WASHINGTON (January 17, 2006) – Technology
is transforming how Americans buy and sell homes in unexpected
ways, including how they work with real estate agents and brokers,
according to one of the largest surveys of real estate consumers
ever conducted. The study was released today by the National
Association of Realtors®.
Nine out of 10 home buyers use a real estate agent in the
search process, but use of the Internet to search for a home
has risen dramatically over time, increasing from only 2 percent
of buyers in 1995 to 77 percent in 2005; it was 74 percent
in 2004. The next largest source of information for buyers
is a yard sign, mentioned by 71 percent of buyers.
When asked where they first learned about the home purchased,
24 percent of buyers identified the Internet, up strongly from
15 percent in 2004 and only 2 percent in 1997. Although most
buyers use an agent to complete the transaction, 36 first learn
about the home they buy from a real estate agent and 15 percent
from yard signs; five other categories were 7 percent or less.
The 2005 National Association of Realtors® Profile of
Home Buyers and Sellers, based on more than 7,800 responses
to a questionnaire mailed to a large national sample of consumers
located through county deed records, is the latest in a series
of surveys evaluating demographics, marketing and other characteristics
of home buyers and sellers.
NAR President Thomas M. Stevens from Vienna, Va., said the
findings underscore the complexity of the home-buying process. “Buyers
who use the Internet in searching for a home are more likely
to use a real estate agent than non-Internet users, and consumers
rely on professionals to provide context, negotiate the transaction
and help with the paperwork,” said Stevens, senior vice
president of NRT Inc.
“The real estate industry today bears little resemblance
to the way we did business 10 years ago. It is hard to find
another industry that has adopted technology so readily to
its customers,” Stevens said. “Realtors® have
invested a lot of time and money in building information technology,
and because of these efforts, more consumers than ever are
using the Internet in their home search.”
The survey shows 81 percent of buyers who use the Internet
to search for a home purchase through a real estate agent,
while 63 percent of non-Internet users buy through an agent;
non-Internet users are more likely to purchase directly from
a builder or an owner they knew in advance of the transaction.
“We find that the level of for-sale-by-owners is on
a sustained decline and is now at a record low. In addition,
a growing share of FSBO properties are not placed on the open
market – they’re private transactions,” Stevens
said.
A clear downtrend in FSBOs has been seen since that market
share experienced a cyclical peak of 18 percent in 1997. Only
13 percent of sellers conducted transactions without the assistance
of a real estate professional in 2005, and 39 percent of those
FSBO transactions were “closely held” between parties
who knew each other in advance, up from 32 percent in 2004.
The FSBO market share was at 14 percent in both 2003 and 2004.
NAR began tracking the FSBO market in 1981; the record was
20 percent in 1987.
“In reality, the term ‘FSBO’ is a misnomer
when used to broadly describe homes sold directly by owners.
Since two out of five of these transactions are between related
parties, and those properties are not placed on the open market,
we believe that ‘unrepresented sellers’ would be
a much more accurate term to describe this segment,” Stevens
said.
The median home price for sellers who use an agent is 16.0
percent higher than a home sold directly by an owner; $230,000
vs. $198,200; there were no significant differences between
the types of homes sold. “While many unrepresented sellers
are motivated to save on paying a commission, we think the
price difference speaks for itself,” Stevens said. “Owners
without professional assistance also have problems in understanding
and completing paperwork, prepping the home for sale, getting
the right price and selling within the time planned.”
Survey data don’t explain the price difference, but
Stevens offered some context. “Agents know best how to
prepare a home and maximize value, agents provide broader exposure
to the market and are more likely to generate multiple bids,
and the portion of sales that are between private parties are
likely to be at a lower price than those on the open market.”
“The housing market today contrasts sharply with predictions
a decade ago that the Internet would ‘disintermediate’ real
estate agents, including speculation that NAR membership would
fall in half. In reality, it’s grown dramatically – selling
real estate is not like selling a book or buying an airline
ticket,” he said.
