Home Buyer & Seller Survey Shows Rising Use
of Internet, Reliance on Agents
WASHINGTON, 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 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 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 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 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
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 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 8 percent.
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
market."
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 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
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 or relative.
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 percent.
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.
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