Commercial Real Estate Broker Chicago IL

The Internet has changed so much in our real estate industry. But on the residential side of the business, the changes have definitely been much more profound. Having one's own agent website, locating prospects through the Web, closing transactions by utilizing automatic email "drip" message campaigns for both client and prospect follow-up, and having downloadable forms and information packages on one's website are all very much the norm on the residential side of the business.

But on the commercial side, it's still very rare to find an agent who employs any of these approaches in his or her own real estate business. While this general lack of technology on the commercial side of the industry is surprising, it may also prove to be the industry's saving grace.

Residential agents have done an outstanding job of making information available on the Internet; unfortunately this accomplishment is now being used against them. Home buyers and home sellers can easily find information on most every home available in their area, and discount brokerage companies are using this ease of access to drive commission rates down.

In addition, the public now expects agents to continue providing this information on the Internet for free.

Basically what has happened here is you have hundreds of thousands of real estate agents continually inputting data into the system to make it work, while others are primarily using the system to reduce the commissions that these agents get paid.

As a real estate agent, how does this make you feel?

About ten years ago, when I was managing a real estate office for Lee & Associates Commercial Real Estate Services, the company employed an executive by the name of Jesse Harrill. Jesse was a very bright man when it came to both information systems and their applications in corporate America. And at one time, he was even in charge of the most powerful computer in the world operated by the Department of Defense. But with regard to data and information systems in the business world, Jesse would often say something like this: "Don't ever give away your data. Once you give away your data, you risk losing complete control of your business."

Truer, more prophetic words have rarely ever been spoken in our industry.

With all the data being continuously supplied online by hard working real estate agents, others are seizing the information and using it against the agents themselves. But what's interesting, since the commercial side of the business is much more fragmented in its dissemination of online listings, is the fact that this information is more difficult to use against commercial agents to drive down their commissions.

Discount commission companies in the real estate industry can really thrive when they have streamlined access to a very efficient multiple listing service, but if they had to employ people to keep listing information current on an ongoing basis instead, this would make it more difficult fo...

According to no less an authority than an editorial in The Washington Post, "not only have the 6 percent commissions earned by purveyors of real estate begun to seem outlandish in an era of exponential growth in housing prices, there is evidence, nationally, of local real estate agents trying to preserve their high fees by preventing or hampering online and discount competitors." "( Electronic Competition ", May 20, 2005)

This is a remarkable editorial comment from a remarkable institution, and it should certainly raise a question: Just what standards apply both to The Washington Post and the rest of the world?

For instance, let's consider those "outlandish" 6 percent fees.

"Consumers," says The Wall Street Journal, "are bargaining harder with real-estate agents over commissions, which have become much more lucrative for agents as home prices have soared. The average national commission has fallen to about 5.1 percent from 6 percent in the early 1990s, industry publication Real Trends estimated last year." (" Realtors May Revise Internet Policy ", May 16, 2005)

So commission rates are actually falling -- exactly what the Post advocates and expects. And there must be fee and service competition, otherwise how could consumers bargain?

Commissions, says the Post, have "begun to seem outlandish in an era of exponential growth in housing prices." In other words, as home prices have risen, the Post's expectation is that real estate fees should decline.

If there was a lack of real estate competition one could agree with the idea that fees are somehow fixed, but brokers who offer something other than traditional services and fees seem to be doing quite well.

As an example, Help-U-Sell Real Estate -- which describes itself as "the nation's first and largest set fee real estate company" -- says it has saved sellers $130 million in the past 12 months. The company also reports that it ended 2004 with 700 offices, up 780 percent since 1999. Help-U-Sell says it expects to have 1,800 offices by 2008.

Why is it, exactly, that real estate fees should decline with rising home values? For instance, has the cost for advertising in the Post been reduced as local home prices have risen?

Imagine that an editorial writer can work at a newspaper with a circulation of 20,000 or at a paper that sells 700,000 copies a day. Which paper will pay more? Is not an editorial which keeps a large enterprise competitive more valuable than the same editorial in a smaller outlet?

The Post's editorialists say "there is no reason why the cost savings and productivity increases that the Internet has brought to many other industries -- and that have often been passed on to customers -- should somehow fail to touch the real estate industry, too."

The assumption here is that Internet development always results in reduced consumer costs. But is this true?

For instance, despite tons of medical and legal advice online have legal fees or medical bills declin...