Text an emoji to order a pizza and track the delivery to your door. Take a picture of a check to make a bank deposit. Order an Uber to get you across town. Technology is pervasive in all parts of our lives, and that includes the home-buying process.
Today you can input a few basic housing search terms and get real-time updates of properties that fit your criteria, including options that aren’t currently on the market. Then you can use a smartphone to complete a mortgage application, and get pre-approved without ever speaking to a person. These are just a few of the innovations that are revolutionizing the way we live and the way the real estate industry works. With every piece of new technology, services that used to be the domain of experts are becoming more accessible to the layperson. In a world where practically everything has become a value proposition, the customer is increasingly asking: “What do I get for the money I’m spending, and can I do it myself for less?”
On the surface, it’s easy to see why a do-it-yourself (DIY) home transaction would be so attractive. Television shows like Love It or List It, Property Brothers, and Fixer Upper make home-buying and -selling seem like something you can wrap up in 30 minutes (with commercial breaks). Couple that with a “Google it” mentality and there is both an increasing confidence among buyers and sellers alike that they can get the job done on their own without paying thousands of dollars in commissions to an agent.
This growing sentiment creates a fertile ground for disruptors that offer to do just that—cut the real estate agent out of the process—and new startups, as well as established players, are attempting to deliver on that promise. Recently, Zillow launched Instant Offers, joining firms like OfferPad to buy houses directly from the homeowner, while in May, In-House Realty—the sister company of Quicken Loans—purchased ForSaleByOwner.com. It is unclear if these concepts will take off, but it is clear that innovative firms see an opportunity to disrupt the traditional real estate agent model, and it appears that an increasing number of customers are open to the idea.
In the soon-to-be-published J.D. Power 2018 Home Buyer/Seller Satisfaction Study, we see an emerging trend of more buyers and sellers indicating they are doing it alone, with both categories increasing a total of 4 percent over a two-year span. While the majority of consumers are still turning to real estate agents, this development should lead agents to closely examine their value proposition. As more customers say they are open to a DIY transaction, less than 50 percent of current customers using a real estate agent (49.5 percent of buyers and 49.9 percent of sellers) are having a “highly satisfying” experience (900-plus overall satisfaction). Among those customers having a transaction that was less than “highly satisfying,” fewer than a third said they would “definitely” use the same agent for their next transaction. That means the current experience for many customers is leaving the door open for alternative solutions.
What’s more, homebuyers are already beginning their searches on their own. The vast majority (88 percent) of respondents indicated that, before they talked to an agent, they began their home search online. This means that, if a homebuyer has sought out an agent, they already know what’s on the market, and they probably have a good idea of what they’re looking for. For sellers, they know what comparable listings are in the area, how much they’re listed for, and how long they may have sat on the market. That means that some of the traditional value that the real estate agent provides in the buying and selling transaction is less relevant.
With the democratization of data, agents have to emphasize their value more than ever before, and with some of their legwork removed, they instead can focus their efforts. So, what are the key attributes that drive the highest levels of homebuyer satisfaction with real estate agents, and how can agents and real estate firms tweak their strategies to deliver in areas that differentiate from their digital counterparts? The critical area of focus is establishing trust. Once they have established that bond, highly-satisfied customers are much more willing to definitely recommend their agent (75 percent) and a firm (71 percent).
That’s not always easy, because to get to the point of finding an agent they trust, buyers and sellers lean on the reputation of the company first. According to the J.D. Power 2018 Home Buyer/Home Seller Study, nearly half (44 percent) of first-time sellers and 39 percent of first-time buyers look for a good company reputation, with the majority (66 percent of sellers and 69 percent of buyers) having visited the company’s website prior to contacting an agent. That means that each experience is critical to increasing the power of the brand and driving future business.
Building trust requires a combination of consistent execution of “the basics”: good communication, delivering value-add experiences and services, and effective problem-solving that create an experience that truly differentiates. For example, providing access to ancillary services can be a major value-add to the relationship. Sure, a client can go and spend hours online researching a moving company, or a mortgage lender, all while in the throes of selling a home and packing up their family, but at some point, consumers will ask the question whether it is a good use of their time and effort. In this new landscape, the agent has to make their value tangible so that customers can clearly understand what they are paying for.
It’s clear that the game has changed, and agents need to adapt—but it is important to not get too focused on trying to stop specific competitors or disruptive solutions. One only needs to look at how taxi companies tried to take on Uber to see the flaws in that approach. Instead, agents need to take a peek in the mirror to understand what those disruptors’ emergence tells them about themselves and their true value to the customer. The ones that can glean those insights and put them to work will be the agents that have nothing to fear.
Craig Martin is senior director, Wealth & Lending at J.D. Power.
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