NATIONAL ASSOCIATION OF REALTORS

Transcription

1 covii 2000 PROFILE OF BUYERS & SELLERS CHAPTER 1: NATIONAL ASSOCIATION OF REALTORS The Voice For Real Estate 2000 OFFICERS President Dennis R. Cronk, CCIM, CIPS, CRE, CRS, GRI President-Elect Richard A. Mendenhall, CIPS, CRB, GRI First Vice President Martin Edwards, Jr., CCIM The NATIONAL ASSOCIATION OF REALTORS, The Voice for Real Estate, is the nation s largest professional association, representing nearly 760,000 members involved in all aspects of the real estate industry. REALTOR, REALTORS, and REALTOR-ASSOCIATE are registered collective membership marks that identify, and may be used only by, real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS and subscribe to its strict Code of Ethics. Treasurer Alan Yassky, CRS, GRI Executive Vice President Terrence M. McDermott NATIONAL ASSOCIATION OF REALTORS 430 N. Michigan Avenue Chicago, IL Web site:

2 THE 2000 NATIONAL ASSOCIATION OF REALTORS PROFILE OF HOME BUYERS AND SELLERS Prepared by: The Economic Research Group of THE NATIONAL ASSOCIATION OF REALTORS 2000 NATIONAL ASSOCIATION OF REALTORS

3 PROFILE OF BUYERS & SELLERS PREFACE H OMEOWNERSHIP IS A MAJOR PART OF THE AMERICAN DREAM. And more and more people are able to achieve that portion of the dream. A strong economy, low interest rates and high consumer confidence enabled many to own a home for the first time in 1999, boosting the national homeownership rate in the United States to an all-time high 66.8 percent. Over 70 million families owned homes in But regardless of economic conditions or level of consumer confidence, buying a home can be a daunting task. How does one find a home? How much home can a household afford? Is a homebuyer likely to be better off purchasing a home in a metropolitan/urban area or in the suburbs? First-time homebuyers face these concerns to perhaps a greater degree, as they have no previous experience on which to depend. Selling a home is no less of a challenge. Is a property priced appropriately and competitively? Can the home be sold within a reasonable timeframe? What is the best way to market a home through newspaper ads, open houses, the Internet? Real estate professionals assist housing consumers in facing those challenges and Over 70 million families answering those concerns. REALTORS and other real estate professionals add value to owned homes in the homebuying and selling process. They provide a wealth of experience and knowledge about all aspects of the housing market, including a firm understanding of the legalities involved in purchasing a home. They also have specialized knowledge about the markets that they serve; this benefits home sellers and enables their properties to sell quickly and at equitable prices. The NATIONAL ASSOCIATION OF REALTORS regularly conducts a survey of homebuyers and homesellers to gather information about their most recent experience in buying or selling a home, and the role of real estate professionals in those transactions. The survey includes questions about those housing consumers, including traditional demographic characteristics such as age, sex, race and ethnicity, income, and type of household. Results of the survey provide the Association with a Profile of Home Buyers and Sellers. The Profile allows REALTORS and other real estate professionals to better determine who their clients are, what their clients want from real estate agents, and ways that real estate professionals can improve their products and services for homebuying and selling consumers. The 2000 NATIONAL ASSOCIATION OF REALTORS Profile of Home Buyers and Sellers shows that homebuyers rely on a professional to sort through the myriad of Kevin A. Roth, Principal Author information now available about homes and the home sales transaction, and value a Wannasiri Chompoopet, Research Assistant real estate agent s help in negotiating for the best possible deal. Home sellers use the expertise of a professional to properly price their properties and market them in a Stacey Joseph, Research Survey Analyst fashion that leads to a quick sale. Real estate agents and brokers successfully serve Kate Anderson, Editor both buyers and sellers in the U.S. housing market.

4 NATIONAL ASSOCIATION OF REALTORS 3 Homebuyers rely on a professional to sort through information about homes and home sales transactions. NOTES TO THE 2000 HOME BUYER AND SELLER PROFILE During the Winter of 2000, the NATIONAL ASSOCIATION OF REALTORS mailed an 8-page questionnaire to 20,000 consumers who either bought or sold a home during The survey resulted in 1,778 usable responses. An additional 103 surveys arrived after the deadline and 974 questionnaires were returned due to invalid addresses. As a result, this survey had an adjusted response rate of 9.4 percent. The names and addresses were obtained from Experian, a firm that maintains an extensive database, derived from courthouse records, of recent homebuyers. Unless otherwise noted, the median is the primary statistical measure used throughout this report. Due to rounding, percentage distributions may not add to 100 percent. This report consists of eight chapters that focus on specific areas of the homebuying and selling process. Chapter 1: Chapter 2: Chapter 3: Chapter 4: Chapter 5: Chapter 6: Chapter 7: Chapter 8: Homebuyers: Characteristics of Buyers and the Homes They Purchase Homebuying: The Search Process Homebuying: The Role of Real Estate Professionals Homebuyers: Use of the Internet Homebuyers: Financing the Home Purchase Homesellers: Characteristics of Sellers and the Homes They Sell Homeselling and Real Estate Professionals Homeselling: For Sale By Owner All information in this Profile is characteristic of In some sections, comparisons are also given for results obtained in previous surveys. Not all results are directly comparable due to changes in questionnaire design and sample size. Some results are presented in regional breakouts. The Census Bureau defines regions as the Northeast,West, Midwest and South.

