Information technology has been increasingly applied in real estate transactions so as to improve trading effectiveness and efficiency. Although the usage has reached phenomenal levels in the past decade, the inherent risks associated with applying the Internet is still not very much understood. Moreover, significant barriers still remain in applying this kind of technology. Even though the internet is widely predicted to revolutionize commerce over the next few years, the full potential of electronic commerce (e-commerce) will only be realized if both buyers and sellers have sufficient confidence to trade electronically (Skevington, 1998). However, when these risks are carefully managed, electronic transactions could provide potential benefits in terms of transaction costs, accessibility to market and speed of transaction. This paper develops a model to optimize the risk management of real estate electronic transactions and suggests methods to mitigate its adverse effects in these transactions.