When Real Estate Isn't Real

From that beginning, many sites, from the proprietary national firms to local brokers to independent sites such as www.zillow.com and www.ziprealty.com/index.jsp, all allowed buyers many ways to begin the labor of love, but still labor, of house-hunting, without opening a single door until they were ready to do so. Some sites differentiated themselves by targeting different customers, such as buyers of 'affordable' properties (see, for example, http://rismedia.com/wp/2007-09-12/national-web-site-for-affordable-properties-debuts-with-4100-active-listings). Others competed for attention with an upfront commission discount by reducing the selling agent's commission (presumably, due to the transactional savings of working online ' see, www.ziprealty.com/buy_a_home/rebate.jsp). A cottage industry has even developed on the foundation of how best to photograph for online marketing, exemplified by the Zillowblog entry 'Making Your Home Picture Perfect' (www.zillowblog.com). (Author's note: My references to particular firms' Web sites are purely illustrative, and not an endorsement of any individual site.)

Even So ' So Many Choices

In fact, with so many sites available, how can prospective purchasers choose which one to use ' or sellers choose where to list their property for sale? In the dawn of e-commerce (and it's not even mid-morning these days), online retail sites proliferated until mega-sellers such as Amazon.com and the Web sites of familiar real-world stores drove out all but the niche sellers. Following that model, perhaps brokers dominant in traditional listings will exercise the same control online ' especially because listing agreements are typically exclusive. Indeed, property sellers may legitimately question why they should list with a small online brokerage and risk missing the marketing clout of the national brokerages both online and off. From that perspective, online real estate becomes simply a new way for the rich to get richer.

Similarly, in the commercial sphere, online tools such as Google Earth and Google Maps have allowed parties to evaluate properties more quickly and cost-effectively than they could ' or still can ' with traditional methods. Here has been a dramatic and almost-always helpful result: The increasingly popular mashup permits a more comprehensive method of due diligence on a property by allowing interested parties to combine information from different databases (whether environmental or demographic) into an easily viewable interface for checking on points of interest. (See, for example, http://googlemapsmania.blogspot.com or www.wired.com/techbiz/it/magazine/15-07/ff_maps#.) Commercial brokers, of course, haven't missed the opportunity to advance business by using the Internet and have also made inventory available online, at such sites as www.loopnet.com, www.cimls.com and www.costar.com. A recent entry, www.terabitz.com, simplifies the mashup process with a customizable, drag-and-drop mapping program that lets the user create a view of a property or region that provides just the information she needs.

The Net Opens Datakeepers' Gates

These developments in online real estate mirror the experience of other practitioners ' entrepreneurs and attorneys ' in other sectors of the economy, where the Internet has devastated information gatekeepers' ability to charge for that knowledge and has democratized customers' access to critical purchasing information. Travel agents, for instance, are no longer the inevitable intermediary for any trip, nor does a bookseller's physical inventory limit what a consumer can purchase to read.

The real property market has made other online appearances as well. In a reverse twist on e-commerce, an active, real-world online market even exists in Linden Research's well-known Second Life online world for the purchase and sale of 'virtual land.' The participants value such property so much that a dispute over rights to Second Life real estate was litigated in a real-world court. See, Bragg v. Linden Research, 487 F. Supp. 2d 593 (E.D. Pa. 2007). However, the case was ultimately sent to arbitration under the binding 'Terms of Service' that govern participation in Second Life, rather than any principles of real-property law. (The court also did not discuss whether buyers of virtual real estate would get a mortgage-interest deduction, as would buyers of 'real property.') (For more on Second Life and related online games and issues, and the background of the case referred to above, see, 'Federal Court Cancels Arbitration Clause in 'Virtual World' Test Case,' in the Aug. 2007 edition of e-Commerce Law &Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_4/news/149081-1.html; 'Ad Push for 'Virtual Property' Subjects Virtual World Gamemaker to Long-Arm Jurisdiction,' also in the Aug. 2007 edition of e-Commerce Law & Strategy ' the last item in 'e-Commerce Docket Sheet,' p. 12, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_4/news/149083-1.html; and 'New Kinds of e-Commerce: Asset Creation, Seclusion And Money Laundering in The Virtual World: It's a Real Problem That Could Easily Get Worse,' in the Aug. 2006 edition of e-Commerce Law & Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/23_4/news/147035-1.html.)

