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What is e transaction?

The idea is to automate all contracting, scheduling and documents on the Internet and have that information accessible to buyers and sellers, their salespeople and brokers, and all third-party vendors.  Consumers will be able to access this file online to view the status of an appraisal, order a title report from a pull-down list of providers, review (and in some cases sign) the actual closing documents, and download and store the entire transaction.

Such a paperless transaction would significantly reduce the amount of phone tag by REALTORS®, clients, and service providers, and would allow REALTORS® to spend more time selling and less time tracking the process. According to estimates, more than 25 companies currently offer or are developing platforms that will track the online transaction process.

Yet the e-transaction management system vendor offers only one piece of the e-transaction pie. There's still the issue of getting all the parties— from brokers and consumers to inspectors and title companies—to participate. The questions of how to get these parties to cooperate, who will fund the system, and who will run it are central to the different types of e-transaction solutions offered by software companies across the country.

Different types of vendors

Talk to e-transaction platform vendors and you'll find different models for how their systems work. Some vendors market their products to associations and MLSs, while some go directly to brokers. Some sell transaction management software, while others charge a subscription fee to access an online transaction platform. Some have title companies or advertisers pay to sponsor the platform, while others charge a per transaction fee to the broker.

Who chooses the vendor is another gray area in the industry.

Does the North Shore – Barrington Association have a role in e-transaction platform?

Do the big brokers want us in? Does it level the playing field?  Should we help with signing people on (inspectors, etc)?

Background article from the AE Magazine:

Broker-run e-transaction model
"In many markets there is a tug-of-war over who is going to be responsible for running the e-transaction system," says Stephen J. Yanoviak, president of Management Advisors Inc. and a consultant to REALTOR® associations on technology solutions. According to Yanoviak, many of the more popular e-transaction companies market directly to brokerages, rather than MLSs or associations, because these vendors come from a contact management software background. These vendors see e-transaction management as a way for brokers to standardize their internal business process and create a competitive edge in their marketplace.

In fact, some associations have run into strong opposition from large brokers in their community who believe the association has no place in transaction management. "The MLS feeds the transaction management with listing data, but transaction management is not a natural extension of the MLS," Yanoviak says. "I have clients in some markets where the MLS met with their brokers to talk about offering transaction management, and the brokers flatly rejected the idea because it would level the playing field."

Some broker-centric models, however, can come with big up-front costs to buy and install the e-transaction management software, and require brokers to hire of a transaction coordinator to ensure that the system is fed with information on a timely basis. Then to get a return on their investment, brokers charge the title companies and other participants either a flat annual fee or a per transaction fee.

Vendors of other broker-run models charge a fee to access the online platform in which the vendor acts as a neutral third party facilitator, allowing the brokers to set up their own preferred provider list and customize other features.

Some broker-centric systems track the process from contract to close, while others take a more expansive view of the transaction. According to Yanoviak, electronic transaction management initially was thought to encompass only the closing process, which began when a buyer had a contract on a property. But software vendors expanded the vision of the e-transaction to include contact management, lead management, providing Web pages, and integrating a salesperson's contact list. Vendors felt that they had a better chance of selling a transaction platform if they addressed the e-transaction from the beginning since it was easier to integrate with existing contact management products, he says.

Putting the broker in charge of the e-transaction was the reason the Kansas Association of REALTORS® chose to offer a broker-centric online transaction management system through a vendor partnership agreement. The state association markets the Synteleos Inc. online platform then educates its members on how to use it. In return, the vendor gives the association a portion of each transaction fee. Brokers who use the system can pass the fee on to their salespeople, other service providers, or the homebuyer or seller. There is no software to buy or install, and any local title company, lender, or other service provider can participate.

"We chose this system because it can be used by any broker or salesperson on a per transaction basis," says Karen Gehle, the Kansas association's chief executive officer. "This system, right now, is used mainly for tracking the workflow of a transaction, not necessarily facilitating one online," she says. Providing consumers with access to their closing information online is optional. The system's main function is to help brokers ensure standard practices among their salespeople and keep a log of all transaction communications.

The state association's marketing of this platform is meant to give members options, not compete, Gehle says, noting that some local associations in Kansas are pursuing their own e-transaction platform solutions.