5 PROFILE OF BUYERS & SELLERS REPORT HIGHLIGHTS BOTH CONSUMERS AND REAL ESTATE PROFESSIONALS BENEFIT FROM UNDERSTANDING the homebuying and selling process. Consumers can learn from the experiences of the millions of homeowners who have completed prior real estate transactions. Real estate agents can learn how to tailor their products and services to attract and better serve the buyers and sellers of the future. Despite the growing presence of the Internet,real estate agents continue to be the leading information source used by homebuyers. In a world filled with newspaper advertisements,real estate magazines,yard signs,and the Internet,half of homebuyers first find the home they ultimately purchase through the services of a real estate agent. Nearly four out of five homebuyers use a real estate agent to assist with the transaction. Homesellers also rely on the knowledge and expertise of real estate professionals; 80 percent of sellers use a real estate agent to assist in the selling process. Real estate agents continue to be the leading information source used by homebuyers. HOMEBUYERS IN 1999: Forty-two percent of homebuyers purchased a home for the first time in The typical homebuyer household consisted of a married couple aged 39 years old with a household income of $60,400. The most important reason for purchasing a home was the desire to own a home. The typical home purchased was an existing single-family detached house located in the suburbs. The typical search took eight weeks during which the buyer visited ten homes. Nearly four out of five homebuyers used a real estate agent as an important information source and to assist in the transaction. Buyers were most likely to learn about the home that they ultimately purchased through a real estate agent. More than half of homebuyers first learned about their real estate agent from either prior experience or referrals. Three-quarters of homebuyers received recommendations from their real estate agent about sources for other real estate related services and/or products. More than 95 percent of homebuyers who received at least one such recommendation purchased at least one product and/or service based on the real estate agent s advice. Two-thirds of buyers said that they would definitely use the same agent again in a future transaction.

6 NATIONAL ASSOCIATION OF REALTORS 5 USE OF THE INTERNET: Thirty-seven percent of homebuyers used the Internet as an information source. Homebuyers who searched on the Internet were actually more likely to use a real estate agent to complete the home search and close the transaction. Internet users tended to be younger and purchased more expensive homes than other homebuyers. Seventy percent of homebuyers who used the Web found using the Internet in their home search to be at least valuable. Nearly three quarters of all homebuyers felt that it is at least somewhat important for their real estate agent to be Internet Savvy. Nearly four out of five homeowners sold their home with the help of a real estate professional. HOME SELLERS IN 1999: Repeat homebuyers in 1999 had been in their previous home for a median of seven years. Eighty-eight percent of repeat homebuyers sold their previous home at the same time they purchased their new residence. Nine percent of repeat homebuyers held on to their previous home for investment purposes. Nearly four out of five homeowners sold their previous home with the assistance of a real estate agent; just 16 percent of homes were sold by the owner directly. Twenty-four percent of home sellers had to sell their home fast because they had already purchased another home, while another 11 percent were in a rush because they were either moving, or already had moved, out of the area. More than half of repeat homebuyers began their home search before they placed their previous home on the market. Repeat homebuyers needed only five weeks to sell their previous home. Sellers of homes typically interviewed just one real estate agent before selecting the agent who ultimately sold the home. Nearly half of home sellers chose their agent based on prior interaction with the agent or based on a referral from friends, relatives, or another broker. Nearly 40 percent of sellers used the same real estate professional who assisted them in selling their previous home to help in their most recent purchase. The most widely reported marketing tools for agent-assisted transactions were yard signs, newspaper advertisements, and real estate magazines. Seven out of ten sellers said that they would use the same agent in future transactions. Sellers of homes who sold their homes themselves (FSBO) tended to be younger and earned less money than agent-assisted sellers. Slightly less than half of all sellers who sold the home themselves did so to avoid paying the commission fee.

7 PROFILE OF BUYERS AND SELLERS CHAPTER K I HOMEBUYERS: DEMOGRAPHIC PROFILE NOWING THE CHARACTERISTICS OF HOMEBUYERS WHETHER THEY ARE FIRST-TIME purchasers or repeat buyers and their preferences for types of properties, could be useful to real estate professionals in planning sales strategies, marketing properties, and establishing solid customer relationships. This chapter presents a demographic profile of homebuyers in 1999, and information on the kinds of residential property buyers purchased. In 1999, the typical homebuyer was 39 years old and married. The household had two wage earners, with a combined household income of $60,400. The buyer purchased an existing single-family home in a suburban community, and had previously owned a home. The median age of homebuyers in 1999 was 39 years ten years ago it was 34 years.

8 NATIONAL ASSOCIATION OF REALTORS 7 AGE The median age of homebuyers similar to the median age of the general population has increased over the last decade. The typical homebuyer in 1999 was 39 years old up from 34 years old in There were differences in the median age of homebuyers across regions of the U.S. The South and West tended to have slightly older homebuyers. This can be explained, in part, by the influx of retirees who relocated to those regions. Seventeen percent of homebuyers in the South were at least 55 years old, compared to just 12 percent in the Midwest. TABLE I-1 AGE OF RESPONDENTS U.S. Northeast Midwest South West Less than 25 years 5% 3% 8% 4% 5% years years years years years or older Median Age INCOME Homebuyers have incomes that are 55 percent higher than the typical American household income. Given the expense of buying and maintaining a home, this is not surprising. In 1999,the typical homebuyer had a household income of $60,400 an increase from $45,000 or 34 percent over the last decade. As a comparison, the typical American household regardless of homeownership had an income of $38,885 in 1998 (the latest U.S. Census data available). Homebuyers in the Northeast and West had slightly higher household incomes compared to households in other regions of the country. In addition, the majority of the households from those regions derived their income from two adult wage earners. TABLE I-2 ESTIMATED HOUSEHOLD INCOME OF HOMEBUYERS FOR 1999 U.S. Northeast Midwest South West Under $25,000 5% 3% 7% 5% 4% $25,000-29, $30,000-39, $40,000-49, $50,000-$69, $70,000-99, $100, , $150,000 or more Median income $60,400 $66,800 $57,800 $59,800 $61,300 Median number of Household wage earners

