Technology is dominating many aspects of the real estate transaction process, but the most important factors are purely human, according to an industry survey of home buyers and sellers.
Most sellers prefer full-service brokerage, where brokers handle all aspects of the transaction process from listing to closing, according the survey, which found that 83 percent of sellers use full-service brokerage, 9 percent use limited services and 8 percent use minimal service, such as simply listing a property on a MLS.
The study, released by the National Association of Realtors, was based on a mailed questionnaire and asked buyers and sellers about preferences and habits in real estate transactions.
NAR 2006 President Thomas M. Stevens from Vienna, Va., said historic comparisons are not available, but that limited and minimal services were a relatively small market share in the past and the question was not part of previous surveys. “Anecdotally, there’s been a modest rise in recent years, and in all probability a somewhat higher level of sellers used full-service brokerage through the early part of this decade,” said Stevens, senior vice president of NRT Inc.
“Our sense is that professionals will continue to experiment with business models and that the lion’s share of consumers will continue to opt for full-service brokerage, but there’s room for all ethical business practices in this industry,” he said.
Additional findings show consumer satisfaction with the level of brokerage service varies, with 71 percent of sellers being very satisfied with their full-service experience and another 24 percent somewhat satisfied. Limited services also received high marks with 76 percent being generally satisfied; however, 50 percent of sellers using minimal service were dissatisfied with their experience.
The survey also found a downtrend in the number of for-sale-by-owner transactions, falling from 13 percent of market share in 2005 to 12 percent today. “When you factor out the properties that were not placed on the open market, the actual number of FSBOs is only 7 percent – the rest are simply unrepresented sellers in private transactions,” Stevens said. NAR began tracking the FSBO market in 1981; the record high was 20 percent in 1987.
The median home price for sellers who use an agent is 31.9 percent higher than a home sold directly by an owner; $247,000 versus $187,200, according to the NAR survey. However, unassisted sellers in this survey, unlike agent-assisted sellers, were more likely to be in a small town or rural area, and their income was 7.2 percent lower than sellers using agents – suggesting their homes may be worth less than the typical home sold by an agent.
The most difficult tasks reported by FSBOs are preparing the home for sale, understanding and performing the paperwork, and selling within the desired time frame.
To find a real estate agent, the survey shows the most important factor for both buyers and sellers is word-of-mouth recommendation. The most important criteria in choosing an agent are reputation and trustworthiness.
The typical home buyer is 41 years old, earned $71,800 and purchased a home costing $214,000 that was 1,815 square feet in size, according to the survey. They searched eight weeks and visited nine homes before making a decision.
Sixty-one percent of buyers are married couples, a record 22 percent are single women, 9 percent single men, 7 percent unmarried couples and 1 percent other. Eleven percent were born outside of the United States.
Three-quarters purchased a detached single-family home, 9 percent a townhouse or rowhouse, 11 percent a condo and 5 percent some other kind of housing; 78 percent of respondents purchased an existing home and 22 percent a new home. The median distance from the previous residence was 13 miles, and 55 percent of all homes purchased were located in a suburb or subdivision.
The biggest factors influencing neighborhood choice are quality of the neighborhood, convenience to job and convenience to family and friends. Other factors with high responses include neighborhood design, convenience to shopping and quality of the school district.
The number of first-time buyers dropped to 36 percent of respondents, compared with 40 percent in the previous three annual surveys. The median age of a first-time buyer is 32, a fairly consistent finding since 1981, with a median income of $58,300. They purchased a home costing $165,000 and plan to stay in that home for six years. The median downpayment by first-time buyers was 2 percent, but 45 percent purchased with no money down. Of first-time buyers who made a downpayment, 22 percent received a gift from a friend or relative, usually their parents.
The typical repeat buyer is 47 years old, earned $81,900, purchased a home costing $249,000 and plans to stay in that home for 9 years. They made a median downpayment of 16 percent, but 11 percent paid cash for their property. Of those making downpayments, 62 used the equity from their previous home.
Buyers used a wide array of resources in searching for a home: 85 percent used a real estate agent, 80 percent the Internet (up from 77 percent in 2005), 63 percent yard signs, 55 percent print or newspaper ads and 47 percent attended open houses. Smaller categories include a home book or magazine, home builders, television, billboards and relocation companies.
When asked where they first learned about the home purchased, 36 percent of buyers identified a real estate agent; 24 percent the Internet; 15 percent from yard signs; 8 percent from a friend, neighbor or relative; 8 percent home builders; 5 percent a print or newspaper ad; 3 percent directly from the seller; and 1 percent a home book or magazine.
Eighty-one percent of home buyers who used the Internet to search for a home purchased through a real estate agent, in contrast with 63 percent of non-Internet users who were more likely to purchase directly from a builder or from an owner they knew in advance of the transaction.
Local metropolitan multiple listing service (MLS) Web sites were the most popular Internet resource, used by 53 percent of buyers, followed by Realtor.com, 52 percent; real estate company sites, 41 percent; real estate agent Web sites, 40 percent; local newspaper sites, 14 percent and real estate magazine Web sites, 6 percent; other categories were smaller.
In order of priority, home buyers want agents to help find the right house, negotiate the terms of the sale, determine what comparable homes were selling for, help with price negotiations, help with paperwork, help determine how much they could afford and help with finding and arranging financing. Three-quarters of buyers use only one agent in the search process.
When asked about the benefits provided by an agent, 55 percent of buyers said agents helped them understand the process, 40 percent said their agent pointed out unnoticed features or faults with the property, 37 percent indicated the agent improved their knowledge of the area, 36 percent said agents negotiated better contract terms, 35 percent reported a shortened search process and 29 percent said their agent negotiated a better price.
Of buyers who use an agent, 64 percent choose a buyer’s representative. Eighty-five percent of all buyers said they were likely to use the agent again or recommend to others, and almost all buyers were satisfied with their agent’s honesty and integrity, with 83 percent being very satisfied.
The median age of a home seller is 46, with an income of $83,800. Seventy-two percent are married couples, had been in their home for six years and moved a median distance of 17 miles. Their home was on the market for six weeks, up from four weeks in the 2005 survey. Ninety percent of sellers were satisfied with the selling process.
Forty-four percent of sellers chose agents based on a referral by a friend, neighbor or relative, and 30 percent used their agent previously; 69 percent of sellers contacted only one agent. Reputation and trustworthiness are the most important factors in choosing an agent; 82 percent said they were likely to use the same agent again or recommend to others.
NAR mailed an eight-page questionnaire in August 2006 to a national sample of 129,500 home buyers and sellers who purchased their homes between July 2005 and June 2006, according to county records. It generated 7,548 usable responses; the response rate was 6.3 percent. All information is characteristic of the 12-month period ending in June 2006 with the exception of income data, which are for 2005.
