Mailbag: How do you feel the real estate industry needs to change?

I recently asked my newsletter recipients the following 3 questions:

• How do you feel the real estate industry needs to change?
• What would give you more confidence when dealing with real estate salespeople?
• What part of the real estate process do you find the most confusing?

The feedback blew me away. I am touched by the amount of time many of you took to write down your thoughts and share your views. Some of the responses would make entertaining blog posts all on their own!

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Over the next few months, I’ll be making suggestions on how we could improve and how you can keep yourself safe when negotiating your way through the ups and downs of buying or selling your home.

In the meantime…

Here are some highlights from your feedback:

“A home is probably the most significant asset that any person will ever invest in, yet a very emotive decision. I find it funny how regulated the financial services sector can be, just to sell an insurance policy or savings product, yet real estate agents can influence such a serious investment decision, with seemingly no consequences!

We were given a fair amount of advice: pushing us to make a decision and get in quick, the market this and the market that. Economists can’t predict the future – apparently, a lot of real estate agents can….?. The reality, of what has transpired in the property market v.s the ‘advice’ given is quite different. The problem is, this can be very intimidating, especially for first home buyers.”

“We looked at a house that went to auction. The agent gave us a guide price of mid-800’s. The reserve price at auction was $949,000. Now if we had wanted to buy this property and gone to auction, having spent good money getting a property report etc, I would have been livid. What is the point of lying – either it is in the buyers range or not – they are not going to magically find an extra 100k. We eventually refused to even look at a property unless it had an asking price in the advert.”

“When we did find a property that we were keen on, there was surprisingly always another offer coming in. It really could have been coincidental, but the market was not flying and it happened often enough to come across as a tactic, more than anything else.”

“People know if they like a house or not and if it is in their price range etc…without an agent trying to persuade them. These are gut and knowledge-based decisions and it makes no sense to me that an agent would try to put pressure on people to put in an offer when they are unlikely to know that person’s circumstances and personal preferences well.

I find it particularly peculiar when an agent escorts one around a house and points out the built-in cupboards and other fixtures that are visible for all to see.”

“One of my hates is when agents list a house on trademe and don’t point out the fact that the house is attached to another house, they take the photos to make it look stand alone and put the address in with no “a” or “b” next to the number to hide it. They seem to leave off the “boundary view” option that trademe offers also. I’ve also seen this done with a stand-alone house that was two story’s, ended up being that the top floor was the only part for sale and didn’t mention any of this on the advert.”

“I have worked with many real estate agents and I have to say that I do not have many good things to say about the agents that I have worked with. I feel that the real estate industry and the agents that work in the industry have been a major part of the massive swift change in housing prices. I say this because many agents that I have worked with have said the following things to me whilst I am putting my ducks in a row to purchase a property:

• “The client will not look at any offers below a certain price…” Then I found out later that the price the house sold for was below that price. I thought that agents had to put all offers in front of the vendor?
• The agents did not come back to me when I was within $5K of the highest offer for another chance.
• The agents did not disclose all of the information that they had about the property as they said I ‘didn’t ask the right questions’.

They in no way worked for me as a buyer and only were focussed on getting as much $$ from the sale of the property as they could.”

“In the last 2 years, we have put our name in the hat for over 12 houses and got pipped at the post in all of our tenders and deadline sales. We are exhausted.”

“Real estate is not a game for most buyers – when agents talk about ‘buoyant markets’ you sound like you are hawking shares on the NZX! People buy for real reasons – births, divorces, relocations – not because the market is strong. This is a mindset problem with your advertising! Esp. notable in emails.”

“POA continues to mean ‘too expensive, don’t ask’.

Auctions should be auctions, not invitations to negotiate with the seller.

When describing a house, make an effort to know about the building (I already know the suburb, and that it has all day sun). If a previous client got a building report and did not buy, then the agent should ask the client for the report and be willing to inform the next client. Yes, buyers should get their own report done, but let’s inform their rational decisions, not conceal, lie by omission, and increase the complexity of the process.”

“I guess the biggest issue in the real estate industry to me is the current demand/supply issues and lower income people being priced out of homeownership

Regarding the real estate industry, it is so very competitive, and I feel often displays the excesses of money making – currently, so many houses are ‘auction’ instead of having a price on them.”

Key issues raised…

There are some recurring themes here…

1. It’s hard to buy a home in Wellington right now!
Finding a home you love is only 10% of the problem. You then have to go up against historically large numbers of competitors, agents who insist you ask the perfect question before providing what should be compulsory disclosures and no-price marketing strategies (like Tender/ Auction) where you have no idea if the home is even in your budget. Imagine the emotional roller-coaster of falling in love and offering on 12 different houses. Only to miss out on all of them…

Read: How to find houses with less competition

2. Agents treating buyers like job applicants, rather than valued clients.
While it’s good to show that you work hard for owners, this shouldn’t result in a complete disregard for service and respect for the people that are actually trying to buy what you are selling. As an industry, real estate salespeople have to make an effort to provide useful, relevant information in a timely manner that doesn’t mislead buyers.

Read: A tale of two open homes

3. Real Estate Industry focussed on profits rather than service.
Sadly this is endemic. I’ll give you an example which explains everything. The company I used to work for has big regional awards events every 3 months. What other industry do you know that feels the need to rank their salespeople and celebrate their success every quarter? All the awards go to the people who, you guessed it, made the most money. As an industry, it’s the only way they know how to measure success.

There are no awards for providing the best customer service, for innovation, for community involvement or running the most effective marketing campaign. It’s all about profit. Now, to be fair, not all of their salespeople are solely focused on making as much money as possible and there are some truly wonderful people in that company. But when the focus on profits runs all the way down, the public is bound to notice.

4. Lack of transparency.
Is there really another offer? What do the owners actually want for the home? Are you sure there isn’t anything I need to know about the property before we go further / before I view it?

There are so many unknowns in real estate and it’s hard to work out where you stand when the salesperson, who is usually a total stranger, is the person you need to rely on to help you through what will probably be the biggest purchase you ever make.

My suggestion is to keep as much of the communication in writing as possible. There is so much information to digest with any property transaction and verbal conversations over the phone or at the property can be confusing and can lead to misunderstandings.

5. No price marketing frustration.
I agree that you probably wouldn’t have had the massive price increases you have seen in Auckland, Tauranga and Wellington without the prevalence of Auction and Tender marketing.

There are plenty of other factors helping to drive price growth too. Things like historically low interest rates, the lack of new properties being built, fear of alternative investments (like finance companies) and an influx of overseas investment that hasn’t been tracked by the previous government. Tenders, Deadline Sales and Auctions definitely play their part though.

I believe every owner should have the right to get the best price they can, even if that involves selling by way of Tender or Auction. As salespeople though, we need to make sure we provide relevant comparable sales information that informs buyers, rather than low quote prices that pull on buyers hopes and dreams, only to dash them later on when they realise they never truly stood a chance.

Read: How to cut through agent quote prices and make better property decisions.

Thanks for reading. I can’t wait to write more on each of these issues. If there is another topic you would like me to cover, let me know in the comments below.

PS. My apologies if your answers didn’t make the shortlist above. Your feedback is still highly valued and I will take it all into account when writing future posts.