Real estate brokers serving up deals
and discounts for online shoppers
By Michael D. Larson • Bankrate.com

Buy a house and get some of the real estate agent's money? Move across town and pocket enough airline miles to fly to Aruba afterward? Sell a home for half the traditional 6 percent sales commission?

That's just a taste of what's waiting for consumers willing to buy and sell property via the Internet. Online real estate brokerages have followed the lead of online mortgage lenders and dangled all sorts of carrots in front of people preparing to move. As a result of their promotional efforts, everything from cash back at closing to discounts on moving-related services and frequent flyer miles await shoppers willing to use the Web for more than just buying books.

"We've harnessed technology. We've used every technology out there. And if you use technology to make your service team more efficient, then your cost structure goes down and you can pass those savings on to consumers," says Scott Kucirek, president of zipRealty.com Inc. The Berkeley, Calif.-based company gives buyers money back and sellers reduced commissions when they use its brokerage services.

"It's always focused on, 'What do customers want? What do buyers and sellers want?'"

Brokerages betting on the Web
Web-savvy consumers already can get cheaper stock trades and higher-yielding bank accounts online because financial institutions operating on the Internet tend to pass on their operating cost savings. Now, Web-centric real estate brokerages think they can do the same. Several have sprouted up, giving buyers and sellers who are comfortable dealing with an online firm the chance to shave thousands of dollars off their moving bills.

"Consumers can save shopping for a mortgage and a home online," says Nick Karris, Internet real estate analyst at Gomez Advisers Inc. The Lincoln, Mass., consulting firm tracks e-commerce developments for consumers and businesses.

"The beauty of the Internet is it provides price transparency and easy shopping, so consumers will be able to make more informed decisions going forward."

Most of the online agencies operate to a certain extent like their off-line competitors. Buyers using zipRealty search through available listings online and present offers with the assistance of a remotely located agent, for instance, but a local agent employed by the company actually shows them the properties they want to see. At the same time, they're able to cut costs by centralizing certain operations, such as marketing. That allows them to offer bonuses to consumers.

Perks frequently take the form of cash rebates simply because of the way the real estate industry works. Consider that when a buyer and seller both use real estate agents, the seller typically agrees to pay 6 percent of the home sales price as a commission. The seller's agent takes 3 percent for showing the property, conducting open houses and putting it on the Multiple Listing Service, a computerized database that agents access for information about the price and specifications of homes currently for sale. The buyer's agent takes the other 3 percent for locating homes that match the client's preferences, showing those homes and drawing up offers for them.

Buyer's bonus
In the off-line world, buyers' agents keep the entire 3 percent, and anything not spent to cover their operating costs is profit. But online agencies with lower costs have more money left, so they can share part of the take with consumers and still earn a buck. zipRealty will pay buyers half of the buyer's agent commission, up to a maximum of 1.5 percent of the sales price or $15,000. eRealty Inc. of Houston, another online brokerage, offers a flat 1 percent of the home sales price.

"We take half the commission we have from the seller and give it to the buyer," Kucirek says. "For buyers it's great. Normally they don't get anything. Here, they get great service and a rebate."

Not all online real estate companies operate the same way. Others offer bonuses without acting as an agent themselves. A buyer who uses HomeSpace Inc. to find a traditional agent and purchase a home can sign up for the Delta Air Lines SkyMiles program and get 3,300 miles for each $10,000 of the property's sales price. That's assuming the seller has a standard 6 percent commission arrangement.

These deals "may not work for everyone, but it's serving a niche," says Kevin Roth, senior economist with the National Association of Realtors in Washington. "It's worth it to the customer to figure out the plusses and minuses of whether that works for them."

Sellers see savings, too
Of course, most home buyers are home sellers first, and the good news is they can save money there too. Both eRealty and zipRealty offer discounted commission rates to people who agree to sell through them, and they both offer support from local agents who handle showings and other tasks requiring human assistance. Kucirek says the average commission that sellers pay for its services is around 4.25 percent, including the amount reserved for the buyer's agent.

Self-reliant sellers can gain from using the Internet as well. Take homebytes.com of Richmond, Va., a company that serves the "For Sale By Owner," or FSBO, market. Traditionally, people who wanted to sell without the aid of a full-blown real estate agent couldn't gain access to the MLS system. That meant their properties lacked the same visibility as those being offered by agent-assisted sellers.

Now, homebytes.com will put sellers' FSBO properties on the MLS for a $499 flat fee. The charge also covers signs, information about real estate contracts, price-setting tools and access to a staff of licensed agents who can provide assistance over the phone if necessary.

"We have kind of used the same trends that have been used in the stock trading industry," says Ruth Hopke, a company spokeswoman.

Consumers should expect the perks to keep coming, too, market observers say. In fact, things could get even better. eRealty, for one, is beefing up its site so that buyers can get discounts on home inspections, moving assistance and other services they need -- and experts predict similar arrangements will become even more common.

"When a service partner wants to become associated with the eRealty service partner program, we spend a lot of time explaining to them that our consumers expect advantages by doing business with us over the Internet," says Russell Capper, the company's chief executive officer. "Those usually fall into the category of increased services or decreased costs and we're getting a lot of cooperation."