Toronto Condo and Real Estate Blog

Home Buyer & Seller Survey Shows Rising Use of Internet, Reliance on Real Estate Agents 

Technology is transforming how Americans buy and sell homes in unexpected ways, including how they work with real estate agents and brokers, according to one of the largest surveys of real estate consumers ever conducted. The study was released today by the National Association of Realtors.

Nine out of 10 home buyers use a real estate agent in the search process, but use of the Internet to search for a home has risen dramatically over time, increasing from only 2% of buyers in 1995 to 77% in 2005; it was 74% in 2004. The next largest source of information for buyers is a yard sign, mentioned by 71% of buyers.

When asked where they first learned about the home purchased, 24% of buyers identified the Internet, up strongly from 15% in 2004 and only 2% in 1997. Although most buyers use an agent to complete the transaction, 36 first learn about the home they buy from a real estate agent and 15% from yard signs; five other categories were 7% or less.

The 2005 National Association of Realtors Profile of Home Buyers and Sellers, based on more than 7,800 responses to a questionnaire mailed to a large national sample of consumers located through county deed records, is the latest in a series of surveys evaluating demographics, marketing and other characteristics of home buyers and sellers.

NAR President Thomas M. Stevens from Vienna, Va., said the findings underscore the complexity of the home-buying process. “Buyers who use the Internet in searching for a home are more likely to use a real estate agent than non-Internet users, and consumers rely on professionals to provide context, negotiate the transaction and help with the paperwork,” said Stevens, senior vice president of NRT Inc.

“The real estate industry today bears little resemblance to the way we did business 10 years ago. It is hard to find another industry that has adopted technology so readily to its customers,” Stevens said. “Realtors have invested a lot of time and money in building information technology, and because of these efforts, more consumers than ever are using the Internet in their home search.”

The survey shows 81% of buyers who use the Internet to search for a home purchase through a real estate agent, while 63% of non-Internet users buy through an agent; non-Internet users are more likely to purchase directly from a builder or an owner they knew in advance of the transaction.

“We find that the level of for-sale-by-owners is on a sustained decline and is now at a record low. In addition, a growing share of FSBO properties are not placed on the open market – they’re private transactions,” Stevens said.

A clear downtrend in FSBOs has been seen since that market share experienced a cyclical peak of 18% in 1997. Only 13% of sellers conducted transactions without the assistance of a real estate agent in 2005, and 39% of those FSBO transactions were “closely held” between parties who knew each other in advance, up from 32% in 2004. The FSBO market share was at 14% in both 2003 and 2004. NAR began tracking the FSBO market in 1981; the record was 20% in 1987.

“In reality, the term ‘FSBO’ is a misnomer when used to broadly describe homes sold directly by owners. Since two out of five of these transactions are between related parties, and those properties are not placed on the open market, we believe that ‘unrepresented sellers’ would be a much more accurate term to describe this segment,” Stevens said.

The median home price for sellers who use a real estate agent is 16.0% higher than a home sold directly by an owner; $230,000 vs. $198,200; there were no significant differences between the types of homes sold. “While many unrepresented sellers are motivated to save on paying a commission, we think the price difference speaks for itself,” Stevens said. “Owners without professional assistance also have problems in understanding and completing paperwork, prepping the home for sale, getting the right price and selling within the time planned.”

Survey data don’t explain the price difference, but Stevens offered some context. “Agents know best how to prepare a home and maximize value, real estate agents provide broader exposure to the market and are more likely to generate multiple bids, and the portion of sales that are between private parties are likely to be at a lower price than those on the open market.”

“The housing market today contrasts sharply with predictions a decade ago that the Internet would ‘disintermediate’ real estate agents, including speculation that NAR membership would fall in half. In reality, it’s grown dramatically - selling real estate is not like selling a book or buying an airline ticket,” he said.

Realtor.com was the most popular Internet resource, used by 54% of buyers, followed by multiple listing service (MLS) Web sites, 50%, real estate company sites, 38%, real estate agent Web sites, 31%, and local newspaper sites, 15%; other categories were smaller.