Another reverse example of virtual real estate with real-world value ' and speculation ' is www.weblo.com, a site for speculation and advertising linked to real-world property locations.

In fact, some sellers are using the virtual real-estate market found in Second Life to promote sales of bricks and mortar in the real world through 'virtual showings' (see, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/09/02/RE07RQEHN.DTL.) According to the software developer of a marketing site within Second Life for an actual property: 'The real-life modeling projects are worthwhile, even if they are limited or imperfect. ' Virtual showings have a very bright future. Fuel costs and traffic congestion are increasing. If you can have a mechanism to help a prospective buyer narrow down their choices for which homes they want to actually visit, you're saving the buyers gas and time, saving the agent gas and time, and saving the homeowner an intrusion. You can make a decision if you want to actually visit the location in person. There's no other way you can convey this amount of information.' (See, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/09/02/RE07RQEHN.DTL.) For example, a luxury home was featured in a virtual 'open house' on Second Life to make it easier ' and cheaper ' for tours, initially, by the limited audience that could afford it, without having to incur travel expense (http://rismedia.com/wp/2007-09-12/realty-homes-in-on-virtual-world). But such marketing isn't for every seller ' the Web site alone cost almost $10,000.

Still Roots in the Real World

For all this online 'real estate' activity, however, 'real estate' still must change hands in the real world. Until very recently, that world used the same procedures that have been in place for centuries ' paper deeds filed in courthouses and recorders' offices. Although those records might have been computerized over the years, particularly by title-search companies, a closing of a real-estate sale still required paper and ink (and a notary). But e-commerce has begun to change that tradition, too. Firms such as the Property Records Industry Association ('PRIA') have developed standards for online recording of real-estate transfer documents. According to that firm's Web site (www.pria.us/CommitteeDocs/eRecordingCounties.xls), more than 250 counties, including those containing several of the country's largest cities, have begun using these standards. Although large, that number is still a small percentage of recording jurisdictions in the U.S., and it remains unclear how many persons involved in the real-estate industry ' particularly lenders, brokers and other advisers ' actually use that system (or anything comparable) where it is available. (PRIA issues a periodic newsletter with updates on the progress of electronic recording for those interested in the development of these standards ' see, https://maxvps029.maximumasp.com/V029U14MFC/PRIA/inTouch.htm.)

Of course, in a field as 'rooted' in the dirt as real-estate law is, it would be surprising if the movement online didn't encounter problems. As in many other areas of e-commerce, for example, privacy remains a paramount concern. This will be particularly true for critical real-estate documents, which often contain confidential information (such as Social Security numbers), even if these data aren't necessary for recording or title purposes. Even the link of an otherwise unpublished name and address can be valuable to a marketer ' or a thief or harasser. While states can choose to eliminate requirements for such information in documents intended for recording in the future in order to preserve privacy, that won't fix the many previously recorded documents containing private information. On the other hand, any such personal data has always been available to anyone willing to visit the filing office and manually retrieve filed documents.

But the fear lurking in the heart of many buyers and sellers today isn't fear of the disclosure itself, but disclosure in an easily accessible and transferable medium. This confidentiality concern, moreover, is not new ' access to public records has existed for many years, and, indeed, is a tradition in American jurisprudence and of the dissemination of information to the public. What has changed is the ability of anyone interested to find, reach and retrieve this information without having to appear in person in numerous courthouses. A thief could, in theory, retrieve images remotely (although with today's privacy concerns, it would be hard to imagine any county allowing unrestricted access to filings with confidential personal information). (A convenient Web site that has collected links to online records, for nominal fees, can be found at http://publicrecords.netronline.com; there's also
a free site, at www.publicrecordsources.com.) As a result of such privacy efforts, e-real estate has counter-intuitively made normal research of public records more difficult than in the pre-electronic records era.

