From Cyberspace to Living Space:

Using the Web to Buy a Home

Traditional real-estate agents obviously have good reason to feel nervous these days: The Internet threatens to demolish the way they earn commissions.

I learned this first-hand recently when I bought my house online.

Well, sort of. It wasn't exactly like Amazon's "one-click" shopping. But after a fair amount of time and effort, including hours driving around with a real live broker and a Web search that helped me dodge a house near a radioactive-waste site, I wound up with a great house for my family -- and a sizable and perfectly legal kickback on the sales commission.

The heightened competition in the property-brokerage business comes amid increasing signs that the go-go housing market of the last few years is sputtering in some areas. Toll Brothers, the nation's largest builder of luxury homes, said earlier this week that new orders dropped 29% in its quarter ended Jan. 31. Goldman Sachs estimates that nationwide inventories of homes for sale, adjusted for seasonal variations, have jumped 38% since April, the biggest eight-month rise on record.

Walter Molony, a spokesman for the National Association of Realtors, says that Web-based brokers remain a niche market and argues that most buyers will continue using so-called full-service brokers regardless of the state of the housing market because they don't have the time to do a lot of work online.

But officials with ZipRealty.com, the Web-based brokerage I used, say they don't expect a slowing housing market to hurt their business, since 80% of their customers are buyers. "I think that our model will do very well in this market," says Pat Lashinsky, ZipRealty's senior vice president of product strategy. Traditional brokers usually show only a few homes, he says, while ZipRealty lets buyers pick among hundreds of local listings online.

No matter how the shifting market conditions shake out, the rise of Web-based competition represents an enormous change in the real-estate market. And, not surprisingly, traditional brokers aren't exactly thrilled to see their longtime commission model -- 5% to 6% of a home's sale price -- being challenged by Internet upstarts. Lately, they've gone on the offensive, battling not only online broker discounters but even the Department of Justice. Last September, the department sued the National Association of Realtors, alleging the trade group was unfairly withholding listings of homes for sale from brokers who mainly use Web sites to deal with their customers. The association denies the claim.

The stakes are huge. Last year, as home sale prices soared, residential real-estate commissions reached an estimated $63 billion, according to Real Trends, an industry research company. In cities like San Diego and Fort Lauderdale , Fla. , home prices have more than doubled over the past five years.

It's not that traditional agents have ignored the online world. Nearly all have Web sites, can send clients emails when new properties come on the market and offer access to Multiple Listing Service listings and other research tools. But the Internet also has spawned a new kind of agent who has fewer expenses and can pass on some of the savings to thrifty consumers who are willing to do a lot of the work.

Like me. In a way, I was an ideal candidate for a Web-based broker since, because of an unexpected job transfer to Boston from London , I had only a few weeks to find a house and move. I saw no need to hook up with an agent with a real office who specialized in a particular area since I had no idea where I wanted to live.

I started out looking at Boston.com, the Boston Globe's Web site, which has articles on local communities and property listings. It was there I spotted an ad for ZipRealty, a publicly traded, seven-year-old company that promises to refund 20% of its commission to buyers. Since agents representing buyers and sellers generally split a commission 50-50, that means with a $500,000 house with a 5% commission, the buyer would get 20% of $12,500, or $2,500. For house sellers, ZipRealty cuts up to 25% off the prevailing area commission. It operates in 11 states and the District of Columbia .

The buyer's rebate sounded pretty good. I registered on the site and within minutes received a phone call from Jack Guerin, a ZipRealty agent in suburban Boston . He suggested I use the company's Web site to find properties I was interested in, and he would show them to me when I came to Boston with my wife on a house-hunting trip.

ZipRealty.com is relatively easy to navigate and, like many other real-estate sites, offers photos and data on MLS properties. It also provides extremely useful maps, neighborhood and school data, and lists of sold homes in the area. It lets you "save" homes you're interested in and alert its agent about properties you want to visit or even make an offer on. Of course, it doesn't offer the kind of inside tips traditional agents often know, like which houses are about to go on the market.

I found the site's school and neighborhood data much too general, so I searched other Web sites, including Mass.gov, the state of Massachusetts ' own site, and BostonMagazine.com, which ranks schools and towns (as well as doctors and ice cream).

While sitting at my computer in London , I managed to narrow my search down to the historic communities of Lexington , Concord and Acton , due west of Boston . Concord was particularly appealing but pricey. But then a search on ZipRealty produced several large, very attractive houses in a West Concord neighborhood that were a lot cheaper.

Probably because I'm a reporter, I immediately grew suspicious. I emailed Jack, and he reported back that the properties were near something called "Starmet."

With a simple Google search, I quickly discovered that a former manufacturing plant owned by Starmet Corp. had produced depleted uranium, and the groundwater below it was now radioactive, according to the U.S. Environmental Protection Agency.

Although a cleanup was scheduled to begin shortly, I decided to search elsewhere.

Even before I met Jack, I began to get a sense of what some traditional real-estate people think of Web-based brokers. A mortgage broker in Lexington told me ZipRealty's commission-rebate policy was "unethical." I suggested she speak to the Justice Department.

Not long after, we met Jack in the lobby of our hotel. He turned out to be an easygoing, knowledgeable, no-pressure kind of guy, who joined ZipRealty in 2002 after being laid off from an Internet financial-services company. I expected he'd have a BlackBerry or an even niftier wireless device, but he didn't. He communicated mostly by cellphone.

We had picked out around a dozen homes to see and spent the next two days driving around with Jack, who had printed out directions off his home computer. At first we saw nothing to our liking, except for one possibility in Acton . Since I had no contract with Jack and was under time pressure, I started looking at old-fashioned newspaper real-estate listings and "for sale by owner," or "Fizbo," Internet sites, where property sellers try to avoid using brokers altogether.

We went to see a "Fizbo" property in nearby Carlisle , without Jack. It was a stylish, modern house on more than an acre. But with its huge windows, I grew worried about the fuel bill. The owners said they thought heating cost around $1,500 a year but weren't positive. I asked them to check.

Turns out they were slightly off. The previous year's bill had come to $4,000. We decided to stick with Jack and look again at the house in Acton, a split-level on a quiet cul-de-sac with two acres of woods and a horse farm down the street. The house was larger and costlier than the one in Carlisle, but the heating bill was significantly less.

We decided it would work. Within 24 hours, with Jack's help, we had knocked the price down slightly and had a deal with the owner -- who turned out to be a local, traditional real-estate agent. Seven weeks later, we closed.

As promised, a large check arrived a few weeks later from ZipRealty. Not unexpectedly, we quickly spent it on a snow blower and other necessities for the new house.