Married couples make up the largest share of the housing market, accounting for 61% of transactions. Single women purchase 21% of homes while single men account for 9%. Unmarried couples were 7% of the market, and 2% were listed as other. In 2004, single women were 18% of buyers and single men were 8%.

The typical buyer walked through nine properties, searched eight weeks to buy a home and moved 12 miles from their previous residence. The typical seller placed their home on the market for four weeks, had lived in it for six years, moved 15 miles to their new residence and previously owned three homes, including the one just sold.

NAR’s senior economist Paul Bishop said both buyers and sellers use traditional methods to choose a real estate agent. “Word-of-mouth recommendation is the most common way to learn about real estate agents,” Bishop said. “The most important criteria, whether you’re buying or selling, are the individual agent’s reputation and their knowledge of the local market.”

In finding a real estate agent, 44% of buyers were referred by a friend, neighbor or relative, 11% used an agent from a previous transaction, 7% found an agent on the Internet, 7% met at an open house and 6% saw contact information on a “for sale” sign. Six other categories accounted for smaller shares each.

The most important factor in choosing a real estate agent was reputation, according to 41% of home buyers, followed by an agent’s knowledge of the neighborhood, 24%. In terms of desired qualities in a real estate agent, three categories were rated as very important by more than nine out of 10 buyers: knowledge of the purchase process, responsiveness and knowledge of the market. Of buyers who use an agent, 63% choose a buyer representative. Satisfaction with real estate agents is very high, with 85% of buyers saying they were likely to use the agent again.

Seller responses are comparable: 43% chose agents based on a referral by a friend, neighbor or relative, and 28% used their agent previously; 10 other categories were 5% or less. Fifty-seven% of sellers said reputation was the most important factor in selecting an agent, followed by their knowledge of the neighborhood, 17%. Eighty-two% said they were likely to use the same real estate agent again or recommend to others.

Four out of ten respondents are first-time buyers, a finding that is consistent for more than a decade. The median age of entry-level buyers is 32 years, also typical over time, and the household income was $57,200. They made a downpayment of 2% on a home costing $150,000, but 43% purchased with no money down. Of first-time buyers who made a downpayment, 23% received a gift from a friend or relative.

The typical repeat buyer is 46 years old and had a household income of $83,200. They placed a downpayment of 21% on a home costing $235,000, but 11% of repeat buyers paid cash for their home. In all, 94% of buyers and sellers believe their home purchase is a good financial investment.

“To underscore the value of housing as an investment, all you have to do is look at the difference in how repeat buyers purchase their next home - the wealth effect of homeownership provides the greatest source for their downpayment, which is significantly larger,” Bishop said. Aside from sellers who pay cash for their new home, 66 use the equity from their previous home for a downpayment.

The most important factors in choosing a location to purchase a home are neighborhood quality, cited by 68%, close to a job or school, 43%, close to family or friends, 36%, and the school district itself, 23%; seven other categories were under 20%.

NAR mailed an eight-page questionnaire to a national sample of 145,000 home buyers and sellers, based on county records, who purchased their homes between August 2004 and July 2005. It generated 7,813 usable responses; the response rate was 5.4%.

The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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Contact the Jeffrey Team for more information

Occasionally, one can see “For Sale By Owner” signs, and some owners think that selling their own home will not only save them money, but believe they have an advantage over the sellers that have their home listed by a reputable real estate agent. Before you decide to take on this very important and legally complicated process… remember not even most real estate lawyers recommend selling your own home yourself in today’s market.

Here are a few of the reasons why:

1. You are limiting your exposure to potential buyers (less than 10% of what a good real estate agent will generate) which means your home could take ten to fifteen times longer to sell on the market.

2. The longer a home is on the market the lower the selling price is. Why? Because most buyers think that if the home has not sold after this long there must be something wrong with the home.

3. The selling/buying process begins AFTER the buyer leaves your home. Most sellers think that all it takes is for someone to see their home, fall in love with the great decor and the offer automatically will follow. Remember that the buying process begins after they leave your home. If a real estate agent does not represent the buyer, and they are looking on their own, they usually leave the home and start to talk themselves out of the buying process. If the buyer is represented by a real estate agent, it can be a different story. Realtors are trained on how to overcome buyer remorse - a very common occurrence.