Consider, for example. In Texas, the state attorney general has required county clerks to manually remove such information from their records, notwithstanding the delays that work will cause. To allow time to fix old records, all public access to online real-estate records was removed. As a result, Dallas County Commissioner Kenneth Mayfield even warned that 'people seeking access to real estate documents and real estate records will have to get used to looking at them the old-fashioned way ' in person ' at least for a time. ' With identity theft being what it is, we don't want to make it any easier for someone's identity to be stolen.” (See, www.dallasnews.com/sharedcontent/dws/news/localnews/stories/DN-records_23met.ART0.North.Edition1.212456e.html.)

But all that cleansing work comes at a cost. Dallas is seeking permission to charge fees to cover the redaction. Consider the national expense of that effort in every county that wants to permit online transactions (as I suspect most lenders would prefer). Fees for routine real-estate recordkeeping meant to cover small but routine costs could become more controversial if they must cover massive technology upgrades. Search engine Google.com has even begun to subsidize some local governments' efforts to make their records (including those other than real estate) available (see, www.dallasnews.com/sharedcontent/dws/bus/industries/techtelecom/stories/050107dnbusgooglerecords.136db4.html). Also, the cost 'savings' of an electronic-transaction system may not benefit property owners. According to a study by breakingviews.com, reported in the Wall Street Journal on Sept. 6, conventional borrowers paid, on average, over half a percentage point more in mortgage interest from 2000 to 2006 than they had in the 1970s, before the financial markets were revolutionized by the available technology (see, http://online.wsj.com/article/SB118903970710218805.html;
subscription required for full story).

The Market Is Watching

Of course, vendors of all stripes have not ignored these steps to fully automate electronic real-estate transactions. The National Notary Assoc- iation, for example, promotes the Electronic Notary Seal, adopted in some states (e.g., Pennsylvania; see, www.izenpe.com/s15-4812/es/contenidos/informacion/notas_de_prensa/es_9067/adjuntos/20060203_NNA.pdf). Several vendors offer online closing systems, such as Tractis (a firm based in Spain; see its Web site at http://money.cnn.com/galleries/2007/biz2/0707/gallery.web_world.biz2/9.html and https://www.tractis.com/login), and SureClose (an offering of a major title insurer, online at www.sureclose.com.) As an online search will reveal, there are many vendors for these products ' and many users.

No matter how good one company's offerings may be, though, widespread use (and cost-savings) will not take place until the industry ' and the government offices that are legally responsible to maintain the filings that determine ownership of real estate ' has established standardized procedures. Until that critical point is reached, therefore, traditional ways of doing real-estate deals cannot be forgotten. Purchasing real estate is not like buying a uniform widget, the type of repetitive transaction well suited to e-commerce without the need for the intervention of a skilled flesh-and-blood sales representative; instead, each real-estate sale is unique, because property (generally) cannot be replicated ' the law, for instance, allows the rarely used concept of 'specific enforcement' to force a breaching seller to sell a property it had agreed to sell because the buyer cannot get that particular property elsewhere. With such need for individual attention, particularly in working with bureaucracies that have not totally converted to online systems, the traditional agent, the 'middle man' that the Internet was supposed to eliminate, becomes all the more important, and still in need ' ever more so, perhaps, with the agent's potential or imminent adoption of online services ' of competent, knowledgeable legal counsel to help safeguard against compliance lapses and other legal pratfalls that could bring serious consequences to the agent and his or her company.

