A collaborative commerce framework for the real estate industry

The Internet opens up new business opportunities for the real estate industry. It provides real estate companies with new ways to collaborate with service providers, gain customer and market information, and communicate with the customer in new ways to turn the industry into a customer-centric driven modus operandi. It also makes the real-estate market more transparent, and hence more efficient. This, in turn, will create downward pressure on existing commission fees, create multiple revenue channels, and redefine the role of the agent as an intermediary. A collaborative commerce-model framework is developed and illustrated to act as an enabler for turning these opportunities into a future reality. The collaborative model is based on a generic e-business applications framework, which incorporates Enterprise Resource Planning, Supply Chain Management, Customer Relationship Management, Selling Chain Management, and Enterprise Application Integration and Business Intelligence. INTRODUCTION In the traditional real estate environment, the agent is at the heart of the transaction; without an agent, it is extremely difficult to either purchase or sell a property. The agent’s job is to bring sellers and buyers together and provide them with information, advice, and assistance throughout the whole property transaction. It is the agent’s responsibility to help the seller establish a reasonable price for the property, plan marketing activities, and find prospective buyers. In return, the client is contractually obligated to pay the agent a commission fee, which equals a certain percentage of the sales value [1]. However, the agent also assists prospective buyers to locate new properties. In this situation, the agent researches the market and compiles a comprehensive list of properties that match the customer’s demands. Once this has been done, the agent arranges for the client to go and view the selected properties. The agent then accompanies the customer and provides him with property information throughout the entire inspection process. Furthermore, he helps to negotiate prices and moving-in dates, as well as to locate banks, insurance companies, and appraisal firms, etc. In return for the agent’s assistance in completing the transaction, he receives a proportion of the commission, paid by the seller – as discussed above (ibid). In some instances, however, when there is a high market demand for properties, the buyer’s agent gets commissioned directly by the buyer. Although this business model has been around – and has seemed to work well – for several decades, it is now starting to fall apart. “Where the industry has excelled is in customer acquisition and doing deals. It has not excelled in serving customers...We look at the world from the inside out. We look at what is good for ourselves and not at what is good for the consumer” [2]. From the customer’s point of view, buying or selling a property has been an extremely long and cumbersome process. The purchasing experience has involved spending hours in the car, driving from house to house in order to find a suitable match – taking up valuable time for the potential buyer. Furthermore, buyers and sellers have also had to trust agents to act in their best interest – they themselves have had little control over the transaction. Information has been “closely guarded by the real estate community, and the only alternative for consumers [has been] to represent themselves” (ibid). The key point is that the traditional business model has created very limited value for the customer. The agent has guarded property information as much as possible, simply to take advantage of the market. With internet-enabled customers, the business model is changing. This paper develops a collaborative commerce framework for the real estate industry, highlighting some of the features of the changing business model. Before outlining the functions of such model, a number of current internet activities in the real estate sector are summarized. REAL ESTATE ACTIVITIES ON THE INTERNET Last year alone, companies invested a total of $500 million in online real estate services and analysts now estimate that there are more than 500,000 real estate Web sites on the Internet [11], [18]. Empowered by the internet, customers can access property data, view related pictures and take 3D virtual tours. At Bovision (www.bovision.com), for example, visitors can view up to five different film clips of each property – featuring different views and angles. Other firms also provide information such as home layout indications and registered plans, details concerning zoning and rates, and locality maps with schools, transport, and shops etc. in order to help the visitor find a suitable house. “You get more information from the Internet in just one hour than it would have taken a week to accumulate 10 years ago” [7]. However, some comp anies do more than list property and neighborhood information on their sites. Century21.com, Homestore.com, and Homeroute.com, for example, have realized that the Internet can be used in even more creative ways to heighten the level of customer service. Century21 (www.century21.com), for example, guides the client throughout most of the relocation experience. To begin with, the site helps the customer calculate how much money can be spent on a new property, taking into account the present income level, taxe s, existing debt payments, etc. The site also features a mortgage calculator, and helps with the decoration of the new home. The ‘Century21 Home Planner’ enables customers to visualize the property,