July 30, 2007
July 17, 2007
PPI Urges E-Transformation of the Real Estate IndustryNew Report Finds Potential Savings of Tens of Billions to Homebuyers Every Year
WASHINGTON, D.C. -- The Progressive Policy Institute (PPI) today released a new report examining how information technology (IT) can revolutionize all stages of the home buying process -- from credit checks to mortgage applications and approvals, to finding one's home - and enable buyers and sellers to make choices for themselves.
The paper, unveiled today at PPI's conference examining the next phase of IT-driven growth and what government can do to speed productivity, details how e-transformation can cut transaction costs in half, saving homebuyers tens of billions of dollars annually. In addition, the report demonstrates the important role Congress and state governments can play in guiding public policy to ensure efficient transformation despite industry forces that may oppose it.
In Modernizing Home Buying: How IT Can Empower Individuals, Slash Costs, and Transform the Real Estate Industry, Shane Ham, a senior policy advisor at PPI, and Rob Atkinson, PPI Vice President, challenge federal and state policy makers and the real estate industry to take action to speed IT transition in the industry. Ham and Atkinson find that IT has the potential to streamline processes and empower consumers to engage in real estate transactions with less reliance on expensive intermediaries.
"We estimate that residential real estate transaction costs can be cut in half, saving American homeowners tens of billions of dollars every year," Ham and Atkinson explain. "Such efficiencies will not only boost productivity and economic growth, they will also play a key role in helping to expand homeownership, as one of the barriers to first-time home purchases is the large amount of money buyers must provide to cover transaction costs."
To jumpstart the e-transformation process, the authors offer several policy recommendations to eliminate barriers and to support e-transformation through laws and regulation changes. A few of these recommendations include:
Create "one stop shopping" for gaining access to and correcting errors in credit reports;
Simplify mortgage rate shopping with standardized forms and "apples to apples" rate comparisons;
Unbundle the functions of real estate agents to encourage competition and disclosing alternatives to buyers and sellers;
Create electronic land records to reduce the risks and cut the cost of title searches and insurance; and
Reduce settlement costs and paperwork through digital signatures and online settlement.
"[I]n some industries where the producers and/or consumers are disorganized or uninformed and the professionals and other middlemen exercise power over the market and the political process, it is unreasonable to expect e-transformation to happen on its own in the foreseeable future," the authors conclude. "It is therefore incumbent on government to move forward with appropriate measures to encourage e-transformation leading to greater competition, greater efficiency, and greater choice for consumers."
The Progressive Policy Institute's Technology and New Economy Project seeks to educate federal, state, and local policy makers about what drives the New Economy, and to foster policies that promote technological advances, economic innovation, investment, and entrepreneurship. For additional information, Web users may access The Progressive Policy Institute Online, at www.ppionline.org, or contact PPI's communications office at (202) 547-0001.
The paper, unveiled today at PPI's conference examining the next phase of IT-driven growth and what government can do to speed productivity, details how e-transformation can cut transaction costs in half, saving homebuyers tens of billions of dollars annually. In addition, the report demonstrates the important role Congress and state governments can play in guiding public policy to ensure efficient transformation despite industry forces that may oppose it.
In Modernizing Home Buying: How IT Can Empower Individuals, Slash Costs, and Transform the Real Estate Industry, Shane Ham, a senior policy advisor at PPI, and Rob Atkinson, PPI Vice President, challenge federal and state policy makers and the real estate industry to take action to speed IT transition in the industry. Ham and Atkinson find that IT has the potential to streamline processes and empower consumers to engage in real estate transactions with less reliance on expensive intermediaries.
"We estimate that residential real estate transaction costs can be cut in half, saving American homeowners tens of billions of dollars every year," Ham and Atkinson explain. "Such efficiencies will not only boost productivity and economic growth, they will also play a key role in helping to expand homeownership, as one of the barriers to first-time home purchases is the large amount of money buyers must provide to cover transaction costs."
To jumpstart the e-transformation process, the authors offer several policy recommendations to eliminate barriers and to support e-transformation through laws and regulation changes. A few of these recommendations include:
Create "one stop shopping" for gaining access to and correcting errors in credit reports;
Simplify mortgage rate shopping with standardized forms and "apples to apples" rate comparisons;
Unbundle the functions of real estate agents to encourage competition and disclosing alternatives to buyers and sellers;
Create electronic land records to reduce the risks and cut the cost of title searches and insurance; and
Reduce settlement costs and paperwork through digital signatures and online settlement.
"[I]n some industries where the producers and/or consumers are disorganized or uninformed and the professionals and other middlemen exercise power over the market and the political process, it is unreasonable to expect e-transformation to happen on its own in the foreseeable future," the authors conclude. "It is therefore incumbent on government to move forward with appropriate measures to encourage e-transformation leading to greater competition, greater efficiency, and greater choice for consumers."
The Progressive Policy Institute's Technology and New Economy Project seeks to educate federal, state, and local policy makers about what drives the New Economy, and to foster policies that promote technological advances, economic innovation, investment, and entrepreneurship. For additional information, Web users may access The Progressive Policy Institute Online, at www.ppionline.org, or contact PPI's communications office at (202) 547-0001.
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