Real estate transaction management systems have rebounded from an early implosion and are slowly gaining ground in the industry, according to a study by Clareity Consulting, a real estate services company.
“The last five years have seen a slow but steady maturation and evolution within the space. Clareity believes the foundation has been built and that transaction management systems are read for primetime,” the report states. The latest report, “Transaction Management: A State-of-the-Industry Report,” is a follow-up to a white paper that the company released in February 2003.
The company estimates that over $120 million was invested in the earliest transaction management technology, “about $100 million of which is ‘gone.’ Several of the companies have closed, some sold their assets for pennies on the dollar, several of the technologies were killed off or shelved by the acquirer, and a few survived under new ownership. Only a few of the companies that pioneered online real estate transaction management were left standing by the end of the Internet gold rush.”
But the systems have come a long way in the past six years, the report notes. “While some players have disappeared, several have remained active and are thriving. New players are also entering the marketplace with increasingly sophisticated products.”
In the report, the company defines an online transaction management system as an online platform and tool that supports some basic functions, including: task tracking and management; digital document management; participant set-up and security; communication, notification and login; service ordering; and transaction searching and reporting.
The are some key drivers that have led real estate professionals to adopt transaction management systems, the report states, including: improved efficiency, lower transaction costs, increased accuracy, higher customer satisfaction and additional revenue. The Clareity report also states that real estate brokers could reduce their exposure to some legal claims by providing more control over files, and some insurance carriers are offering discounts to brokers who use systems that include such features as auditable “paper trails.”
And the systems could allow brokers to improve their ancillary services offerings by facilitating access to companies engaged in affiliated business arrangements, for example, the report states. Successful systems, though, should be “vendor neutral” and “allow for unlimited choices and welcome new participants in order to strengthen the value of the network,” while not hampering existing business relationships, according to the report. Integration with other brokerage systems and MLS systems is “a must,” Clareity also reports.
In a 2004 survey of real estate agents, Clareity found that 86 percent of respondents said they were either “interested” or “strongly interested” in using a transaction management system. But that is not to say that most agents will be the hands-on users of the systems – Clareity also estimates that about 10 percent of agents who have access to transaction management systems are primary users. It is more common for assistants or transaction coordinators to work with the systems, the report notes.
Large brokers are the ones that are most aggressive in implementing transaction management systems, according to the report, and “Clareity knows of several very large brokers who are in the process of contracting with transaction management system vendors.”
“On all fronts, transaction management system usage is on the rise. (The systems are) moving from being a product used by only early adopters on the bell curve to being a product used by the early majority, a much larger segment of the market.” These brokers are in some cases forging ahead with their own systems before MLSs in their operating areas have their own systems in place. Large franchises, meanwhile, have been silent on whether they are considering implementation of a transaction management system, the report states.
“Clareity tends to think they are not. Franchises simply span too large a geographic footprint. Franchises…lack the in-depth influence over their individual offices that will be required to implement transaction management systems successfully.”
As there are several competing transaction management products emerging across the country, Clareity noted in the report that standards are needed to facilitate the easy exchange of data between these various systems and to avert a technology “train wreck” in which the various systems do not communicate well with one another and users must enter the same data multiple times in a real estate transaction.
Clareity contends in its report that this problem can be avoided “by allowing (MLS) participants to use their own transaction management system and having these systems interoperate.” Clareity stated in the report that it does not believe that a National Association of Realtors entity will attempt to drive the standard for transaction management systems, as some industry players have suggested.
The company supports the development of standards through a cross-section of interested parties. “Those involved must make a real commitment in both time and dollars,” the report states, and “timelines should be established early on in order to ensure the process moves forward at a reasonable pace.”
The report also dispelled some myths about transaction management systems. While these systems can improve workflow, communications and automations for real estate transactions, they will not significantly expedite loan processing, the inspection process, moving process and the overall transaction, the report states.
Also listed in the report are the pros and cons of MLS-centric systems and broker-centric systems.
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