Consumers question agents' value — the industry should push back
A T3 Leadership Summit panel discussed the agent value prop, consumer interest in new compensation models, and how the industry can be more proactive.
Key points:
- Surveys show consumers’ perceptions of agents have taken a hit since the Sitzer/Burnett verdict, but many buyers still say they want an agent.
- While consumers are open to different ways to pay their agents, such as retainers and flat fees, industry leaders are more reluctant to try them out.
- Many consumers don’t know about the lawsuits or changes ahead, giving real estate agents an opportunity to explain their value and counter negative perceptions.
SCOTTSDALE, Ariz. — As news of the changes coming to real estate continues to percolate throughout the industry and the consumer sphere, there seems to be some consensus about the impact — but the two groups differ in their views of how agents should get paid.
That was one conclusion from a panel discussion at the T3 Sixty Leadership Summit on April 24. Brian Boero, co-founder of the real estate marketing firm 1000WATT, spoke with T3 Sixty's Jack Miller and Paul Hagey, providing some insight into what consumers and industry leaders think about the changes coming out of the Sitzer/Burnett verdict and subsequent NAR settlement. (Note: T3 Sixty and Real Estate News share a founder, Stefan Swanepoel.)
Consumers don't value agents — and the industry isn't doing enough to change that
In a recent survey, 1000WATT found that more consumers are questioning the value of real estate agents, although 70% believe they do need a buyer agent. Industry leaders have noticed this sentiment as well: In a separate survey by T3 Sixty, 70% of industry leaders said they think consumers don't understand the value of an agent.
"The industry leaders feel that consumers' perception of real estate agents was harmed," by the Sitzer/Burnett verdict, said Hagey, SVP of publications at T3 Sixty.
The industry needs to work on explaining agents' value, the panelists suggested. Consumers believe technology has made it easier to find a home, and some conclude that agents are now less valuable.
In a call to action, Boero told the leaders in attendance that more needs to be done to disabuse the notion that agents only find homes. Brokerages and agents should be focusing on the value and expertise they provide, like negotiation and risk mitigation — things that can save a buyer from accepting a bad deal, or buying a bad house.
"We have to recalibrate and reframe the value story," Boero said.
Consumers are more willing to consider new compensation models
The panelists noted that the consumers and industry leaders surveyed were less aligned around new or alternative commission payment options.
According to the 1000WATT survey, consumers are more willing to consider different ways of funding agent commissions. Boero said consumer sentiment tends to be malleable and fluid, leaving them more open to whatever option is put forward — as long as it is explained to them.
In the industry survey, however, only about one-third of leaders said they were considering alternative compensation models. Of those who were open to new models, the retainer option was the most popular, followed by a flat fee and an hourly rate.
As new rules come into play and business practices start to change, Hagey expects there will be a lot of trial-and-error as companies see how the market responds — which could explain why industry leaders are reluctant to consider more options at this stage.
"We just don't know, there is a lot of uncertainty," Hagey said.
Regardless of how compensation is handled, Miller expects most consumers will continue to want a full-service homebuying experience.
"This is a country where people will spend more to have the food delivered than for the food itself. And so we want the high service," Miller said.
Many are unaware of the lawsuits, settlements and their effects
While the industry may be smarting from some of the backlash and negative public perception that came after the Sitzer/Burnett verdict, there is still time to fix it.
One of the more surprising data points highlighted during the panel discussion was how much — or how little — the general public is paying attention to changes in the industry.
According to one 1000WATT survey, only 37% of experienced real estate consumers had even heard of the buyer commission lawsuits and the recent NAR settlement, meaning nearly two-thirds were unaware of one of the biggest issues to ever rock the real estate world.
"That means there is a huge opportunity," Boero said, to explain and promote the value of agents.