensees and paying less to those who remain.

In general terms productivity works like this: If ten people produce 100 widgets in a day that's great. If they produce 200 widgets in the same time and with the same resources then productivity has doubled.

But while enhanced productivity is usually held as out as a universally-desirable goal, that's not always the case. If ten people produce 100 widgets in a day that remains great, but if five people produce 100 widgets in a day with the same resources, productivity has doubled. That's great news -- unless you're one of the five people who lost a job.

But what about real estate? We have more than two million licensees and more members of the National Association of Realtors than in the past. Can we have both more active licensees and greater productivity? With so many people now using the Internet to find property and mortgage information is there any evidence suggesting that brokers have become more efficient in the electronic era?

Consider 1982 -- a joyous year when computing was dominated by such brands as Apple, Kaypro, and Osborne; removable disks really were floppy, and online real estate was a futurist's dream. That year, says NAR, it had 617,521 members and 1,990,000 existing homes were sold -- 3.22 properties per member.

In 1992, the Internet and real estate began to take off. Large real estate areas were operated by such online services as Genie, CompuServe, and AOL. Listings could be found online, homes were sold, buyer brokers located, mortgage rates were posted daily and message boards buzzed with real estate talk. The industry numbers looked like this: 743,921 NAR members and 3,479,000 existing home sales -- 4.67 properties per member.

Last year, 2002, was great for real estate even as much of the economy faltered. Low mortgage rates and worries on Wall Street made housing look like the most conservative investment around. On the Web, thousands of sites offered real estate data, listings, advice, information, forms, photos, and mortgage rates. This time around NAR had 860,000 members and 5,563,000 existing properties were sold -- 6.46 per NAR member, twice the productivity per member when compared with 20 years earlier.

In effect, there's evidence that brokers have become substantially more productive and efficient over time, but such evidence is not flawless. For instance, not all homes are sold by NAR members -- there are real estate licensees who are not NAR members and they make some portion of all home sales. Also, not all homes are sold by real estate brokers and agents -- some properties are marketed by owners, estates, auctioneers, courts, etc. Lastly, not all home sales involve existing properties -- there are also new homes, commercial sales, etc.

Is the increase in transactions per NAR member a direct result of the Internet and the electronic revolution?

Given websites, cell phones, and personal computers it's easier for brokers and salespeople to use time wisely, speed clerical chores, see more people, advertise at lower cost and market to larger audiences than 20 years ago.

The catch is that the averages mask what's really happening. The benefits of the technology revolution are not evenly distributed. According to NAR's 2001 profile of member residential firms, three-quarters got 10 percent or less of their business from the Internet and 22 percent got nothing. Meanwhile, 5 percent of all residential firms obtained at least half their business online.

As the real estate marketplace cools, fewer transactions will occur and there'll be a reduction in the number of active licensees vying for buyers and sellers. Who will survive? To the productive and plugged-in will go the laurels -- and the checks.

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