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Bundling Home Purchase Services

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July/August 2001 - Volume 80, Number 4

Stefan Swanepoel

As we enter the 21st century, the business world is consumed with more questions than answers.

Do we need to repackage the services we offer online?

Do customers want bundled or unbundled services?

Where do we find e-buyers?

How do we make e-commerce profitable?

In the midst of this uncertainty, however, one fact has consistently emergedB electronic commerce is accelerating the shift of power toward the customer. The consumer is more demanding, more knowledgeable, and more actively involved in the transaction. This shift of power is not only evident in other industries but in the real estate industry as well. In order to fully understand the impact of this shift and the opportunity it presents the real estate professional, let’s examine how another industry is dealing with the concept of bundled services in a rapidly changing environment.

Several years ago the utility industry began to deal with the issue of deregulation and the entry of competition into what had been a very closely controlled industry. All of a sudden the customer was no longer just the meter at the end of the bill. The industry was faced with the fact that the customer now had a choiceB to leave or stay. The business model had to become customer centric, which required a shift in philosophy and not just technology. Customer service took on an important role but only as a tool to achieve the desired results for the customer. The key objective became getting results for the customer. If utility companies were going to keep their customers, the answer was to be found in bundling services and competitive prices.

If the customer was going to have choice, then the utility companies needed to make the commitment that they would provide the service. It is interesting that the first to take an initiative in this area were the Rural Electric Cooperatives (Co-ops). These small providers of energy generally purchase their power from the larger utilities and were concerned with the potential of losing their customer base to those utilities. The action they initiated to head off this challenge was to begin bundling services for their customers.

The Co-ops had a well-established relationship with their customers and the first thing they began to do was to determine what services their customers wanted in addition to delivery of electricity. They determined that high on their customers’ lists were satellite television service, cellular phones, and paging. The Co-ops immediately developed strategic relationships with service providers in these areas and began to "bundle" those services along with their delivery of energy. They were able to do this efficiently and cost effectively because they already had an effective communication channel with their customers through the monthly billing cycle and the customer support center. Once the first step was successfully taken, the Co-ops began to actively provide other products and services, which their customers were obtaining from other sources. One of the key products they were able to provide at a very competitive price, was propane. By simply focusing on delivering "results" to their customers through customer service, the Co-ops not only cemented an existing relationship, they enhanced their revenue through the adoption of value-added services and products. The real estate industry should learn a lesson here.

A New e-Economy Requires New Ways of Communicating

If we examine the real estate industry in this light we can see a number of similarities between the two:

An existing customer base;

Customer acquisition and retention;

The threat of competition from larger players;

The issue of customer choice in a previously controlled industry and;

The unbundling and rebundling of services.

In both industries, the basic services provided need to be first "unbundled" before they can be "rebundled," based upon customer choice. For the utilities, this meant allowing the customers to choose what energy delivery services they wanted out of the previously bundled package. This allowed the customer to assume some of the delivery risk in exchange for a lower cost.

The same holds true in the changing real estate paradigm. The real estate industry has had many services tied up in one bundle for a long time, protecting property information, all intertwined with real estate commissions. Many consumers have felt that the 6% commission for a realtor is too high, but have never really had the ability to do anything about it. Now, as a result of all the technological advances and the growth of the Internet as a communications medium, the customer wants to change all that. The biggest single enabler for this shift, is that the Internet has made it possible for the customer to take away a real estate agents number one empowerment toolB data.

Real Estate Information Has Been Set Free

The homebuyers and sellers of today have access to property and market information that was previously in the sole possession of the real estate professional. It was difficult for the customer to obtain and they were never really able to work around it very effectively. The Internet has changed all that, and gaining access to the information databases is only the first step. The successful professional of the future is the one who recognizes this change and seizes the opportunity.

Tomorrow’s real estate professional is going to become an aggregator of services just like the Co-op. First, however, we will have to unbundle the real estate transaction into its component parts and rebundle them in a package to meet the customers’ needs. For example, in the pre-closing phase of the transaction there are a number of basic services such as property searching, determining market value, locating and qualifying for a mortgage, contracts and negotiation, to name a few. If we move into closing and post-closing services, the potential increases significantly. Let’s assume in our example that the customer has all of these needs but doesn’t want the real estate professional to provide them all. The opportunity lies in determining what the customer wants and meeting those needs as quickly and efficiently as possible.