9 PROFILE OF BUYERS & SELLERS CHAPTER 1: DEMOGRAPHIC PROFILE HOUSEHOLD FORMATION Historically, homebuyers have been married couple households. This tradition continued in Nearly two thirds of all homebuyers were married couples. Six percent of homebuyers were unmarried couples. But single-person households account for a significant share of homebuyers. Eighteen percent of homebuyers were single females an increase from 13 percent in 1989 and a segment of the homebuying population that has risen readily throughout the 1990s. Single males represented nine percent of homebuyers, virtually unchanged from Whereas married couples represented a nearly equal proportion of homebuyers in most regions in the country, singlefemale buyers were most prevalent in the South. Surprisingly, the typical homebuyer household did not have children under the age of 18 living at home. However, homebuyer households were more likely to have children at home compared to the typical American household. In 1999, 42 percent of homebuyers had at least one child under the age of 18 compared to 34 percent for all American households regardless of homeownership. FIGURE I-1 NUMBER OF CHILDREN UNDER THE AGE OF 18 (Percentage Distribution of Households) * Less than 1% TABLE I-3 Five or more * Four 1% Three 6% Two 16% One 19% ADULT COMPOSITION OF HOMEBUYER HOUSEHOLDS Married couple 68% 70% 64% 66% Single female Single male Unmarried couple Other * * Less than 1% FIGURE I-2 PERCENTAGE OF FIRST-TIME HOMEBUYERS 50% 40% 30% 20% 38% 44% None 58% 41% 42% 42% 42% 10%

10 NATIONAL ASSOCIATION OF REALTORS 9 REPEAT VS. FIRST-TIME BUYERS First-time homebuyers represent new opportunities for real estate professionals, and they have always been a vital segment of the housing market. In 1999, 42 percent of homebuyers were first-time homebuyers compared to 38 percent in The Northeast had relatively more first-time homebuyers compared to the other three Census regions. First-time homebuyers generally are younger than experienced homebuyers, and usually not as wealthy. The typical first-time homebuyer in 1999 was 32 years old 13 years younger than the typical repeat buyer. Further, the median 1999 household income for first-time buyers was $49,700 $18,900 lower than the $68,900 earned by repeat homebuyers. First-time homebuyers generally are younger than those homebuyers who have previously owned a home. FIGURE I-3 PERCENTAGE OF FIRST-TIME BUYERS, BY REGION 50% 40% 30% 20% 10% 0 42% U.S. 45% 41% 41% 41% Northeast Midwest South West TABLE I-4 AGE OF FIRST-TIME BUYERS VS. REPEAT BUYERS 1st time Buyer Repeat Buyer Less than 25 years 11% 1% years years years years years or older 1 11 Median 32 years 45 years TABLE I-5 ESTIMATED HOUSEHOLD INCOME OF HOMEBUYERS FOR st time Buyer Repeat Buyer Under $25,000 6% 4% $25,000-29, $30,000-39, $40,000-49, $50,000-69, $70,000-99, $100, , $150,000 or more 3 10 Median $49,700 $68,600

11 PROFILE OF BUYERS & SELLERS CHAPTER 1: DEMOGRAPHIC PROFILE SECOND HOMES But all repeat buyers do not necessarily sell a home at the same time they purchase one. Some decide to purchase a second home possibly a vacation home or decide to hold on to their previous home for either investment or vacation purposes. Nearly six percent of all homebuyers (that is ten percent of all repeat homebuyers) purchased a second home in This is comparable to 1989 when seven percent of all homes purchased, including ten percent of homes purchased by repeat buyers, were second homes. Interestingly, the typical secondhome buyer is more likely to be married and is older than are other buyers. Nearly four out of five second-home buyers are married, compared to two thirds of all buyers. Second-home buyers had a median age of 43 years four years older than the typical homebuyer. Further, they earned greater incomes, with the typical second-home buyer earning $68,800 in FIGURE I-4 SECOND/VACATION HOMEBUYERS HOUSEHOLD COMPOSITION 5% 8% 8% Married couple Single male Single female Unmarried couple 79% TABLE I-6 HOUSEHOLD INCOME FOR SECOND HOME BUYERS, 1999 Percent Under $25,000 2% $25,000-29,999 5 $30,000-39, $40,000-49,999 7 $50,000-69, $70,000-99, $100, , $150,000 or more 12 Median income $68,800