4. Because of the limited exposure you will very likely end up with a lower selling price. Remember, in order to generate the highest price possible for your home, you need exposure. You need the maximum exposure possible, to generate the highest price possible.

5. Most buyers find it extremely awkward to negotiate or even to talk directly with sellers and therefore avoid FSBO properties.

6. Lack of negotiating experience and lack of pertinent information will often result in a lower selling price, or worse yet, a bungled contract and possible lawsuits.

7. The majority of qualified buyers are working with experienced real estate agents.

8. Many serious buyers will pass by a FSBO home merely because they recognize that it is not in the real estate mainstream - this can some times make them wary.

9. As most local buyers now retain an experienced real estate agent to represent them as their buyer-agent, you will probably be negotiating against an experienced professional.

10. Expected savings in broker’s fees will also be greatly reduced if you offer a selling commission to entice real estate agents to bring potential buyers. And a lower sales price could offset any commission savings.

11. If you are planning to use a lawyer to help you negotiate the offer, then your lawyer’s fees will be considerably higher.

12. Only real estate agents have access to the up-to-date market information provided on MLS. News reports cannot approach the timeliness or specificity available to agents. Furthermore, real estate agents are involved in home sales much more frequently than the average homeowner is. This familiarity leads to a degree of expertise that provides an edge on negotiating and successful selling.

13. You only pay the commission to the real estate broker if they successfully sell your home.

14. Accepting an offer is one thing, ensuring a safe and successful closing is quite another. Real estate transactions occassionally have problems on closing. Expecting the buyer’s and seller’s lawyers to fight it out or resolve the problems can sometimes mean the deal is lost. This is the time that your experienced real estate agent can be the most important. Your Realtor can act as a great mediator. Lawyers MUST act only on their client’s instructions and are not paid to negotiate.

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Contact the Jeffrey Team for more information

Buyers pay a premium for a home that is in top-notch, move-in condition, so once you decided to sell, make sure the home is ready to be sold.

First, you have to figure out what needs to be done to your home. A thorough home inspection up front will help to identify problem areas. Having the property inspection done and all the corrections taken care of before you get offers also shows the buyers that you are conscientious homeowners. This will relieve some of their anxiety about buying a home.

Also, any buyer will have a home inspection done before closing the sale. Often, this is when they will re-negotiate the price because of any problems that may turn up in the inspection. Having your own inspection done and making all necessary repairs first removes this opportunity for the buyer to try and re-negotiate.

Properties in prime condition are a pleasure for real estate agents to show, so they get shown more often. The more exposure a property gets, the better the chance of selling it quicker and for a higher price.

Use the following checklist as your guide to preparing your home for sale.

Spruce Up the Outside

Paint: Few things you will enhance the salability of your house quite as much as painting the outside. Before painting, scrape or water-blast any blistered or peeling paint; repair gutters and down spouts; and replace wood showing dry rot. Pay special attention to wood, trim, gutters, and wrought iron.

Front Entry: Give special care to this area. First impressions do make a difference! All woodwork should be freshly and neatly painted, including the door if necessary. Replace badly worn or broken doorbells. Polish any door brass. Paint or replace an unsightly mailbox. Put out a new or clean doormat.

Yard: Mow and trim the lawn. Weed flower beds; remove or replace dead plants or trees. Water regularly during the growing season. With desert landscaping, make sure that no underlying plastic is exposed, that rocks and sand are tidy, and that weeds and unwanted grass are removed.

Driveway / Garage / Carport: Clean up grease or oil spots; remove the soil at least, if not the stains. See that the garage door opens freely, and if you have an automatic door opener, make sure it’s in good working order.

Air Conditioners: Paint or replace any rusted exposed metal. Correct improper draining.

Patio: A nice spread of outdoor furniture looks very appealing. If necessary, borrow some from a friend to enhance the “showability” of your property.

