School of Information Studies (iSchool) faculty members Kevin Crowston and Steven Sawyer along with colleague and former iSchool professor Rolf Wigand were presented with a Best Paper Award by the Association for Information Science and Technology’s Social Informatics special interest group at the organization’s annual meeting in Copenhagen last month.
Their paper, “Social Networks and the Success of Market Intermediaries: Evidence from the U.S. Residential Real Estate Industry,” was published in the journal The Information Society in September, 2015.
Their research on market intermediaries started in the early 2000’s, when the popularity of the commercial Web was beginning to take off, and home buyers and sellers were turning to real estate websites to help them research properties for sale.
“It was projected at that time,” said Sawyer, “that real estate agents weren’t going to be needed anymore, that they wouldn’t have a place in this new marketplace.”
And yet, 15 years later, there are more real estate agents in the business, even as the Internet has become a ubiquitous part of the process of buying or selling a house.
“We decided to see what was going on, why real estate agents weren’t going away, and why they remained as part of the home sale transaction when buyers and sellers now had such tremendous access to data and information,” Sawyer explained. “The market had been disintermediated, but the intermediaries were still there.”
To conduct their research, the team worked with the National Association of Realtors to obtain data from a sample of roughly 500 real estate agents from across the country.
What they discovered was that the agents were finding themselves in the position of information coaches now, rather than information brokers. With free and open access to home listings, comparable sale information, and neighborhood demographics, agents are doing more explaining and curation of information around the purchase or sale of a home, providing local knowledge that a database wouldn’t have.
Furthermore, the data showed that agent’s connections with networks of home buyers and sellers did not predict success: instead it was the strength of their professional networks.
“Agents provide a value added service to their clients, via deep expertise networks - when you sign on with an agent, you get access to their Rolodex,” explained Sawyer. “Agents have connections to a wide range of other professionals, ancillary services like home inspectors, interior decorators, contractors, electricians, and so on. It’s these networks that are helping to ensure real estate agent success in today’s marketplace.
And importantly, these connections cannot be readily replaced by an Internet search. While services like Angie’s List can help a consumer find a trade person, it is the agent’s promise of repeated business that encourages a quick reply.
These findings help explain the surprising persistence of real estate agents. They keep a place because they bring value to the transaction – both in terms of helping bring the house to a sale as well as providing expertise in all the things needed when buying and selling a house – mortgage brokers, home decorators, contractors, a chimney sweep, etc.
What this research says more broadly is that in markets characterized by high value and high specificity, agents can add value through expertise, and knowledge but also by providing access to specialized services that will enable the transaction to complete. Buying something simple, like a toaster, can be done without an agent, but buying a yacht, or deciding on substantial financial investments, or chartering a cargo ship, will be easier with an enabling agent and their professional network brought to bear.