12 NATIONAL ASSOCIATION OF REALTORS 11 PRIOR LIVING ARRANGEMENT Forty-five percent of homebuyers surveyed had rented an apartment or house prior to the purchase of their home with another two percent purchasing the home they had been renting. Of the four regions of the U.S. the South saw the highest rate of prior renting nearly half of all homebuyers in the South rented prior to purchasing. More than a third of homebuyers previously owned a home prior to their recent purchase. The Midwest had the highest percentage of repeat buyers 42 percent. TABLE I-7 PREVIOUS LIVING ARRANGEMENT U.S. Northeast Midwest South West Rented an apartment/ 45% 46% 41% 50% 41% condo/townhouse/single-family home Owned single-family home Lived with parents/relatives/friends Owned apartment/condo/townhouse Rented the home that was ultimately purchased Other PRIMARY REASON FOR MAKING A HOUSING CHANGE The vast majority of homes purchased in 1999 were solely for a place of residence for the buyer. This is consistent with prior surveys. There are numerous reasons why people decide to purchase a home space considerations, financial advantages, or employment considerations, to name a few. But the most popular reason for making a housing change was the desire of the homebuyers to own their own home. Thirty-four percent of all homebuyers and two thirds of first-time homebuyers cited this as their reason. Nearly a quarter of homebuyers in the Northeast said a desire for more space was the primary reason for moving. Fifteen percent of buyers in the South moved either because of corporate relocation or a new job. TABLE I-8 PRIMARY REASON FOR MAKING HOUSING CHANGE Nationwide Desired owning a home of my own 34% Desire more Space 18 Corporate relocation or new job in another area 12 Larger home: investment/tax deduction/upscale neighborhood 7 Desired to be closer to job, school, relatives, mass transit 6 Needed less space (children left, divorce) 4 Decline of previous neighborhood 3 Wanted a newly constructed home 2 Retirement 2 Desired a change of climate 2 Health/age (too much yard/stairs, allergies) 2 Desired second home 1 Desired more space for home business * Other 9 * Less than 1%

13 PROFILE OF BUYERS & SELLERS CHAPTER 1: DEMOGRAPHIC PROFILE FACTORS THAT INFLUENCED DECISION TO CHOOSE THE HOME RECENTLY PURCHASED Just as there are many reasons why people make a housing change, there are also many factors that homebuyers consider when choosing a home to purchase. Price (71 percent) and neighborhood (74 percent) are the factors most widely cited by recent homebuyers. Naturally, households with children under the age of 18 are more likely to consider schools in their housing choice almost three out of five homebuyers with children reported schools as a factor. And real estate professionals also influence buyers decisions by giving useful information and insight. Twelve percent of homebuyers considered their real estate agent a factor in their housing choice. TABLE I-9 FACTORS INFLUENCING HOUSING CHANGE (Percentage of Respondents) Percent Neighborhood 74% Price 71 Work 34 School 32 Friends/Family 23 Parks/Recreation Facilities 15 Shopping Center 13 Real Estate Agent 12 Planned Community 10 Public Transportation 5 Potential Rental Income 5 Health Facilities 3 DISTANCE MOVED Most households relocated within the same general geographical,suburban or metropolitan area. In 1999, the typical homebuyer moved just ten miles. Of course, not all housing changes are simply to another home on the same block or in the same neighborhood. Twenty percent of all homebuyers in 1999 moved at least 50 miles (median distance). Half of those long distance moves were prompted by corporate relocations. For first-time homebuyers, the median distance drops to eight miles. Only nine percent of first-time homebuyers moved more than 50 miles. TABLE I-10 DISTANCE BETWEEN NEW AND PREVIOUS RESIDENCE (Miles) Nationwide Northeast Midwest South West Mean Median

14 NATIONAL ASSOCIATION OF REALTORS 13 THE HOME Slightly more than one out of five homebuyers purchased a newly constructed home. While this is a slightly higher proportion of new homes found in the 1997 survey, it is still lower than the 27 percent found in On a regional basis, just 11 percent of home sales in the Northeast were newly constructed homes compared to 27 percent in the South. The vast majority of the nation s housing stock consists of single-family homes. As a result, most housing transactions deal with this category of residential property. More than four out of five homes purchased in 1999 were single-family homes. Seven percent of buyers in 1999 purchased a townhouse or row house. Results for the 1989 survey were similar: homebuyers purchased single-family homes and townhouses at rates of 81 and nine percent, respectively. Suburbs are the most likely location of a newly purchased home. Forty-six percent of homebuyers surveyed purchased residences in suburban subdivisions. In both the Northeast and the South, suburban locations were the choice of more than half of homebuyers. FIGURE I-5 TYPE OF HOME PURCHASED, EXISTING VS. NEW, BY REGION 100% 80% 60% 40% 20% 0 TABLE I-11 22% 78% U.S. New Home 11% 89% 17% 83% Northeast Midwest South West Existing Home CHARACTERISTICS OF HOME PURCHASED 27% 73% 24% 76% U.S. Northeast Midwest South West Detached single-family home 82% 75% 82% 84% 84% Apartment/condo/co-op Townhouse or row house family house Other

15 PROFILE OF BUYERS & SELLERS CHAPTER 1: DEMOGRAPHIC PROFILE But homes in urban areas are also popular. In 1999, 41 percent of buyers purchased homes within a city neighborhood, and city locations were most popular among Western homebuyers. First-time homebuyers were more likely to purchase homes in a city not surprising since first-time owners tend to be young and tend to prefer smaller homes than older repeat homebuyers do. Forty-seven percent of first-time homebuyers purchased their home in a city neighborhood compared to 36 percent for repeat homebuyers. TABLE I-12 LOCATION OF HOME PURCHASED U.S. Northeast Midwest South West Suburban neighborhood/subdivision 46% 52% 44% 52% 37% Within a city neighborhood Rural Resort property Other st Time Buyer Repeat Buyer Within a city neighborhood 47% 36% Suburban neighborhood/subdivision Rural 9 12 Resort property 1 2 Other 1 1

16 NATIONAL ASSOCIATION OF REALTORS 15 2 CHAPTER HOMEBUYING: THE SEARCH PROCESS THE 20TH CENTURY ENDED WITH A RED-HOT HOUSING MARKET. BUOYED BY A STRONG economy and low interest rates, homebuyers purchased more than 6.5 million homes both existing and new in 1999, an increase from an also-strong 6.2 million in And while the housing market may cool down as we enter the 21st century, it will still be strong by historic standards through 2000 and Every homebuyer who purchased one of those 6.5 million homes went through a process of searching for that property. Despite the plethora of information sources accessible to consumers, including the Internet, homebuyers continue to trust the experience and know how that real estate brokers and agents provide. In 1999, four of five of homebuyers used a real estate professional for both the home search and to complete the transaction. Four out of five homebuyers used a real estate agent as an information source for their home search.