Even though buyers and sellers could find each other more efficiently through the Internet, someone still has to know ' and oversee ' all the steps that must occur to make and close a deal; from title insurance, to certifications, to loan documents, to the hundreds of details that all must be handled properly to avoid problems with what are typically large purchases. And the potential complexities of the typical title report, and knowing how to clear liens and other encumbrances, demand far more skill, judgment and experience than simply the ability to navigate a search function in a Web browser. (In my experience, real-estate title work for a historical landmark property in a New England state included several dozen handwritten pages dating to Colonial times ' not something easily analyzed through an automated process.) Finally, the key data that buyers and sellers want ' analysis of neighborhoods, amenities and pricing ' may be more easily obtained from an experienced agent working on commission, selling his or her knowledge of a local community, than from multiple automated databases.

Remember, too, that the real-world agent usually still will be needed to literally 'open the door' of a property in which a potential buyer is interested. Rarely would anyone make a major purchase without viewing and inspecting a property, but prudent sellers will not typically open their property to strangers who found them online, without any oversight or screening. In other words, buying a piece of property is not like buying a book or a concert or other event ticket ' whatever convenience an online system can offer, it will not provide the comfort that most buyers and sellers now get from the services that an agent, and an experienced attorney, provides, whether in a residential or commercial sale, or lease. Even the best virtual tours (such as the iPix 'geocentric' tour seen at www.360by360.com/mlstour.da?ad_id=3410) don't give the full experience buyers typically want before a major purchase. (And, yes, there has always been a limited number of corporate relocations whose owners buy unseen, but they are the vast minority among transactions.)

A Bumpier Road Could Be Taken

Yet despite their importance to any deal, real-estate agents haven't been immune to the problems their travel counterparts face (see, for example, www.boston.com/realestate/articles/2007/08/05/rebates_a_real_estate_rift/). Like the commission sellers threatened by national sales Web sites (see, for instance, 'The Death of a Salesman ' Online,' in the May 2007 edition of e-Commerce Law & Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_1/news/148603-1.html), the agents who offer online rebates to attract clients have triggered a harsh response. Traditionalists likened the rebates to illegal kickbacks, a once pervasive practice in the real-estate industry, for which specific disclosure legislation and the ubiquitous RESPA form were promulgated.

The agents' trade association has also defended its turf against online brokers' transactions. According to a National Association of Realtors representative: 'Online rebates put cash in consumers' pocket, but what is the flip side? Don't be surprised to learn that your agent can't negotiate a lower commission or may reduce the level of service they provide because they owe the rebate company
35% of their commission for the pleasure of being introduced to you. Commissions are for the brokers; that's what they are working for. If a consumer participates in a commission, that's less for the broker. And sooner or later, the broker has to cut back on something to stay profitable, and that is usually labor.'

In an industry where someone 'on the ground' is critical to the deal in ways that cannot be replaced through the cost-savings available in using online tools, perhaps the greatest threat to the growth of online real-estate sales is the risk that they will erode the service level of traditional brokers. If their income is cut when they are forced to reduce commissions, or they must change their service to a 'fee basis,' what some may see as elimination of unneeded inefficiencies might well instead be a reduction in the efficiency of the entire system of real-estate transactions.

So, after all, perhaps many deals for bricks and mortar themselves, the antithesis of e-commerce, will remain offline, at least in part. Certainly, we can expect that skilled agents will certainly continue to use the many online tools being developed by e-commerce firms to gain a competitive advantage, just as forward-looking entrepreneurs and the principles and employees of their firms moved listings off of paper and put them online in the dot-com boom. Instead of pure 'e-real estate,' however, we may see a race among real-estate firms to discover which will most effectively adopt the many online real-estate tools that are now becoming available, like the few mentioned in this article. But the upside for most interested parties to the development of sales technology that will enable e-commerce is this: Don't expect e-commerce to e-liminate the commissioned real-estate agent, or the need for counsel.

For years, e-commerce writers have distinguished the 'bad, old bricks-and-mortar' world from the 'new and improved' e-commerce economy. But recently, the marketing, purchase and sale of real estate have all begun to join online.

Certainly, some of the earliest Internet adopters were real estate brokers. In their intensely competitive market, they quickly recognized the consumer advantages of the Internet, where they could post online listings, later on with photographs and virtual tours, which consumers could peruse at their leisure before calling a listing agency to speak with an agent about a property.

