Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less

Demanding consumers”Internet buyers tend to be better informed on market conditions and better prepared to act on the home they want when they start working with a realtor. Luckily for realtors, these changes don’t necessarily hurt, as long as they are able to adjust to the new relationship and realize that the new-style buyers value speed and efficiency over guidance when finding a home.”- E-marketer, Internet Home Buyers Changing the House RulesThanks to the Internet and other technological innovations, more real estate information is freely available than ever before. As a result, consumers are demanding new choices, improved services, faster transactions and lower prices. According to a recent NAR survey, the number of sellers stating that they didn’t want to pay a sales commission fee rose from 46 percent in 2003 to 61 percent in 2004. In 2004, 23 percent of Florida home sellers opted to sell independently without an agent, up from 14 percent in 2003 and nearly double the 14 percent national average, according to Planet Realtor.And Web-enabled consumers are demanding a high digital IQ when working with real estate professionals. In addition to being well-versed on their own industry-specific technology, real estate professionals now are expected to utilize laptops, mobile phones, digital cameras, personal digital assistants and global positioning systems to keep pace with Internet buyers and sellers.Downward pressure”If consumers are going to do their own home-shopping online, they expect to save some money, just as they would for using the self-service lane. That’s why they are susceptible to online discount brokers and the new affinity companies that are promoting lower commissions if only the consumers will use their agents. These business models promote the idea to consumers that they ought to be paying less money in commissions.”Realty Times Columnist Blanche EvansTraditional real estate commissions, typically around six percent of a home’s selling price, are facing downward pressure from consumers and competition. Some consumers claim traditional real estate commissions don’t reflect:- Today’s home prices. Years ago, when median-priced homes sold for $25,000, real estate commissions were typically five percent, or $1,250. Today, with South Florida median home prices around $300,000, the cost of a six percent full-service real estate commission becomes $18,000. Some brokers even charge additional fees to cover administrative costs. When you consider that today’s average homeowner sells a home every five to seven years, real estate commissions can dramatically impact your personal savings and net worth.- Owner equity. When selling properties, most homeowners calculate the cost of selling as a portion of sales price, though the commissions are paid out of owner equity. (Equity is the difference between the value of your property and amount of mortgages owed.) Consider this example: You decide to sell a property for $250,000 in which you hold 10 percent equity, or $25,000. After paying a six percent commission of $15,000, you are left with $10,000 before any applicable closing costs. In this example, the $15,000 commission is six percent of the selling price, but 60 percent of the $25,000 equity.- Services performed. Under today’s commission structure, selling a $100,000 house at six percent typically costs $6,000, while selling a $500,000 house costs $30,000. Does selling the more expensive home really require five times more effort? Your cost is the same whether the agent spends one hour or 100 hours marketing your home. This is one reason many real estate consumers find fee-for-service real estate so appealing.