17 PROFILE OF BUYERS & SELLERS CHAPTER 2: THE SEARCH PROCESS THE HOME SEARCH In 1999, the typical homebuyer took eight weeks to search for a home. (This is identical to results found in 1989.) Interestingly, there is no difference in the length of the home search for firsttime and repeat homebuyers. There were, however, differences across regions. Homebuyers in the Northeast took the most time ten weeks for their searches. Those in the West took just six weeks. The typical homebuyer in 1999 walked through ten homes before choosing the residence that was ultimately purchased. This number was unchanged across Census regions, or among first-time or repeat buyers. In 1989, the median number of home visits was 11. TABLE II-1 ACTIVE HOME SEARCH Number of weeks U.S. Northeast Midwest South West Mean Median Number of homes seen Mean Median THE ROLE OF REAL ESTATE PROFESSIONALS Using a real estate professional is still the preferred method of purchasing a home. Nearly four out of five homebuyers used a real estate agent and/or broker to complete their transaction. Eleven percent of homebuyers purchased their home directly from a homebuilder. Just nine percent of buyers purchased their home directly from the home s previous owner. These figures are similar to those found in earlier surveys. TABLE II-2 METHOD OF HOME PURCHASE Through a real estate agent/broker 81% 79% 79% Direct from the builder Directly from the previous owner Through a foreclosure or trustee sale U.S. Northeast Midwest South West Through a real estate agent/broker 79% 85% 77% 78% 80% Direct from the builder Directly from the previous owner Through a foreclosure or trustee sale

18 NATIONAL ASSOCIATION OF REALTORS 17 INFORMATION SOURCES Homebuyers usually consult a variety of information sources. But despite the growing number of these sources over the years, one constant has remained: most homebuyers value the information they receive from a real estate professional. In 1999,four out of five homebuyers used a real estate agent as an information source during their home search. This proportion is virtually unchanged from that found in The use of real estate agents also was consistent among all four Census regions and did not differ among first-time or repeat buyers. Other popular information sources included newspaper advertisements,yard signs,home book magazines,and open houses. More than two out of five homebuyers consulted newspaper advertisements. While this figure is consistent with 1989 results,it is a decrease from survey results during the mid-1990s. Use of yard signs and home book magazines has remained relatively stable in recent years. The most striking change has been in the effectiveness of open houses. In 1989,41 percent of homebuyers reported that open houses were an information source. By 1999,this figure dropped to 28 percent. The only information source that saw a significant increase in use was the Internet. In 1995,just two percent of homebuyers used the Internet as an information source. In 1999,however,37 percent of homebuyers used the Internet. The highest rate of Internet use was in the Northeast,where nearly one out of every two homebuyers perused the Web when conducting their home search. TABLE II-3 INFORMATION SOURCES USED IN HOME SEARCH (Percent of Respondents) Real estate agent 86% 82% 80% Newspaper advertisement Internet Yard sign Home book/magazine Open house Friend/neighbors/relative Builders Television Knew the seller Real estate phone hotline Relocation company Yellow Pages * 1 1 Other * Less than 1% In 1999, 37 percent of homebuyers used the Internet as an information source in their home search.

19 PROFILE OF BUYERS & SELLERS CHAPTER 2: THE SEARCH PROCESS LEARNING ABOUT THE HOME Homebuyers may use several information sources in their search process, but they are most likely to actually find the home that they will purchase through a real estate professional. Nearly one half of all homebuyers first learned about the home they ultimately purchased through a real estate agent. Interestingly, new information sources, such as the Internet, have not diminished the role of real estate agents in matching a home with a buyer. In 1989, long before the Internet had any influence on real estate, 50 percent of homebuyers first learned about their home from their real estate agent. Consistent with prior studies, yard signs was the second most widely cited source where homebuyers first learned about the home that they purchased. In 1999, 15 percent of homebuyers found their home from seeing a yard sign, down slightly from 17 percent in Other widely cited sources of information were friends/relatives and newspaper advertisements. While the use of the Internet as an information source has skyrocketed through the mid- to late 1990s, few users actually find the home that they ultimately purchase on the Internet. Just four percent of homebuyers in the survey found their home on the Internet. Even in the Northeast, which had the highest level of Internet use, only eight percent of homebuyers first learned about their home on the Web. TABLE II-4 WHERE BUYER FIRST LEARNED ABOUT HOME PURCHASED Real estate agent 50% 50% 49% Yard sign Newspaper advertisement Friend/neighbor/relatives Builder Internet * 2 4 Home book/magazine Knew the seller Open house Real estate phone hotline * * * Yellow Pages * * * Television * * * Relocation company * * * Other * * 4 * Less than 1% New information sources, such as the Internet, have not diminished the role of real estate agents.

