, January 17, 2006 -
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
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 percent of buyers in 1995 to 77
percent in 2005; it was 74 percent in 2004. The next largest
source of information for buyers is a yard sign, mentioned by 71
percent of buyers.
When asked where they first
learned about the home purchased, 24 percent of buyers
identified the Internet, up strongly from 15 percent in 2004 and
only 2 percent 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 percent from yard signs; five
other categories were 7 percent 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
NAR President Thomas M. Stevens
, 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
The survey shows 81 percent of
buyers who use the Internet to search for a home purchase
through a real estate agent, while 63 percent 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 percent in 1997. Only 13 percent of sellers conducted
transactions without the assistance of a real estate
professional in 2005, and 39 percent of those FSBO transactions
were "closely held" between parties who knew each
other in advance, up from 32 percent in 2004. The FSBO market
share was at 14 percent in both 2003 and 2004. NAR began
tracking the FSBO market in 1981; the record was 20 percent in
"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,"
The median home price for sellers
who use an agent is 16.0 percent 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, 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 percent of buyers, followed by
multiple listing service (MLS) Web sites, 50 percent, real
estate company sites, 38 percent, real estate agent Web sites,
31 percent, and local newspaper sites, 15 percent; other
categories were smaller.
Married couples make up the
largest share of the housing market, accounting for 61 percent
of transactions. Single women purchase 21 percent of homes while
single men account for 9 percent. Unmarried couples were 7
percent of the market, and 2 percent were listed as other. In
2004, single women were 18 percent of buyers and single men were
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
professionals," Bishop said. "The most important
criteria, whether you're buying or selling, are the individual
agent's reputation and their knowledge of the local
In finding a real estate
professional, 44 percent of buyers were referred by a friend,
neighbor or relative, 11 percent used an agent from a previous
transaction, 7 percent found an agent on the Internet, 7 percent
met at an open house and 6 percent saw contact information on a
"for sale" sign. Six other categories accounted for
smaller shares each.
The most important factor in
choosing an agent was reputation, according to 41 percent of
home buyers, followed by an agent's knowledge of the
neighborhood, 24 percent. In terms of desired qualities in an
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 percent choose a buyer representative. Satisfaction
with real estate agents is very high, with 85 percent of buyers
saying they were likely to use the agent again.
Seller responses are comparable:
43 percent chose agents based on a referral by a friend,
neighbor or relative, and 28 percent used their agent
previously; 10 other categories were 5 percent or less.
Fifty-seven percent of sellers said reputation was the most
important factor in selecting an agent, followed by their
knowledge of the neighborhood, 17 percent. Eighty-two percent
said they were likely to use the same agent again or recommend
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 percent on a home costing $150,000, but
43 percent purchased with no money down. Of first-time buyers
who made a downpayment, 23 percent received a gift from a friend
The typical repeat buyer is 46
years old and had a household income of $83,200. They placed a
downpayment of 21 percent on a home costing $235,000, but 11
percent of repeat buyers paid cash for their home. In all, 94
percent 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 percent, close to a job or school, 43 percent, close
to family or friends, 36 percent, and the school district
itself, 23 percent; 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 percent.