And really, from the agent's perspective, what could be better? He or she avoided the until-then unavoidable time and cost expenditures of physically showing many houses, and could focus on closing a sale to a buyer who had already identified a home of interest. The application of the Internet and its technology sped not only the sale for buyers and sellers, but the payment of commission to brokers, taxes to municipal and other government authorities, and the reputation of sure-shot brokers.

From that beginning, many sites, from the proprietary national firms to local brokers to independent sites such as www.zillow.com and www.ziprealty.com/index.jsp, all allowed buyers many ways to begin the labor of love, but still labor, of house-hunting, without opening a single door until they were ready to do so. Some sites differentiated themselves by targeting different customers, such as buyers of 'affordable' properties (see, for example, http://rismedia.com/wp/2007-09-12/national-web-site-for-affordable-properties-debuts-with-4100-active-listings). Others competed for attention with an upfront commission discount by reducing the selling agent's commission (presumably, due to the transactional savings of working online ' see, www.ziprealty.com/buy_a_home/rebate.jsp). A cottage industry has even developed on the foundation of how best to photograph for online marketing, exemplified by the Zillowblog entry 'Making Your Home Picture Perfect' (www.zillowblog.com). (Author's note: My references to particular firms' Web sites are purely illustrative, and not an endorsement of any individual site.)

Even So ' So Many Choices

In fact, with so many sites available, how can prospective purchasers choose which one to use ' or sellers choose where to list their property for sale? In the dawn of e-commerce (and it's not even mid-morning these days), online retail sites proliferated until mega-sellers such as Amazon.com and the Web sites of familiar real-world stores drove out all but the niche sellers. Following that model, perhaps brokers dominant in traditional listings will exercise the same control online ' especially because listing agreements are typically exclusive. Indeed, property sellers may legitimately question why they should list with a small online brokerage and risk missing the marketing clout of the national brokerages both online and off. From that perspective, online real estate becomes simply a new way for the rich to get richer.

Similarly, in the commercial sphere, online tools such as Google Earth and Google Maps have allowed parties to evaluate properties more quickly and cost-effectively than they could ' or still can ' with traditional methods. Here has been a dramatic and almost-always helpful result: The increasingly popular mashup permits a more comprehensive method of due diligence on a property by allowing interested parties to combine information from different databases (whether environmental or demographic) into an easily viewable interface for checking on points of interest. (See, for example, http://googlemapsmania.blogspot.com or www.wired.com/techbiz/it/magazine/15-07/ff_maps#.) Commercial brokers, of course, haven't missed the opportunity to advance business by using the Internet and have also made inventory available online, at such sites as www.loopnet.com, www.cimls.com and www.costar.com. A recent entry, www.terabitz.com, simplifies the mashup process with a customizable, drag-and-drop mapping program that lets the user create a view of a property or region that provides just the information she needs.

The Net Opens Datakeepers' Gates

These developments in online real estate mirror the experience of other practitioners ' entrepreneurs and attorneys ' in other sectors of the economy, where the Internet has devastated information gatekeepers' ability to charge for that knowledge and has democratized customers' access to critical purchasing information. Travel agents, for instance, are no longer the inevitable intermediary for any trip, nor does a bookseller's physical inventory limit what a consumer can purchase to read.