20 NATIONAL ASSOCIATION OF REALTORS 19 FUTURE INFORMATION SOURCES Despite the continued evolution of information sources for housing, homebuyers expect to continue to rely on the expertise of real estate professionals for their future real estate transactions. Eighty-four percent of homebuyers surveyed expect to use a real estate agent as an information source in their next home purchase. Real estate professionals clearly are serving their customers well because agent-assisted homebuyers are even more likely to use a real estate professional again. Nine out of ten homebuyers who used a real estate agent in their most recent transaction expect to do so in their next transaction. Homebuyers also expect to use newspapers, friends/relatives, open house, and yard signs in their next home search. In addition, the Internet appears to have an increasingly important role in real estate transactions. Two thirds of homebuyers expect to use the Internet as an information search in the near future. TABLE II-5 FUTURE INFORMATION SOURCES FOR HOMEBUYERS (Percent of Respondents) U.S. Northeast Midwest South West Real Estate Agent 84% 86% 85% 85% 82% Open houses Newspaper advertisement Friend/neighbors/relatives Yard signs Internet Home book/magazine Builder Television Real estate phone hotline Relocation company Yellow Pages More than four fifths of homebuyers surveyed expect to use a real estate agent in their next home purchase.

21 PROFILE OF BUYERS & SELLERS CHAPTER 3 HOMEBUYING: THE ROLE OF REAL ESTATE PROFESSIONALS R 3 EAL ESTATE AGENTS AND BROKERS CONTINUE TO PLAY A VITAL ROLE IN THE HOME SEARCH. Quality service by real estate professionals leads to more business. More than half of homebuyers either chose a real estate agent that they previously used or followed the recommendations of friends, relatives, or neighbor when choosing a real estate professional to complete the real estate transaction. Referrals and/or prior experience generate the majority of business for real estate agents.

22 NATIONAL ASSOCIATION OF REALTORS 21 REAL ESTATE AGENTS In 1999 real estate agents continued to serve an important role in the home search process. Typically, homebuyers hired the first real estate agent they interviewed and remained with that agent throughout their home search. Homebuyers in the Northeast were more likely to interview and/or use more than one real estate agent for the home search. Further, nearly half of all first-time homebuyers interviewed more than one agent before choosing the one used to buy the home. One reason why repeat homebuyers interview fewer real estate agents is because buyers frequently use the same real estate professional whom they had used in a previous transaction. Sixteen percent of repeat homebuyers specifically chose their agent because they had used the agent in a prior transaction. In general, referrals and/or prior experience generated the majority of business for real estate agents. In 1999, more than a third of homebuyers chose an agent who was currently or was previously used by either a friend or relative. Another eight percent of homebuyers chose their agent because of the agent s reputation presumably gathered also from experiences of acquaintances. Referrals from employers, real estate brokers, and membership organizations resulted in nearly another ten percent of homebuyers matching up with their agent. Other popular sources of potential clients for real estate professionals included personal contact by agents, for-sale signs, open houses, and buyers walking into real estate offices. TABLE III-1 NUMBER OF REAL ESTATE AGENTS INTERVIEWED One Two Three Four Five or More 61% 22% 11% 3% 3% FIGURE III-1 THE NUMBER OF REAL ESTATE AGENTS USED IN THE HOME SEARCH NATIONWIDE Four 1% Five 1% Three 6% Two 18% TABLE III-2 REASON FOR CHOOSING REAL ESTATE AGENT One 73% All 1st time buyer Repeat buyer Agent is a (was referred by) friend, neighbor, relative 34% 40% 30% Used agent previously to buy or sell house Reputation of real estate agent For sale sign/brochure box Referred through my employer/relocation company Personal contact by agent Visited open house and met agent Walked into office and agent was on duty Referred through another real estate broker Newspaper ad Met agent through builder s model home Internet/on-line/Web site Homes magazine/book ad Yellow pages ad Direct mail Referred through my membership organization 1 1 * Seminar about home buying/selling 1 2 * Radio/TV cable ad * * * Advertising specially * 1 * Real Estate telephone hotline * * * Contacted agent after news story * * * Professional Designation(s) held by real estate agent * 1 * * Less than 1%

23 PROFILE OF BUYERS & SELLERS CHAPTER 3: THE ROLE OF REAL ESTATE PROFESSIONALS AGENT COMPENSATION Traditionally,the home seller compensates the real estate professional(s) who facilitates the sales transaction. The most recent data shows this tradition maintained in In nearly two thirds of the cases,the home seller fully compensated the real estate agent serving the homebuyer. In just 15 percent of the cases did the homebuyer fully compensate their own (buyer) agent. CLIENT EXPECTATIONS Real estate professionals best serve their clients when they know what homebuyers expect from them. In the recent survey, three out of five homebuyers reported that the most important service provided by a real estate agent is helping buyers find the right home. Twelve percent of homebuyers felt the most important function of their real estate professional was to help with price negotiations. For 12 percent of homebuyers, help with paperwork was the most important service that real estate professionals provide. First-time homebuyers have unique needs that real estate agents can fulfill. Eight percent of first-time buyers most wanted their real estate agent to help them figure out how much housing they could afford. Eight percent wanted help in finding and arranging financing. TABLE III-3 BUYER S AGENT COMPENSATION Paid by: All 1st time buyer Repeat buyer Seller 65% 62% 68% Buyer Both the buyer and seller Don t know TABLE III-4 WHAT BUYERS MOST WANT FROM REAL ESTATE PROFESSIONAL 1st time buyer Repeat buyer Help you find the right house to purchase 56% 62% Help with price negotiations Help your paper work Tell you what comparable home are selling for 5 8 Tell you how much house you can afford 8 2 Help find and arrange for financing 8 3 FIGURE III-2 WHAT BUYERS MOST WANT FROM REAL ESTATE PROFESSIONALS (Percentage Distribution of All Survey Respondents) Help find and arrange for financing Tell you how much house you can afford Tell you what comparable homes are selling for Help your paper work Help with price negotiations 7% 5% 12% 5% 12% Help find the right house to purchase 60%