Swimming Pool: Adjust chemicals until the pool sparkles. Hose dust and cobwebs from filtration equipment. Store chemicals and tools neatly. Keep pool area tidy and secure.

Look at the Basics

Windows: Repair or replace torn or bent screens. As a last resort, remove them entirely; it’s better to have no screens than to have unsightly ones. Replace any cracked or broken panes. Also, notice unsightly foliage near windows. A window framed in ivy can give a warm, homey feeling, but cut it back if the foliage is restricting the light coming into the rooms. Drapery rods should be affixed firmly to walls and work smoothly; draperies should be clean and hang properly.

Doors: Check to see that all doors open and close freely, including closet doors and patio or sliding glass doors. Oil any squeaky doors. Tighten the hardware, particularly doorknobs. And while you’re at it, tighten hardware on kitchen and bathroom cabinets, too.

Walls: As with the exterior, painting indoors will pay dividends out of all proportion to the time and effort spent. Wallpaper should be clean and adhere smoothly to walls.

Floors: Repair or replace missing or damaged pieces of tile; polish if needed. Repair of a loose stair tread plate or loose carpeting on a stairway is a top priority.

Carpet: Steam cleaning is the best answer for soiled carpets, especially when shampooing isn’t enough. If pet odors are present, clean the carpet some time before your home is placed on the market to be sure the odors have been eliminated.

Check the Mechanicals

Lights: Every light socket in and around the house should have a good bulb of adequate wattage. Don’t overlook those outside and in the garage. Also remember the utility room, halls, closets, over the kitchen sink, and in the oven and exhaust hood.

Switches and Fixtures: Repair or replace wall switches, outlets, and light fixtures that don’t work. Replace any broken switch plates.

Appliances: Those that will be sold with the home should be in good working condition. If specific equipment doesn’t work and you don’t intend to repair it, point this out.

Plumbing: Badly chipped or irreversibly stained sinks and tubs should be re-enameled, patched, or replaced. Leaky or noisy toilets should be fixed, as well as any dripping faucets.

Sprinkler Systems: These should be working properly with no defective heads.

Go for the Spacious Look

One of the best and least expensive ways to improve the “showability” of your home is to open up as much space as possible. Openness stimulates positive feelings in buyers. Overstuffed rooms or closets give the impression of being smaller than they really are. You can’t change the size of what you have, but you can try to present it in a pleasing way.

Closets and Storage Areas: One of the most frequently voiced requirements of buyers is for more closet and storage space. Open up your storage areas by removing items you aren’t using.

Counters and Cabinets: The same principle used for closets applies here: overcrowding gives the impression of inadequacy. This applies to bathrooms and kitchens with the kitchen being most important. Store infrequently used appliances.

Garage: Buyers will pay a premium for a garage if they can visualize it being of value to them, but it’s hard to sell when the garage is filled to overflowing. If your garage has become a two-car attic, move the excess to a mini-warehouse.

Housekeeping Hints

Bathrooms: Few places in the home can get so dirty so fast, and yet few things will “unsell” a house as fast as dirty bathrooms. Vanity, sink, faucet hardware, and mirror are the focal points. But don’t forget other potential problems: soap residue in a shower, a moldy shower curtain, accumulated dirt in the track of a sliding shower door, soiled or missing grout, soiled toilet bowls, and dirty or battered bath mats.

Kitchen: Most buyers will inspect the kitchen carefully, so time invested here is well spent. Clean the stove inside and out. Replace badly stained or corroded reflector plates under the heating elements on electronic range tops. Don’t neglect the kitchen exhaust hood; buyers frequently check this area as a clue to general housekeeping.

Windows: Clean windows are an absolute necessity if a house is to look its best. Weather permitting, open windows to let in fresh air.

Water Heater and Softener: Perhaps because it’s so unusual, a sparkling clean water heater or water softener really impresses buyers: and it takes so little time and effort.

All this may seem like a lot of work, and it is, but it means a quicker sale with less hassle and more money in your pocket. Not to mention the pleasure you and your family will receive from living in a well-kept home.