The real property market has made other online appearances as well. In a reverse twist on e-commerce, an active, real-world online market even exists in Linden Research's well-known Second Life online world for the purchase and sale of 'virtual land.' The participants value such property so much that a dispute over rights to Second Life real estate was litigated in a real-world court. See , Bragg v. Linden Research , 487 F. Supp. 2d 593 (E.D. Pa. 2007). However, the case was ultimately sent to arbitration under the binding 'Terms of Service' that govern participation in Second Life, rather than any principles of real-property law. (The court also did not discuss whether buyers of virtual real estate would get a mortgage-interest deduction, as would buyers of 'real property.') (For more on Second Life and related online games and issues, and the background of the case referred to above, see, 'Federal Court Cancels Arbitration Clause in 'Virtual World' Test Case,' in the Aug. 2007 edition of e-Commerce Law &Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_4/news/149081-1.html; 'Ad Push for 'Virtual Property' Subjects Virtual World Gamemaker to Long-Arm Jurisdiction,' also in the Aug. 2007 edition of e-Commerce Law & Strategy ' the last item in 'e-Commerce Docket Sheet,' p. 12, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_4/news/149083-1.html; and 'New Kinds of e-Commerce: Asset Creation, Seclusion And Money Laundering in The Virtual World: It's a Real Problem That Could Easily Get Worse,' in the Aug. 2006 edition of e-Commerce Law & Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/23_4/news/147035-1.html.)

Another reverse example of virtual real estate with real-world value ' and speculation ' is www.weblo.com, a site for speculation and advertising linked to real-world property locations.

In fact, some sellers are using the virtual real-estate market found in Second Life to promote sales of bricks and mortar in the real world through 'virtual showings' (see, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/09/02/RE07RQEHN.DTL.) According to the software developer of a marketing site within Second Life for an actual property: 'The real-life modeling projects are worthwhile, even if they are limited or imperfect. ' Virtual showings have a very bright future. Fuel costs and traffic congestion are increasing. If you can have a mechanism to help a prospective buyer narrow down their choices for which homes they want to actually visit, you're saving the buyers gas and time, saving the agent gas and time, and saving the homeowner an intrusion. You can make a decision if you want to actually visit the location in person. There's no other way you can convey this amount of information.' (See, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/09/02/RE07RQEHN.DTL.) For example, a luxury home was featured in a virtual 'open house' on Second Life to make it easier ' and cheaper ' for tours, initially, by the limited audience that could afford it, without having to incur travel expense (http://rismedia.com/wp/2007-09-12/realty-homes-in-on-virtual-world). But such marketing isn't for every seller ' the Web site alone cost almost $10,000.

Still Roots in the Real World

For all this online 'real estate' activity, however, 'real estate' still must change hands in the real world. Until very recently, that world used the same procedures that have been in place for centuries ' paper deeds filed in courthouses and recorders' offices. Although those records might have been computerized over the years, particularly by title-search companies, a closing of a real-estate sale still required paper and ink (and a notary). But e-commerce has begun to change that tradition, too. Firms such as the Property Records Industry Association ('PRIA') have developed standards for online recording of real-estate transfer documents. According to that firm's Web site (www.pria.us/CommitteeDocs/eRecordingCounties.xls), more than 250 counties, including those containing several of the country's largest cities, have begun using these standards. Although large, that number is still a small percentage of recording jurisdictions in the U.S., and it remains unclear how many persons involved in the real-estate industry ' particularly lenders, brokers and other advisers ' actually use that system (or anything comparable) where it is available. (PRIA issues a periodic newsletter with updates on the progress of electronic recording for those interested in the development of these standards ' see, https://maxvps029.maximumasp.com/V029U14MFC/PRIA/inTouch.htm.)

Of course, in a field as 'rooted' in the dirt as real-estate law is, it would be surprising if the movement online didn't encounter problems. As in many other areas of e-commerce, for example, privacy remains a paramount concern. This will be particularly true for critical real-estate documents, which often contain confidential information (such as Social Security numbers), even if these data aren't necessary for recording or title purposes. Even the link of an otherwise unpublished name and address can be valuable to a marketer ' or a thief or harasser. While states can choose to eliminate requirements for such information in documents intended for recording in the future in order to preserve privacy, that won't fix the many previously recorded documents containing private information. On the other hand, any such personal data has always been available to anyone willing to visit the filing office and manually retrieve filed documents.

