Google and Craigslist in RE Market

Google and Craigslist May Weaken
Realtors' Hold on Home Listings

By James R. Hagerty
From The Wall Street Journal Online

Craigslist.com and Google.com, two Web sites that have fundamentally altered the way consumers buy a broad range of products, are emerging as places to shop for residential real estate, a development that in the long term could weaken Realtors' hold on home selling.

Listings of real estate for sale on Craigslist, a popular Web site featuring free classified ads, rose to 335,126 in March, more than triple the level of a year earlier. Google Inc., meanwhile, is testing a tool to help users sort through listings of homes for sale. Several more specialized sites launched in the past year -- including Trulia.com, Oodle.com and Propsmart.com -- offer free access to substantial numbers of listings.

While their real-estate ventures are still relatively small, sites like Google and Craigslist have begun reshaping the advertising world as they offer a potent alternative to ad spending on traditional media such as newspapers and TV. Craigslist in particular has become a popular place to post classified listings for rental apartments, child care, jobs, furniture and personals. With household brand names and huge numbers of users -- Google had 89 million visitors in February, according to research firm NetRatings Inc. -- Google and Craigslist have the potential to draw large numbers of home-sale listings.

The proliferation of real-estate sites comes as brokers are under pressure from several directions. As home sales slow, an increasing number of discount brokers are vying for customers. In addition, the U.S. Justice Department and the Federal Trade Commission are investigating industry practices that they say deter competition.

Commissions on home sales have declined slightly over the past decade and now average around 5.1%, according to estimates from Real Trends, an industry publication.

The Web-site companies say they don't aim to revolutionize real-estate brokerage and indeed are working to cooperate with brokers in many cases. But the growth of the sites may embolden more consumers to try selling their homes themselves and, when they do use agents, to reduce their reliance on them. Abdullah Yavas, a real-estate professor at Pennsylvania State University, says these sites may encourage an "unbundling" of agents' services, with consumers paying for only the services they want, rather than a whole package. For instance, a consumer might list a home on Craigslist and arrange showings, but still hire an agent -- for a lower commission -- to help with negotiations or guide the paper work.

Craigslist's chief executive, Jim Buckmaster, sees a move toward even more public access to information about homes for sale. The information "isn't something that should be controlled or owned by brokers," Mr. Buckmaster says. "It's going to eventually happen" that all the brokers' listings become publicly available. "You can mark that down as done. It's just a matter of when."

Unlike buying books or airplane tickets, real-estate transactions are complicated, so most people still want agents' help to complete the process of buying or selling homes. For buyers, the new home-shopping sites promise to further erode the information advantage enjoyed by real-estate agents over consumers. Most of the new sites offer listings of homes being sold directly by owners, as well as those being sold through agents. (Trulia.com includes only agent listings.) That contrasts with the policy of Realtor.com, the popular real-estate Web site owned by the National Association of Realtors. Realtor.com excludes homes for sale by owners.

"As a buyer, you want to see everything that's available," not just the homes represented by agents, says Ron Hornbaker, co-founder and president of Propsmart Inc., Kansas City, Mo., which owns Propsmart.com.

Shoppers can't rely on agents to tell them about for-sale-by-owner offerings, because agents often don't earn commissions for introducing buyers to these properties and find such transactions more difficult to complete. Agents also may fail to tell potential buyers about homes being sold through discount brokers.

There are already a host of specialized for-sale-by-owner Web sites, but none of them can promise one-stop shopping. ForSaleByOwner.com, one of the biggest such sites, estimates that it has 10% of all owner listings. While Craigslist and Google won't be comprehensive either, their sheer size will likely attract more listings. Another attraction for sellers: They can post information on the new sites free, while some specialized FSBO sites charge fees.

Realtor.com still has a formidable advantage, with about three million listings -- around 10 times the number on Craigslist. Realtor.com gets listings from nearly all multiple-listing services -- the local firms that compile listings from brokers and are generally owned by local Realtor organizations. The National Association of Realtors says about 13% of home sales last year were FSBO and that often those were sales between people who already knew each other.

Google in November began allowing consumers and businesses to directly submit content such as real-estate listings for inclusion in some Google search results through a service called Base. Google previously included real-estate listings from sites it came across, but they weren't always up-to-date and couldn't easily be sorted by price and other attributes. In March, Google began on a test basis letting consumers who were searching terms such as "Los Angeles real estate" narrow their results by choosing various categories -- saying whether they want to rent or buy, for example -- and letting them see real-estate listings plotted on a map.

To keep up with the competition, a number of real-estate brokers are improving their own sites. Real Living Inc., a big regional broker based in Columbus, Ohio, recently upgraded its site to provide email alerts to buyers when there is new information about some properties and to let sellers see how many people have viewed their homes and what comments they have made.

Most sellers still want their homes listed on the local services operated by Realtors. Perry Ahmed, an investor with several properties for sale in the Washington, D.C., area, lists them through real-estate agents on a multiple-listing service but also puts them on Google and Craigslist. He has worked out a deal with his agent that will ensure that he pays lower fees if he finds a buyer without the agent's help.

Many of the ads on both Google and Craigslist are for homes whose owners are represented by real-estate agents. But some are from people like Leigh Chodos, a marketing consultant in Brookline, Mass., who isn't using an agent in his efforts to sell a condo. "I'd rather save myself the 6% commission," Mr. Chodos says.





1Listing.com is a California fixed fee Multiple Listing Service (MLS) listing and marketing website for California For Sale By Owner (FSBO) sellers. 1Listing charges only $299 for a listing on the MLS. Visit us at www.1Listing.com or call (707) 693-0100.