Realtor.com was the most popular Internet resource, used by
54 percent of buyers, followed by multiple listing service
(MLS) Web sites, 50 percent, real estate company sites, 38
percent, real estate agent Web sites, 31 percent, and local
newspaper sites, 15 percent; other categories were smaller.
Married couples make up the largest share of the housing market,
accounting for 61 percent of transactions. Single women purchase
21 percent of homes while single men account for 9 percent.
Unmarried couples were 7 percent of the market, and 2 percent
were listed as other. In 2004, single women were 18 percent
of buyers and single men were 8 percent.
The typical buyer walked through nine properties, searched
eight weeks to buy a home and moved 12 miles from their previous
residence. The typical seller placed their home on the market
for four weeks, had lived in it for six years, moved 15 miles
to their new residence and previously owned three homes, including
the one just sold.
NAR’s senior economist Paul Bishop said both buyers
and sellers use traditional methods to choose a real estate
agent. “Word-of-mouth recommendation is the most common
way to learn about real estate professionals,” Bishop
said. “The most important criteria, whether you’re
buying or selling, are the individual agent’s reputation
and their knowledge of the local market.”
In finding a real estate professional, 44 percent of buyers
were referred by a friend, neighbor or relative, 11 percent
used an agent from a previous transaction, 7 percent found
an agent on the Internet, 7 percent met at an open house and
6 percent saw contact information on a “for sale” sign.
Six other categories accounted for smaller shares each.
The most important factor in choosing an agent was reputation,
according to 41 percent of home buyers, followed by an agent’s
knowledge of the neighborhood, 24 percent. In terms of desired
qualities in an agent, three categories were rated as very
important by more than nine out of 10 buyers: knowledge of
the purchase process, responsiveness and knowledge of the market.
Of buyers who use an agent, 63 percent choose a buyer representative.
Satisfaction with real estate agents is very high, with 85
percent of buyers saying they were likely to use the agent
again.
Seller responses are comparable: 43 percent chose agents based
on a referral by a friend, neighbor or relative, and 28 percent
used their agent previously; 10 other categories were 5 percent
or less. Fifty-seven percent of sellers said reputation was
the most important factor in selecting an agent, followed by
their knowledge of the neighborhood, 17 percent. Eighty-two
percent said they were likely to use the same agent again or
recommend to others.
Four out of ten respondents are first-time buyers, a finding
that is consistent for more than a decade. The median age of
entry-level buyers is 32 years, also typical over time, and
the household income was $57,200. They made a downpayment of
2 percent on a home costing $150,000, but 43 percent purchased
with no money down. Of first-time buyers who made a downpayment,
23 percent received a gift from a friend or relative.
The typical repeat buyer is 46 years old and had a household
income of $83,200. They placed a downpayment of 21 percent
on a home costing $235,000, but 11 percent of repeat buyers
paid cash for their home. In all, 94 percent of buyers and
sellers believe their home purchase is a good financial investment.
“To underscore the value of housing as an investment,
all you have to do is look at the difference in how repeat
buyers purchase their next home – the wealth effect of
homeownership provides the greatest source for their downpayment,
which is significantly larger,” Bishop said. Aside from
sellers who pay cash for their new home, 66 use the equity
from their previous home for a downpayment.
The most important factors in choosing a location to purchase
a home are neighborhood quality, cited by 68 percent, close
to a job or school, 43 percent, close to family or friends,
36 percent, and the school district itself, 23 percent; seven
other categories were under 20 percent.
NAR mailed an eight-page questionnaire to a national sample
of 145,000 home buyers and sellers, based on county records,
who purchased their homes between August 2004 and July 2005.
It generated 7,813 usable responses; the response rate was
5.4 percent.
The 2005 National Association of Realtors® Profile of
Home Buyers and Sellers can be ordered by calling 800/874-6500
or going to the Realtor.org store. The cost is $50 for NAR
members and $125 for non-members.