But the fear lurking in the heart of many buyers and sellers today isn't fear of the disclosure itself, but disclosure in an easily accessible and transferable medium. This confidentiality concern, moreover, is not new ' access to public records has existed for many years, and, indeed, is a tradition in American jurisprudence and of the dissemination of information to the public. What has changed is the ability of anyone interested to find, reach and retrieve this information without having to appear in person in numerous courthouses. A thief could, in theory, retrieve images remotely (although with today's privacy concerns, it would be hard to imagine any county allowing unrestricted access to filings with confidential personal information). (A convenient Web site that has collected links to online records, for nominal fees, can be found at http://publicrecords.netronline.com; there's also
a free site, at www.publicrecordsources.com.) As a result of such privacy efforts, e-real estate has counter-intuitively made normal research of public records more difficult than in the pre-electronic records era.

Consider, for example. In Texas, the state attorney general has required county clerks to manually remove such information from their records, notwithstanding the delays that work will cause. To allow time to fix old records, all public access to online real-estate records was removed. As a result, Dallas County Commissioner Kenneth Mayfield even warned that 'people seeking access to real estate documents and real estate records will have to get used to looking at them the old-fashioned way ' in person ' at least for a time. ' With identity theft being what it is, we don't want to make it any easier for someone's identity to be stolen.” (See, www.dallasnews.com/sharedcontent/dws/news/localnews/stories/DN-records_23met.ART0.North.Edition1.212456e.html.)

But all that cleansing work comes at a cost. Dallas is seeking permission to charge fees to cover the redaction. Consider the national expense of that effort in every county that wants to permit online transactions (as I suspect most lenders would prefer). Fees for routine real-estate recordkeeping meant to cover small but routine costs could become more controversial if they must cover massive technology upgrades. Search engine Google.com has even begun to subsidize some local governments' efforts to make their records (including those other than real estate) available (see, www.dallasnews.com/sharedcontent/dws/bus/industries/techtelecom/stories/050107dnbusgooglerecords.136db4.html). Also, the cost 'savings' of an electronic-transaction system may not benefit property owners. According to a study by breakingviews.com, reported in the Wall Street Journal on Sept. 6, conventional borrowers paid, on average, over half a percentage point more in mortgage interest from 2000 to 2006 than they had in the 1970s, before the financial markets were revolutionized by the available technology (see, http://online.wsj.com/article/SB118903970710218805.html;
subscription required for full story).

The Market Is Watching

Of course, vendors of all stripes have not ignored these steps to fully automate electronic real-estate transactions. The National Notary Assoc- iation, for example, promotes the Electronic Notary Seal, adopted in some states (e.g., Pennsylvania; see, www.izenpe.com/s15-4812/es/contenidos/informacion/notas_de_prensa/es_9067/adjuntos/20060203_NNA.pdf). Several vendors offer online closing systems, such as Tractis (a firm based in Spain; see its Web site at http://money.cnn.com/galleries/2007/biz2/0707/gallery.web_world.biz2/9.html and https://www.tractis.com/login), and SureClose (an offering of a major title insurer, online at www.sureclose.com.) As an online search will reveal, there are many vendors for these products ' and many users.

No matter how good one company's offerings may be, though, widespread use (and cost-savings) will not take place until the industry ' and the government offices that are legally responsible to maintain the filings that determine ownership of real estate ' has established standardized procedures. Until that critical point is reached, therefore, traditional ways of doing real-estate deals cannot be forgotten. Purchasing real estate is not like buying a uniform widget, the type of repetitive transaction well suited to e-commerce without the need for the intervention of a skilled flesh-and-blood sales representative; instead, each real-estate sale is unique, because property (generally) cannot be replicated ' the law, for instance, allows the rarely used concept of 'specific enforcement' to force a breaching seller to sell a property it had agreed to sell because the buyer cannot get that particular property elsewhere. With such need for individual attention, particularly in working with bureaucracies that have not totally converted to online systems, the traditional agent, the 'middle man' that the Internet was supposed to eliminate, becomes all the more important, and still in need ' ever more so, perhaps, with the agent's potential or imminent adoption of online services ' of competent, knowledgeable legal counsel to help safeguard against compliance lapses and other legal pratfalls that could bring serious consequences to the agent and his or her company.