Developing alternatives”Consumers want what they want, when they want it and will gravitate to the most cost-effective source to obtain it. Why? Because our “one-size-fits-all” approach to working with sellers and buyers is archaic and won’t allow consumers to access various segments of help they need in a timely fashion. That’s why .com Web start-ups are finding a receptive audience in real estate consumers and why for-sale-by-owners are burgeoning.”Julie Garton-Good, Author of “Real Estate a la Carte: Selecting the Services You Need, Paying What They’re Worth”Until recently, you have had few practical alternatives to the traditional full-service, full-commission real estate transaction with a broker. Most sellers paid a single commission fee for a full range of real estate services, whether they needed them or not. Now traditional real estate agencies face the challenge of identifying new services that have value to today’s sophisticated online and empowered consumers.One result is an “unbundling” of traditional one-size-fits-all real estate services for consumers who want more control over real estate transactions and their associated costs. If you’re willing to take on some tasks traditionally performed by agents and brokers, you could receive lower transaction costs. You might benefit from the following emerging alternatives:Fee-for-services”Consumers want assistance from real estate professionals, but don’t want to pay for it in the form of traditional commissions,” says a la Carte real estate Pioneer Julie Garton-Good. Garton-Good has been preaching the fee-for-services gospel for more than 20 years. As the name implies, you can choose which tasks you feel comfortable performing and hire qualified real estate professionals to do the rest. Many traditional real estate brokerages are beginning to offer a more menu-based service plan. For example, you may not mind listing your home and holding open houses, but you may want assistance with contracts and closings.One-stop shoppingIn response to dwindling margins and the rising costs of technology and lead generation, some real estate companies are attempting to combine traditional and Web-based services to provide consumers a single source for all their real estate needs. One-stop shopping sites generally provide or partner with lenders, insurers, title companies, real estate attorneys and others to facilitate all aspects of buying and selling. In addition, some sites are adding home-improvement and related services to stay in touch with consumers between buying and selling transactions.Web-based discountersAlthough many Web-based real estate companies flamed out in the dotcom era, scores of new companies have emerged to take their place. By offering targeted services such as flat-fee MLS listings, buyer rebates and AVM tools, these sites are appealing to independent buyers and sellers who prefer to take a more active role in transactions. In addition to listings, some sites also offer how-to articles and advice for those who choose to go it alone.
Tradition + technology + turbulence = opportunitiesSo, given the trends, changes and ongoing industry evolution, what can independent buyers, sellers and investors expect in this new era of real estate?o The Web and other technologies will continue to evolve and transform the $1.3 trillion real-estate industry. Technology will continue to reduce the time, expense and complexity of manual processes, and increasingly sophisticated search and valuation tools will play a more strategic role.o Free and low-cost real estate resources will continue to be available and even multiply on the Web. In real estate, knowledge truly is power. Consumers will try to use their power to gain more control of the real estate process and subsequently expect to be compensated in the form of reduced and fee-for-service commissions.o The role of traditional real estate brokerages will evolve as Web-enabled consumers become more knowledgeable. This likely will trigger some restructuring and consolidation of traditional brokerages, but will also drive the development of innovative new practices targeting online and empowered consumers. Real estate professionals will focus more on promoting their local knowledge and industry expertise, while consumers will perform some buying and selling tasks on their own.o Traditional real estate commissions and profitability levels will continue to face downward pressure from various sources. The future will be profitable for brokerages that are able to extend their core expertise of neighborhood and industry knowledge into flexible new consumer-centric offerings.o The traditional high-touch, full-service real estate agency is evolving, not disappearing. Real estate professionals who provide exceptional service and value to their customers will always be in demand.You now can find more real estate knowledge, tools and resources on the Web than ever before, enabling you to buy and sell with increased confidence. For real estate professionals, reinventing the industry means making hard decisions, changing processes and managing new opportunities. But for consumers, reinvention in real estate is a winner, hands-down.Learn more at

Procedures for Profitable Real Estate Investments in Chile