The e-transaction platform vendors who have a background in Internet MLS technology market their products to new and existing MLS and REALTOR® association clients.

Association-run transaction
Some associations believe that they are the ideal neutral third party to run e-transaction management systems in their markets because they run the MLS, an essential component of any platform.

"Associations are best suited to sponsor the platform because we're not in it for the per transaction fee or to make a major profit," Tulsa's Unser says. "We want to cover our cost and advance a service for our members."

Association-run e-transaction platforms can charge members a fee or a negotiated discount fee, but the more popular models are free to members and charge service providers like title companies and mortgage brokers. The San Antonio Board of REALTORS® in Texas signed on with an e-transaction vendor earlier this year for just that reason. "We wanted to offer a product that was free to REALTORS® and open to all of our local title companies and other affiliate members to participate," says Travis Kessler, executive officer of the San Antonio association.

San Antonio uses Texas-based Expeditrix's SmartClose, an online platform linked to its MLS that creates a folder for every transaction. Participating title companies fund this platform and work with the association's nearly 4,000 members to create the transaction folders. In this model, it is the vendor's responsibility to contract with the title companies for sponsorship. According to Kessler, the association "provides the MLS information to create the digital folders and we educate our membership on using the platform and what is an electronic transaction."

While many other associations are waiting, the San Antonio association went forward and signed a one-year nonexclusive agreement with Expeditrix to make sure that members are ahead of the game, says Kessler. "So in two-to-four years, when e-transactions are common practice, our members will be already up to speed," he says. "We do realize that it's not going to happen tomorrow, but we've got to start somewhere to give our members an opportunity to adjust."

How to choose the right system for your association
With the variety of electronic transaction platforms now available and those in development, where is an association or MLS to start?

Experts agree that the e-transaction is relatively undefined and in its infancy. Estimates put widespread use of online electronic transactions as far off as 10 years down the road.

But according to Unser, AEs need to begin a dialogue with their brokers and start evaluating products today. A tangled mess of separate broker platforms, with the MLS sponsoring its own system and no one talking to each other, is one risk of associations not getting involved in the process early, he says. MLSs and associations need to be involved on the ground level to set standards, define parameters, and create a base system that is flexible enough to allow brokers to build on it.

According to Yanoviak of Management Advisors, however, most associations " are just somewhat interested in transaction management at this point." Out of his last 27 clients who sought help selecting an Internet-based MLS system, only two asked Yanoviak to provide specifications on an e-transaction management system. "As for the other 25, there's just not a high enough level of interest right now."

Yanoviak and Unser agree that, for now, associations need to begin educating their members, gathering a consensus, and building a plan. "There's a lot to learn about what our role might or should be down the road," Unser says.

According to Yanoviak, associations are now in an education phase. "They need to be able to say to their brokers, 'Here's what transaction management is, here are some things that are being done in other parts of the country, and these are our options,' " he says.

He adds that associations should offer information and options—not necessarily a hard proposal, but at least a pretty good idea for their brokers to react to and visualize how it could be done.

Kessler also believes that associations should begin to become familiar with their options. "We accept that this is going to happen," he says, "so it's incumbent upon all boards and the industry to at least examine what e-transaction system will work best in their individual marketplace and start somewhere."

NAR's Own Transaction Management Platform: An update on eRealtor.com

eRealtor.com, the national association's own e-transaction management platform, has completed beta testing in the San Francisco area and is close to being ready for rollout, says Errol Samuelson of Homestore.com, the platform developer. The company is currently tweaking the transaction software after feedback from extensive broker surveying.

Samuelson says the main job of REALTOR®associations at this point is to get their members ready for the e-transaction by making sure they're up to speed on the basics of technology. Associations will also need to license their forms to Homestore.com for inclusion into the platform, he says.

Samuelson says the eRealtor.com platform will be open to REALTOR® members only. For more info as it becomes available, visit www.erealtor.com.

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Reprinting: REALTOR® associations and others are welcome to reprint articles (unedited) from RAE at no charge with publisher permission. Contact: Carolyn Schwaar, 312-329-8874 or send an e-mail with the name of your association, publication, and the article you'd like to reprint to: cschwaar@realtors.org

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