Executive report describing how information technology impacts the Real Estate Industry - Essay Example

Executive report describing how information technology impacts the Real E Industry Information Technology has embedded itself in all areas of life including how one shops, communicates, learns, explores, negotiates and earns, with the real estate market being no exception. This wave that has swept across and engulfed several industries has resulted in greater transparency of operations, a larger platter of choices, quicker transactions and easier negotiations. The Web has completely restructured traditional relationships between the sellers on one hand, the buyers on the other and the entire distribution channel that acts as an intermediary.

The Information Technology revolution has resulted in making certain services or products relatively redundant while others which were earlier passive have now boomed. Online purchasing for instance has reduced the number of agents, retail stores and warehouses needed - these very services were thriving a couple of decades ago. On the other hand, access to the most unusual information, the most uncommon places, the rarest of books and even personal web logs are now just a click away. Hence, the value of a product, service or piece of information has undergone an overhaul since the onset of the Information Technology revolution.

Added, these values even after changes are not static but yet in the process of stabilizing, allowing for large potential differences between current value and future value.Traditionally, real estate value has been known to depend upon criteria such as size, location, amenities, and even climatic environments, and now, information technology is an added consideration. Cyberspace technology enables interested clients to browse through properties of their choice using various search options such as zip code, size, amenities and budget.

It is also possible to take a virtual tour of the property, its interiors and its neighborhood. Added, real estate sites link up with other related industries to provide easy loan options, interior designing options, links to moving companies and other services. Often a health club, gymnasium, spa or shopping mall ties up with such websites, providing a two-way beneficial contract: the presence of that facility adds to the value of the property and the facility eventually benefits if the client buys the place.

Added, that gymnasium or shopping mall can directly or indirectly boast of its presence as one of the 'features' on the website of a particular piece of real estate. Thus, the use of information technology adds not only to the value of the property directly under consideration, but also of those properties that surround it. An important consideration here is that while information technology boosts the current and future value of real estate in terms of its attractiveness and appeal, it often reduces the cost of the property for the buyer.

This is because customers are spared the money and effort it would conventionally take in traveling, searching, negotiating and then again repeating the process until the deal is made as per satisfaction. Online access to visual tours, various search options and even customized answers to queries are all provided by websites free of cost. Negotiations too are quicker and easier, with fewer formalities and documentation. Revenue is generated by the website through advertisements and tie-ups, which in turn creates pressure on these sites to attract maximum 'hits'1.

Such competition between real estate websites ensures that the customer gets maximum satisfaction and facilities at no extra cost, in fact, saving on money that would have been necessarily spent were it not for these facilities.Environmental factors particularly political and economic ones are intricately linked to real estate transactions. Local as well as state governments, changes in property laws, tax fluctuations, strikes, the presence or absence of thriving businesses nearby are all important considerations.

Added, social factors such as the kind of neighborhood, the socio-economic status of nearby families, reputation of close-by schools and others play an important role. Interestingly, while the former political and economic aspects get smoothened out with information technology, the social aspect is one where technology cannot replace touch. A customer can conveniently look up information regarding the legal aspects of any property, the tax benefits and other political or economic concerns. It seems unlikely however, that a client would gather satisfactory information about the social environment of a property without the traditional method of physically going, interacting and analyzing.

The positive repercussions of increasing use of information and cyberspace technology are many, most of which have already been addressed above. These benefits include greater variety, efficiency, transparency, speed and economy. In fact, a 2002 survey found that over 95% of customers who used internet facilities found these either "somewhat" or "extremely" useful.2On the flipside, there has been concern that demand for brokerage services may be on the decline. The commissions received by real estate brokers is expected to fall 11% in three years from the current $18.

8 billion, according to a Bank of America report (Rich, 2000). Another issue is that earlier brokerage firms had greater control and monopoly over the market through the local multiple listing service (MLS). This information was available only to particular member brokers, thereby creating an informational monopoly. The information technology boom threatened to sweep away this advantage, however, the National Association of Realtors (NAR) protected the firms' interests through Homestore.com Inc.

This online real estate corporation involves a large database of realtors sharing listings only with Homestore.com. (Donald et al, 2002) Added, despite concern that the demand for brokers and other 'human' services will reduce when replace by computers and machines, several experts speculate that just the opposite will happen. Since the quantity of information regarding real estate is increasing, people with specializations and professional backgrounds will be demanded more for supporting and processing this information.

One thus observes the various influences on the real estate industry by greater and quicker knowledge systems. As significant as these changes are, these are not static but ongoing, the effects of which are yet to stabilized.End notes1 Number of 'hits' is the total number of times a website has been accessed by all users2 Study was conducted by NAR. For an online summary refer to http://www.ncrealtors.org/searchpubs/THR/2002/thr-0802/internet.htm. Accessed on 29th December 2006.ReferencesDonald, Jud et al.

The impact of information technology on real estate licensee income. Journal of Real Estate Practice and Education, 2002Gruman, Galen The tech-savvy Real Estate Agent Peachpit Press, 2006Ovies, Kelli Internet Has Positive Impact on Real Estate Tar Heel Realtor: A publication of the North Carolina Association of Realtors, Inc.Rich, M. For Brokers, the Internet Looms Ever Larger. The Wall Street Journal, August 23, 2000.