| there are a number of characteristics of the real | | | | contractually governed.the increasing complexity |
| estate industry, which act in concert to make the full | | | | associated with such wide ranging variations between |
| automation of agency services a remote possibility. | | | | local market social structures as well as the varying |
| three of the more significant are as follows. | | | | contractual relationships amongst settlement service |
| 1) risks to the consumerperhaps the most significant | | | | providers, further insulates the real estate agent as |
| factor preventing the disintermediation of the agent | | | | an intermediary in the two-sided real market since |
| has to do with the monetary value of the product | | | | technologically based systems do not posses the |
| being exchanged and the corresponding potential | | | | ability to interpret social interactions. |
| risks associated with making an error in the process. | | | | 3) process differences in local marketslocation, |
| in other industries where the middleman has been | | | | location, location- the old real estate maxim doesn't |
| disintermediated by information technology, the value | | | | just apply to the value of real estate. it also applies |
| of the product is relatively low; a trip to hawaii for a | | | | to the process. different markets have evolved over |
| family of four may cost $5000. and because a trip to | | | | time in response to a myriad of local factors. |
| a common locale is essentially a commodity, the risks | | | | differences in laws and regulations exist on the state |
| of a bad purchase are essentially limited to a | | | | and local level. because markets vary as much as |
| potentially negative experience.in real estate | | | | they do in terms of their structural processes, the |
| however, the average price of a home in the us is | | | | prospect of a universally standardized, system for |
| now over $200,000. and because the transaction | | | | transacting real estate is remote. the costs of |
| process is so highly complex with numerous | | | | producing such a system would be in the billions when |
| requirements involving legal contracts and disclosures, | | | | you take into account the idiosyncrasies of all the |
| the cost/benefit/risk ratio is simply not the same as | | | | local markets in the us. |
| in the travel, stock brokerage, or insurance industries. | | | | In addition to the technological barriers of an |
| given the relative infrequency of the average | | | | automated system, there are sociological barriers |
| transaction and consumers' emotional and financial | | | | associated with different locations, which only agents |
| investment in a home, the potential for risk aversion | | | | can circumvent. one example of this is the subjective |
| is much greater. as was pointed out previously, as | | | | characteristics of local markets. local neighborhoods |
| home prices sky rocketed, consumers relied more on | | | | and even local streets have attributes, which are |
| agents than they had in the past with the number of | | | | important to buyers. this type of current, local |
| fsbo's declining dramatically. | | | | market knowledge is difficult to capture in a |
| 2) social/contractual nature of the real estate | | | | consistent way. for example, while a particular |
| transactionsover time, transactions have grown | | | | neighborhood may have a good reputation, the |
| increasingly complicated. new laws requiring disclosure | | | | characteristics of different streets may vary widely |
| and soaring home values have increased the | | | | within that neighborhood. the buyer may be elderly |
| sub-facets of a real estate transaction. as a result, | | | | and may want to avoid living on a street where |
| the number of settlement services providers required | | | | there are a number of families with small children. |
| to consummate a transaction has steadily increased | | | | over time, agents acquire this type of valuable |
| over time; as noted previously, a typical transaction | | | | community information, which buyers are interested |
| my involve up to 40 different parties. the effect of | | | | in. in a 2008 presentation at the Harvard business |
| this trend towards increasingly complexity is that the | | | | school, Spencer Rascoff, president of pointed out |
| sale has become a more socially embedded process | | | | the development of community-specific local content |
| (wigand and crowston and sawyer 2001). further | | | | as the single most important factor in the ongoing |
| complicating the process is the fact that the | | | | success of (Spencer Rascoff, Harvard Business |
| interactions amongst the various parties are | | | | School 1/31/08). |