When you get to know about the prospects that exist in Chile real estate markets, you would be surprised that investments in Chile are better than in several other markets. The real estate environment in developed countries offers little scope for appreciation in the near future. On the other hand, Chile market is on a growth path and you can reap maximum benefits by investing in Chile real estate.The Republic of Chile is a narrow, long coastal area between the Andes Mountains and the Pacific Ocean. Before you think of making any real estate investment in Chile, you would do well to know the basic features of the country and people, so that you could make informed decisions on your investment in Chile. Once you understand Chile better, the problem of how to reap maximum benefits from your investment in Chile becomes much easier.Geography of ChileThe climate in Chile varies from temperate rainy climate in the southern region to the Mediterranean climate in the central region and to the driest desert of the world in the northern region of Atacama. The central area is the most prominent in population terms and the agrarian economy, being the political and cultural center of the nation. The southern region is full of green forests, string of volcanoes, lakes, and grazing lands. The coastal region in the southern Chile contains several islands, fjords, canals, inlets, and twisting peninsulas.Economy of ChileYou might be surprised to know that Chile is the leader of the Latin American countries in terms of quality of life, competitiveness, economic freedom, political stability, low level of corruption, globalization, and lower poverty rates. After the introduction of economic reforms in 1990s, the country had been witnessing annual growth above 4%. In the past decade, the growth rate had been between 5% and 7%. In 2006, Chile had the highest nominal per capita GDP among the Latin American countries. In the same year, the government had a fiscal surplus of $11.3 billion, about 8% of its GDP. Chile is one of the very few countries in the world to maintain fiscal surplus for the last several years. It is also the economy with the fastest growth in the last 6 years in the entire Western Hemisphere.Culture and TourismThe official language is Spanish but the spoken accent is very different from other South American countries. English had been mandatory and most schools teach the language. Tourism is a growing industry in Chile. Estimates by the National Service of Tourism reveal that about 2 million people visit Chile every year. The ski resorts in the central Andes region, such as Valle Nevado and Protillo have international reputation. Laguna San Rafael National Park and its many glaciers in Patagonia in the southern Chile is a major tourist attraction, along with Torres del Paine National Park, the Chiloe Archipelago, and Easter Island situated in the Pacific Ocean are the other famous travel destinations in southern Chile. The Valparaiso coast near Santiago with its numerous beach resorts and Vina del Mar with its casino, beaches and annual song festival attract large number of visitors.Real Estate Investment in ChileIn spite of the above features of strong economy and large tourist attractions, the potential of Chile had not been fully realized by many overseas real estate investors. If you discuss about foreign real estate investments, people usually mention Brazil or Argentina in South America as good places. Further, you are advised not to think about investing in Venezuela and Columbia, due to their bad reputation from drug cartels, dictatorship political decisions, and fierce internal fighting. Chile is not even mentioned as an investment destination, since very few know about the opportunities that exist in Chile for profitable real estate deals.Business Culture of ChileChile is a country with large families even now. Business could be developed mostly through word-of-mouth approach, since very few consulting firms exist in many places. However, the people of Chile are cordial and quite helpful, when they believe that you are sincere and honest. Once you are trusted by the locals, you would be amazed to find the response and offers you receive for investing your money wisely in Chile. The private property laws in the country are also well established. The legal institutions of the country are quite strong and the laws are very clear. Contracts are strictly honored. Banks are highly reliable and opening of foreign exchange accounts are simple. Corruption is also quite low.Impact of Global Slowdown on Chile Real Estate MarketThe global downturn in economic growth and real estate prices had reflected in the Chilean market also. Office vacancy rates are lower in Santiago, the capital of Chile and other major cities, compared to the rates that existed before 2008. In the home market segment also, people hesitate to obtain home mortgage loans due to uncertainty about the impact of world economy affecting growth in Chile. However, the lower prices offer a golden opportunity to purchase property in these cities and in other places in this country. According to the real estate dealers in Santiago, the city had provided the highest returns on initial investments, while the returns on tourist centers like Vina del Mar had not been that much better, comparatively. Still, it is very clear that any property investment in Chile would give higher returns in long-term, due to the anticipated growth during this decade.Investing in Real Estate in ChileIn Santiago, small apartments with 1-2 bedrooms increase in value by about 8% annually, while value growth of larger properties are around 5% at present. When it comes to buying properties in Chile, there is no discrimination between locals and foreigners. International real estate investors are allowed to purchase property in all parts of the country, except in areas considered vital for national security. The country laws do not impose citizenship or residency requirements for property purchase. However, foreign buyers should obtain a Chilean income tax identity proof or RUT before legal acquisition of properties in Chile.ConclusionIf you choose to buy a property through a local real estate agent in Chile, the sales commission payable varies between 1.5% and 3%, which is normally shared by the seller and the buyer equally. This procedure would avoid undesirable problems in issues such as building permits, inheritance claims, tax matters, etc., while giving you detailed research data on the property and its present, as well as future value. Hence, buying through a local real estate agent is certainly advisable and any investment in Chile would definitely maximize your chances of getting better returns on the investment.