Even though buyers and sellers could find each other more efficiently through the Internet, someone still has to know ' and oversee ' all the steps that must occur to make and close a deal; from title insurance, to certifications, to loan documents, to the hundreds of details that all must be handled properly to avoid problems with what are typically large purchases. And the potential complexities of the typical title report, and knowing how to clear liens and other encumbrances, demand far more skill, judgment and experience than simply the ability to navigate a search function in a Web browser. (In my experience, real-estate title work for a historical landmark property in a New England state included several dozen handwritten pages dating to Colonial times ' not something easily analyzed through an automated process.) Finally, the key data that buyers and sellers want ' analysis of neighborhoods, amenities and pricing ' may be more easily obtained from an experienced agent working on commission, selling his or her knowledge of a local community, than from multiple automated databases.

Remember, too, that the real-world agent usually still will be needed to literally 'open the door' of a property in which a potential buyer is interested. Rarely would anyone make a major purchase without viewing and inspecting a property, but prudent sellers will not typically open their property to strangers who found them online, without any oversight or screening. In other words, buying a piece of property is not like buying a book or a concert or other event ticket ' whatever convenience an online system can offer, it will not provide the comfort that most buyers and sellers now get from the services that an agent, and an experienced attorney, provides, whether in a residential or commercial sale, or lease. Even the best virtual tours (such as the iPix 'geocentric' tour seen at www.360by360.com/mlstour.da?ad_id=3410) don't give the full experience buyers typically want before a major purchase. (And, yes, there has always been a limited number of corporate relocations whose owners buy unseen, but they are the vast minority among transactions.)

A Bumpier Road Could Be Taken

Yet despite their importance to any deal, real-estate agents haven't been immune to the problems their travel counterparts face (see, for example, www.boston.com/realestate/articles/2007/08/05/rebates_a_real_estate_rift/). Like the commission sellers threatened by national sales Web sites (see, for instance, 'The Death of a Salesman ' Online,' in the May 2007 edition of e-Commerce Law & Strategy, available at www.lawjournalnewsletters.com/issues/ljn_ecommerce/24_1/news/148603-1.html), the agents who offer online rebates to attract clients have triggered a harsh response. Traditionalists likened the rebates to illegal kickbacks, a once pervasive practice in the real-estate industry, for which specific disclosure legislation and the ubiquitous RESPA form were promulgated.

The agents' trade association has also defended its turf against online brokers' transactions. According to a National Association of Realtors representative: 'Online rebates put cash in consumers' pocket, but what is the flip side? Don't be surprised to learn that your agent can't negotiate a lower commission or may reduce the level of service they provide because they owe the rebate company
35% of their commission for the pleasure of being introduced to you. Commissions are for the brokers; that's what they are working for. If a consumer participates in a commission, that's less for the broker. And sooner or later, the broker has to cut back on something to stay profitable, and that is usually labor.'

In an industry where someone 'on the ground' is critical to the deal in ways that cannot be replaced through the cost-savings available in using online tools, perhaps the greatest threat to the growth of online real-estate sales is the risk that they will erode the service level of traditional brokers. If their income is cut when they are forced to reduce commissions, or they must change their service to a 'fee basis,' what some may see as elimination of unneeded inefficiencies might well instead be a reduction in the efficiency of the entire system of real-estate transactions.

So, after all, perhaps many deals for bricks and mortar themselves, the antithesis of e-commerce, will remain offline, at least in part. Certainly, we can expect that skilled agents will certainly continue to use the many online tools being developed by e-commerce firms to gain a competitive advantage, just as forward-looking entrepreneurs and the principles and employees of their firms moved listings off of paper and put them online in the dot-com boom. Instead of pure 'e-real estate,' however, we may see a race among real-estate firms to discover which will most effectively adopt the many online real-estate tools that are now becoming available, like the few mentioned in this article. But the upside for most interested parties to the development of sales technology that will enable e-commerce is this: Don't expect e-commerce to e-liminate the commissioned real-estate agent, or the need for counsel.