For sale by owner online: who gets the saved commission?

The evoluTion of The inTerneT in commerce has dramatically reshaped many industries such as security trading, retail banking, and travel agency industry. It had been widely predicted that the Internet would also present a serious threat to real estate agent as a market intermediary. Recent studies show, however, that in spite of growing use of the Internet by home buyers and sellers in the last several years, there is no sign of disintermediation in the real estate brokerage business. There can be many reasons why the predicted change did not occur. This study investigates the impact of the Internet on housing prices and its implications on real estate brokerage industry. We conducted an empirical study to identify the difference in price between the houses sold with a broker and those sold by the owner using the Internet. The findings of our study are interesting and provide a rationale for the continued strong presence of the realtors in housing industry. the internet and Real estate industry Over the last decade, the Internet has experienced a phenomenal growth in attracting consumers and businesses. While Internet technology has penetrated virtually every geographical area of the globe, 9 electronic-commerce (EC) has flourished in a variety of industries, including the real estate industry. It is argued by many that the EC economic model is much more efficient at the transaction cost level due to elimination of the middleman in the distribution channel. 4 This economic efficiency has led to radical development of disinter-mediation in industries such as security trading, computer retailing, and travel agency industry. The real estate industry has seen similar sign of revolutionary changes. A number of for-sale-by-owner Web portals, such as ForSaleByOwner. com, Owners.com, Zillow.com, and ISoldMyHouse.com, have emerged and thrived in the recent years. At the same time, numerous online discount brokers like ZipRealty.com, HelpUSell. com, Assist2Sell.com and Redfin.com, have come into sight and gained some momentum. In early 2006, the Internet giants Google and Craigslist decided to enter the market, offering listing services for home buyers and sellers. 6 These developments have brought enormous challenges to the National Association of Realtors (NAR), the industry's dominant power, which has already provided the Multiple Listing Services (MLS) on its official Web site, Realtor.com. Can the EC model efficiency emerge from the real estate transactions? Will the realtor be disintermediated in the near fu-ture? These have been some of the questions asked by …