24 NATIONAL ASSOCIATION OF REALTORS 23 AGENT REPRESENTATION AND BUYER AGENCY Satisfaction with a real estate professional can be related to the level of understanding that the homebuyer has of the role and obligation of the agent. Knowing whether the real estate agent represents the buyer or the seller is an example. More than half of homebuyers surveyed indicated that their real estate agent asked them to sign a disclosure form indicating whom the agent represented in the transaction. Just 15 percent of homebuyers were certain that they did not sign such a form, while 19 percent were not sure. Almost two thirds of repeat homebuyers signed a disclosure statement with their real estate agent. In many cases, homebuyers sign agreements with their real estate agents in which the real estate professional agrees to represent only the buyer. In 1999, nearly half of all homebuyers who used the services of a real estate professional signed a buyer s representative agreement with their agent. The use of buyer s representatives did not differ among the four Census regions or among firsttime or repeat homebuyers. In more than half of transactions, the home seller compensates buyer representatives. Less frequently, the buyer pays the agent a percentage of the sales price of the home; there are also cases in which both the buyer and seller compensate the agent. TABLE III-5 AGENT REPRESENTATION DISCLOSURE Disclosure Statement Signed All 1st time buyer Repeat buyer At first meeting 38% 33% 42% When contract written No Don t know/not sure TABLE III-6 BUYER REPRESENTATIVE ARRANGEMENTS WITH REAL ESTATE AGENT U.S. 1st time buyer Repeat buyer Written Agreement 38% 38% 39% Oral agreement No Not sure TABLE III-7 BUYER REPRESENTATIVE COMPENSATION* All 1st time buyer Repeat buyer Paid by seller 56% 58% 54% Don t know Paid by buyer, % of total Paid by buyer and seller Paid by buyer, flat fee Other * Agents who represent buyer exclusively in transaction.

25 PROFILE OF BUYERS & SELLERS CHAPTER 3: THE ROLE OF REAL ESTATE PROFESSIONALS The majority of agents who acted as a buyer representative in a transaction actually served both homebuyers and sellers in their practice. Three out of five buyer representatives in these transactions also served the home seller in other transactions. Only 15 percent of these buyer representatives represented only homebuyers in their practice. REPRESENTATION AT SETTLEMENT Many homebuyers feel that closing on a property is a stressful event,and they often choose to have representation to help them through the process. In 1999,a majority of homebuyers had their own real estate agent present at the closing. Attorneys and the seller s agent were cited less frequently as a representative of the buyer at the settlement. TABLE III-8 EXCLUSIVE BUYER REPRESENTATION TABLE III-9 WHO REPRESENTED BUYER AT SETTLEMENT (Percentage of Respondents) Percent The buyer 65% Buyer s real estate agent 51 Buyer s attorney 17 Seller s real estate agent 10 Bank attorney 5 Don t know/not sure 2 All 1st time buyer Repeat buyer Yes 15% 14% 16% No Don t know FAIR HOUSING Nearly two thirds of homebuyers reported that that their real estate agent advised them of their rights under the Fair Housing laws. But this could be a low estimate, since nearly a quarter of homebuyers was not sure if they were advised of these rights. TABLE III-10 FAIR HOUSING LAWS Did your real estate agent advise you of rights under the Fair Housing Laws? Percent Yes 64% No 12 Don t know/not sure 24

26 NATIONAL ASSOCIATION OF REALTORS 25 Only two percent of homebuyers felt that there were cultural barriers that made it difficult to complete their transaction. This conclusion is similar to that found in previous homebuyer/seller surveys. FIGURE III-3 Do you feel that there were cultural barriers that made it difficult to complete your transaction? Yes 2% No 98% SERVICES RECOMMENDATIONS AND BUY RATE Homebuyers rely on real estate professionals to help them find the home of their dreams and to make the settlement process as smooth as possible. In recent years though, real estate agents have become resources for information about products and services related to the purchase of a home as well as the moving process. Three quarters of homebuyers received recommendations from their real estate professional about providers of other real estate related services and/or products. More than 90 percent of homebuyers who received at least one recommendation purchased at least one product and/or service based on the recommendation given by the real estate agent. First-time and repeat homebuyers were just as likely to follow the recommendations offered by their real estate agent. Among the most widely reported services and products recommended in 1999 were home inspectors, title insurance, mortgage lending, appraising, and termite/insect TABLE III-11 RECOMMENDATION OF GOODS AND SERVICES (Percentage of Respondents) Yes, and Yes, but buyer No Recommendation buyer used it used someone else Made Home inspector 67% 10% 23% Title company/insurance Termite/insect inspector Appraiser Mortgage lender Home warranty Land surveyor Lead-based paint inspection Radon inspection Settlement attorney Homeowner s insurance Home improvement companies Appliance repair/sales Moving company

