Disintermediation or Reinter mediation?
Real estate transactions have relied heavily on intermediaries. Most obviously, brokers use their specialized knowledge to aid buyers and sellers. E-commerce introduces new opportunities, improving the availability of information, reducing transaction costs, and facilitating the searching and matching process. At the same time, eCommerce has reduced barriers to entry and these opportunities may now be available to new entrants to the industry, thus increasing competition.
Real Estate Auctions
Auctions have long been the center of a dilemma in real estate markets. On the one hand, auctions would seem to be highly efficient mechanisms for selling properties, by giving all potential buyers easy and equal access to the bidding process. For example, auctions are commonly used in Australia and New Zealand. In the United States, on the other hand, auctions are rarely used and are clearly dominated by the traditional method of “listing” a property with a broker, and then waiting until the broker finds a buyer willing to pay a sufficiently high price to close the deal. What is going on here?
The answer seems to be that, at least in the United States, the traditional physical auction, taking place at a specific location and a specific time, is too constraining in terms of limiting the number of buyers that can actually participate in the bidding process.
Real Estate Finance
The premium on rapid dissemination of quality information has made finance a very fertile field for Internet usage. The range of real estate finance-related Web sites extends from online mortgage firms to those involved in private project financing and equity placements.
Commercial Real Estate Finance
The needs of commercial real estate finance are being served by a host of Web sites that are bringing developers, brokers, investors, and lenders together. Developers and sellers of projects and properties make their presentations and solicit offers on these Web sites. The sites involve variations on interactive meetings facilitating the free flow of information, and in some cases incorporate due diligence filtering procedures.
Mortgage-backed securities sites offer data and information on ratings, duration, spreads, delinquency rates, and upcoming offerings. Borrowing from other, more general, finance Web sites, there are now a plethora of sites catering to potential individual investors in REITs and limited partnerships and speculative property purchases.
Property management companies with large portfolios of apartments need to integrate specialized property management software on the one hand with effective communication with investors, customers, and managers on the other. Both the Internet and its segmented, private version—the intranet—are now being used for to access data and analysis from these applications and then to disseminate the information. At any given time, it is possible to retrieve the latest data regarding revenues, expiring leases, and vacancies. Real-time online tracking and database accessing are made possible by this two-way transfer of processed information.
So it is not surprising that insurance firms are taking significant advantage of Internet capabilities in managing their back offices. Furthermore, the Internet is increasingly being used to market insurance, based on the ability of firms to offer policies based on the information that the consumer provides, and for consumers to carry out comparison shopping. Title insurance is a particularly interesting example since records pertaining to property ownership are now becoming available online. The computerization of these records together with the advent of the Internet is allowing title insurers to expand to serve national markets.