Don’t Confuse Discounted Pricing with Bundled Services

Statistics show us that the customer is entering the transaction at different places today and is coming in much more informed than in the past. In many cases, they have already searched the property database, selected several homes of interest and pre-qualified for a mortgage. It is the agent’s job to meet the customer where he is and quickly deliver the desired result. Technology has both accelerated the time-to-close and increased the customers’ expectations in that area. How the agent responds will determine what kind of "customer experience" is achieved.

It is also clear that the "new economy" has given birth to a whole new way of doing business. In 1999, the Internet economy generated over $500 billion dollars in business. Today we have a new thriving online economy, conducting e-business over the Internet, 24 hours a day, 365 days a year. In many cases, the boundaries of certain traditional services are changing and even disappearing. So when stores have no doors, and malls no walls, once-separate services start coming into one.

The Confines of Time and Space are Rapidly Disappearing

Consumers want up-to-date information, quick responses and regular follow-up, complete and comprehensive services, maybe even at less cost than he or she might be paying today, and an overall pleasant experience. So, when it comes to the rebundling of services, it would seem that real estate brokerages are currently in an ideal position to deliver bundled components; i.e., real estate brokerage service, the mortgage service, the title and escrow/transfer service, and insurance services.

The Home Ownership Circle of Life

The strategies of a real estate professional should be:

To automate their client base so that they can better manage their clients when they also become someone else’s clients.

To ensure that they remain the key point of contact for the customer regarding all home- related inquiries.

To bundle additional services so as to secure additional streams of revenue to counter the continuing downward pressure on real estate commissions, especially on the listing side.

To create a vehicle to maintain a lifelong relationship with the customer so that when he decides to sell one day he returns.

Joint ventures and common ownership of participating entities has become a popular way to deliver bundled services. Already certain large brokerages such as Long & Foster, 9keys, and HomeServices own large real estate brokerages, as well as mortgage, insurance and title companies. With the pending possible changes to the Gramm-Leach-Bliley Financial Modernization Act, it might also soon be possible for chartered banks to own and operate real estate brokerages. Interesting. The shoe might soon be on the other foot. Either way, agents, title reps, mortgage officers, and other real estate professionals will have to reevaluate their role in the home purchase transaction.

Customer experience starts and ends with communication. In study after study, customers have complained that they cannot get the information or answers they require in a timely manner, if at all. Technology has changed that and the customer is looking to do business with companies that understand technology and how to use it to get results faster and cheaper. The customer wants service immediately, not necessarily when it is convenient to the company or agent. Many companies are spending lots of money on technology and the Internet to get customers to their site, only to lose them to a poor experience. The customer doesn’t care, he just wants the transaction to be transparent and hassle free and it is up to the real estate industry to deliver. Offline business is built upon good customer experiences in all areas and it is even more critical for online business.

The key element for the real estate industry is to focus on designing a structure that is customer centric, a structure that utilizes available technology to provide the customer with a pleasant experience. While e-commerce has eliminated some opportunities and created new ones, at the same time it has forever changed the way we approach the customer and the business opportunity.

Do You Hear Your Competition Marching Toward Your Customers?

The real estate professionals of today must recognize that the customer not only desires to take control of the transaction, he is already doing it. The question to ask is "why does the customer need me" before he asks "what have you done for me lately?" The answers to both of these questions are best communicated in advance.

Real estate professionals, it’s time to take action! Create call centers with multiple communication channels, bundle your service offerings, integrate your video, voice and data, go wireless, and remember that clients will always require high-touch.

Stefan Swanepoel is a strategic consultant to many companies in the real estate, financial, technology, and telecommunication industries. He is widely regarded as one of the nation’s leading authorities on e-business in the real estate industry, and is a speaker and five-time author. He can be reached at This article is an excerpt from Stefan's presentation during the 2001 ALTA® Tech Forum in Orlando, FL.

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