27 PROFILE OF BUYERS & SELLERS CHAPTER 3: THE ROLE OF REAL ESTATE PROFESSIONALS inspectors. These were not only the most likely recommended services, but were also the ones that homebuyers were most likely to follow. Homebuyers followed the recommendations of their real estate agent at least 75 percent of the time. At the other end of the spectrum, the least likely products and services to be recommended included moving companies, home improvement firms, and appliance repair companies. Such recommendations for ancillary products and services can be valuable for homebuyers, especially since they are usually preoccupied with other facets of the real estate transaction and could use sound advice from those with the experience and know-how that real estate agents offer. Nearly half of homebuyers who purchased services and/or products recommended by their real estate agent did so because of convenience. Another 26 percent followed their agent s recommendations because of the reputation of either the real estate firm or agent. A portion of homebuyers was interested in the ability of their real estate agent and/or firm to provide a broad menu of services and goods. In the 1999 survey, just over a quarter of homebuyers stated that they would choose a real estate agent and/or firm because it offers goods and services like insurance and mortgage finance. Another 39 percent of homebuyers were not sure if offering such services would play a role in their choice of a real estate agent or firm. Just over one quarter of homebuyers say they would choose a real estate agent or firm because it offers goods and services like insurance and mortgage finance. TABLE III-12 REASON FOR USING RECOMMENDED GOODS AND SERVICES (Percentage Distribution of buyers who got recommendations) Percent Convenience 50% Reputation of sales agent/real estate firm 26 Quality of service 10 Did not purchase any service recommended 8 Price 6 TABLE III-13 FUTURE AGENT CHOICE BASED ON GOODS AND SERVICES OFFERED Would buyer choose agent based on availability of a menu of goods & services? Percent Yes 27% No 34 Not sure 39

28 NATIONAL ASSOCIATION OF REALTORS 27 ONE-STOP SHOPPING Some real estate firms combine a variety of real estate related goods and services into a single package. Such programs, frequently referred to as one-stop shopping, give homebuyers a convenient place to purchase all the services and goods needed in their homebuying transaction and therefore make the buying process easier. Increased customer satisfaction, in turn, leads to increased customer loyalty and repeat business for the firm. As of the end of the current survey period (1999), the penetration of onestop shopping remained low. Just 11 percent of homebuyers reported being offered a package of real estate related goods and services. However, of those who were offered such a service, half did purchase it. TABLE III-14 WAS BUYER OFFERED ONE-STOP SHOPPING Percent Yes, buyer purchased the package 6% Yes, buyer purchased services elsewhere 5 No 89 Half of those homebuyers who were offered a package of real-estate related goods and services (one-stop shopping) purchased this package. USING THE SAME REAL ESTATE AGENT AGAIN The ability of real estate agents to meet the needs of their clients explains why those clients return to them for future transactions. Sixty-five percent of homebuyers would definitely use the same real estate agent in a future transaction. An additional 20 percent of homebuyers believe that they might use the same agent, while just eight percent were sure that they will use a different agent in the future. These high levels of homebuyer satisfaction are consistent through all four Census regions and among both first-time and repeat homebuyers. TABLE III-15 USE OF REAL ESTATE AGENT IN NEXT HOME PURCHASE Definitely would use same agent again 67% 70% 65% Might use again Definitely would not use again Don t know/not sure 4 5 6

29 PROFILE OF BUYERS & SELLERS 4 CHAPTER HOMEBUYERS: USE OF THE INTERNET T HE INTERNET IS CHANGING HOW MANY COMPANIES CONDUCT BUSINESS FROM SELLING books to trading stocks and bonds. Real estate is no exception. In recent years, real estate firms and real estate professionals have created Web sites to market their services and, in many cases, post their listings. In 1999, three out of ten real estate professionals had a Web page and three out of five used in their real estate practice. Fiftyseven percent of real estate firms had a Web page and nearly seven out of ten firms report having generated business from the Internet. Generally, the Internet is being used as a search tool in conjunction with not as a substitute for the services offered by real estate professionals. In spite of claims that the Internet represents a threat to real estate agents and firm, it appears that homebuyers are using the Web as an information source that they use in combination with real estate professionals. Nearly seven out of ten real estate firms report having generated business from the Internet.

30 NATIONAL ASSOCIATION OF REALTORS 29 INTERNET USERS In 1999, 37 percent of homebuyers used the Internet as an information source. Homebuyers who used the Internet tended to be younger and slightly wealthier than non-internet users. Internet users accessed real estate Web sites primarily to search for listings and generally found the experience to be helpful. Users of the Internet as a home search tool tend to be younger and earn more than that their non-internet using counterparts. In 1999, the typical homebuyer who used the Internet in the home search was married, 36 years old, and earned $69,900. As a comparison, the typical non-internet using homebuyer in the same year was married, 41 years old, and earned $55,800. Homebuyers who used the Internet in their home search were, in other ways, not unlike other homebuyers who did not use the Internet in the homebuying transaction. For example, both groups typically did not have children under the age of 18 (although those who used the Internet were slightly more likely to have children). Also, both groups were just as likely to have two wage earners in their household. TABLE IV-1 CHARACTERISTICS OF INTERNET HOME SEARCHERS Household composition Internet user Non-Internet user Married couple 68% 64% Single female Single male 8 9 Unmarried couple 6 6 Other 1 2 Age of respondent Internet user Non-Internet user Less than 25 years 4% 5% years years years years years years years years or older 1 9 Median 36 years 41 years # of children under 18 Internet user Non-Internet user None 55% 59% One Two Three 7 6 Four 1 1 Five or more 1 * * Less than 1%