Electronic Real Estate in Europe

MA-Thesis / Master von Jan-Philip von Gottberg

Introduction:

The Internet as a communication medium is integrated in almost every process of today’s business. Barely one company can ignore the Internet technology. Hence, it is not astonishing that nowadays the Internet has a great impact on real estate transactions. The question that arises is whether the real estate business is ready for this technology or not. This affects the company side as well as the customer side. Eventually both sides have to be familiar with the technology to accomplish the conclusion of the contract. Although many businesses still work the traditional way, which means the physical trade, the evolution obtains everyone. Still many companies deal their real estate avoiding the Internet. However the reality shows a different picture. More and more people get used to the Internet. Roughly everything is marketable over the Internet, so now people select the Internet likewise for selling or buying online or simply just to get a picture of the market. Hence, the companies have to catch up and adapt to the market change.

The idea of integrating the Internet into real estate business has an important background: it is imperative to increase the number of customers. Technologies like Internet help for instance smaller companies to reach customers all around the globe. An opportunity like this was unimaginable a few years ago. In detail it means that a real estate company needs at most premises an own or public server and is able to create a business on an entire virtual platform. Increasing the number of customers and decreasing the costs through saving time and effort has a huge impact on the business development.

Although the online real estate industry has not reached an optimum level in Europe, several countries are pushing the development forward. Despite all this the process starts slowly. The change from a face-to-face business to a virtual commerce causes different dilemmas. Beside technical issues the whole selling and buying process has to be overworked and this costs vastly money and time. The change of business is influenced by economic resources, technological progress and meeting the customer’s expectations.

Germany and the United Kingdom both show very active real estate markets. Given a comparative, high and dense population, the total volume of real estate transactions is fairly high. Additionally the residential properties are interesting for both sides and hence the trade among each other is very active. Nevertheless, the online real estate markets of both countries could not differ more. In the German market almost every agent makes his own business. In the United Kingdom in contrary most of the agents are incorporated in a combined network. Different approaches with different results.

What are the main differences of the online real estate industry and to what extent are these diverse approaches effective? In order to highlight the crucial elements, the research is made up of several successive chapters: Firstly, Germany and United Kingdom are evaluated individually according to special criteria based on the review and a web design evaluation of the real estate websites.

Secondly, the results are compared and added with further aspects, in particular the disparities of the market behaviours and the use of information and communication technologies.

Table of contents:

Text Sample:

Chapter 4., Literature Review:

Internet as a Marketplace:

The Internet has revolutionized the society. If information technology is the presentday equivalent of electricity in the industrial era, in our age the Internet could be likened to both the electrical grid and the electric engine because of its ability to distribute the power of information throughout the entire realm of human activity. Furthermore, as new technologies of energy generation and distribution made possible the factory and the large corporation as the organizational foundations of industrial society, the Internet is the technological basis for the organizational form of the Information Age: the network.

But how could this network be used as a marketplace for real estate business? To put it simply, markets are places (physical or in a figurative sense) where goods and services are exchanged between buyers and sellers. The exchange of goods and services between a buyer and seller is called a transaction. Independently of the nature of the goods and the type of markets involved, transactions can be broken down into three basic steps. First, prospective buyers identify and evaluate their needs and sources to fulfil them, while potential sellers arrange to provide their goods and identify potential customers. Although the exchange of information between the participants of a transaction plays a major role throughout the whole process, it is at the core in the first step, which we therefore call information phase. It is followed by the step of negotiating the terms of a deal, such as prices and quantities, eventually finalized by a contract, e.g., in the form of a purchase order. Finally, the transaction is executed with money and goods being exchanged according to the conditions previously stipulated. Some sort of mutual performance monitoring accompanies this step to conclude the deal.

Online Real Estate Overview:

To relate this to the real estate business, these three steps are used to close a contract. The question that persists is in what extent the Internet is involved into this. It is still in the same real estate industry. They still work in the same market area. Many of the players are still the same people. They are still matchmakers bringing sellers and buyers together. Clearly, many aspects of the real estate world ‘as we know it’ have not changed.

What the Internet has revolutionized – changed or evolved may be better words – is our customer’s habits and expectations. Prospects examine property features and view virtual tours online, but still want the human hand holding and personal negotiating skills of the real estate professional to close a transaction. To stay focused on customers, customers’ needs must be mirrored in websites and in the services delivered by technology. Technology is a tool. The internet itself has added some specific new tools to our marketing toolbox.

In 1995, if the word ‘Immobilien’ (real estate) was entered into an internet search engine, such as AltaVista, 3,500-4,000 hits worldwide related to the topic of German real estate would have resulted. At that point in time, 35 million users worldwide had internet connections. If the process is repeated in 2003, more than 4,000,000 hits worldwide related to the topic ‘Immobilien’ result. For decades, real estate business had been conducted in certain ways – property buyers found real estate agents through cold calling or word-of-mouth and worked with them to find their dream home, new business location, or lucrative investment property. Agents and brokers used certain tools listing presentation, those infamous multiple listing books, open houses -- to present their clients with the information they needed.

The technological capabilities of the Information Superhighway have changed the way real estate transactions are conducted. It is now entirely possible for someone sitting in front of a computer screen in their home, office, or even on a transcontinental flight, to take an online tour of a property and its neighbourhood or get approved for a loan without ever setting foot in a real estate office. The real estate industry greeted the Internet a bit warily at first, as might be expected. „Who needs real estate agents if anyone can access property information online?“ was a question that commonly came up in one way or another at industry meetings and in publications. As the real estate community has come to learn the possibilities and limitations of the Internet and how to work with them, real estate brokerages, investment companies, franchises, and mortgage bankers have staked their claims online along with the industry's supporting agencies and special interest groups.

As Walsh (2007) stated, an online presence is a vital component of a real estate professional's marketing strategy. Because today's consumers want accurate information quickly and conveniently, real estate professionals must harness the features, capabilities and opportunities of online marketing to meet these ever-increasing customer demands.

Usually the real estate industry is distinguished for little information transparency. Hence, the market participants who have special know how – e.g. in a local real estate market or special kinds of properties – dispose over competitive advantages. The Internet enables new ways to more information transparency and to organize the customer relationships. Although the established business processes of the real estate industry are challenged overall. This process revolution affects the organization of the agent activities as well as the initiation, development of financing transactions and other partitions of the real estate industry. 11% of homebuyers in 2003 found their new houses on the Internet in United Kingdom.

And with real estate agents on track to sell a record 6.5 million existing homes in 2004, conservative estimates suggest that online listings will generate more than $ 130 billion worth of home sales this year alone.