Instant Gratification and Self-Service in Real Estate
And It's Attendant Problems.
It is a part of the modern mindset that whenever we want something (or some curiosity takes hold of us) we go online expecting instant gratification. We not only expect truth, but we expect those correct answers to come quickly. And as “shopping online” trains us toward instant gratification, we have grown to expect to “check out” without any kind of human contact or consultation. With so much information online, why shouldn’t we expect to find Truth™ in “a five minute Google search?” Why would I wait for help when I can simply “put it in the cart” and buy it?
For simple problems, the urge for immediate fulfillment functions fine. If you want to know a statistic, or a fact, a quick search may suffice. For renting a movie online or having some doughnuts dashed to your door, the consequences are so low, any negative consequences that might come with doing something (too) fast are less relevant. But for more complicated questions, instant gratification can lead to inferior choices and outcomes; self-service can become as much of a hinderance as a helper.
At what point does the irresistible urge for instant gratification meet the immoveable force of a topic that can’t be safely negotiated with a five minute search online?
If it’s not a high-value transaction, perhaps speed and self-service are more useful. If a dozen doughnuts (delivered) is a $20 decision, extensive research, consultation, and deliberation are probably unnecessary. If the value of the transaction is low, and the risk of a making a mistake is inconsequential, maybe expertise and consultants are less relevant. But, as in real estate, when the value of the transaction is five figures, six figures, even millions of dollars…
Real estate; it’s expensive.
— Me
Real estate sales are almost always high value transactions. When the consequences of making an “unwise” decision are serious, are you sure you don’t want to talk to an expert before you make up your mind?
In the middle of writing this piece, this conversation came up again, with a personal friend of mine. In his next real estate deal, he said, he wants to skip hiring a real estate agent. He is looking forward to representing himself.
My friend in this example - let’s call him Abe - is such a smart guy. He has an Ivy League education, he’s close to 50 years old and has a lot of real-world living experience, and in business, he is respected and very successful. He is the kind of person that can offer good thinking on almost any topic. But when he told me he doesn’t need a real estate agent for his next real estate transaction, I was quick to tell him I think he should reconsider that idea.
The question is not so much about what the fastest way to do something, but: Does expertise matter? The internet excels at speed, offering instant access to information. But having access to information doesn’t make us experts. For many important decisions in life, speed and ease of access are no substitute for good judgment or years of experience.
I trust my friend Abe. Generally, I can testify to his excellent judgment on so many topics. I also know him well enough to know he has only previously purchased two pieces of property (and a third, via a business partnership). Is that enough experience for him to claim expertise? I don’t personally think so.
If real expertise comes from experience, from a thorough examination and exploration of a given domain, very few people will have expertise in buying and selling property. They just don’t have enough experience.
Most people only buy real estate a few times in their life (if they buy at all). “95% of buyers” don’t have much, if any, real experience. You might think - given the very large price tag associated with real estate - that buyers would want help on what to buy, what their choices are, and how much to pay for property. In my own real estate transactions, I want the best advice I can find. The more I learn, the more I value my relationships with local real estate agents. And yet…
(To my great surprise) not everyone agrees with me. There are quite a few buyers out there that think they do not need to work together with an agent when they are buying property. They have the internet, and they have done “some research” (at least “five minutes online”), and they have already found the property they want (there were pictures, and everything). What more does a buyer really need?
Maybe I don’t need to consult a pastry expert when I want doughnuts. And I suppose I could do some online research to learn how to bake some bread, change the oil in my lawn mower, or trim a tree in my garden. These are low value, “almost no consequences” transactions. But when it comes to other areas of life, like health decisions (for example), are you still “qualified” to self diagnose? And are you really going to invest some large percentage of your life’s savings into buying a house after a “quick google search?” Are you sure?
This article isn’t about technology. I want to write about real estate agents (don’t we all?). But earlier this year, I wrote not once, but twice, about real estate agents and proptech businesses. And as I did my research about proptech companies for those articles, the efforts of technology teams to try to replace people with processes were easy enough to document. Too easy, actually. There was a lot of “jump online and help yourself.”
My current position is that the internet is great for information, but that buyers should slow down, and intentionally seek the help of a dedicated buyer’s agent before they consider a transaction.
It is not that the internet can’t help your real estate pursuits. I’m an internet guy, but the problem with “self service” is that when you don’t have enough expertise, you don’t even know what questions to ask. What you search for online, even though the answers come fast, won’t necessarily take you where you want to go. Worse yet, instant gratification and self-service may lead you (very quickly indeed) to make high-consequence decisions that aren’t in your best interests.
”Hey, look at this ‘great deal’ I found online in five minutes. My agent? I don’t have one, but just look at these pictures. And I can afford it, so I’m ready to talk to the seller. I’m gonna jump on it.”
I do see the temptation.
If you can use an online property listing website, contact the seller’s agent directly, and move quickly toward buying some property that “looks great,” why would you want to wait? Why would you pay a commission? Why do we need real estate agents at all? Maybe “all you need” is someone to help you “fill in the contract,” and you can wrap all of this up by the weekend?
Am I doing a great job of staying neutral on this topic? Not really. For anyone that has missed my obvious bias, let me be clear:
You should hire a buyer’s agent to help you do some proper property research before you buy.
In most markets, property sellers seem to appreciate that hiring a real estate agent will help them to make better decisions and facilitate the transaction. But especially on the buying-side in real estate, there is an increasing segment of buyers out there that think they don’t need one. My advice to them is to slow down, and to ask themselves if they have any reason (at all) to think they have expertise on this topic. If you don’t have expertise: go talk to an expert. If you haven’t been involved in several deals, get some help from someone with expertise before you make one of the biggest financial decisions of your life.
My friend Abe (of course) is not the only buyer that wants to “shop for property online” without the help of expert. I know the impulse to “do it yourself” is common.
In my advisory position, I see foreign clients trying to buy property in Japan that are clearly going the “self-service” route. They typically start with a Google search, and end up looking at Japanese online real estate portals. They browse some listings, and they see some property they like. “Five minutes later,” they are ready to close the deal.
Here is very real example from a client:
”Now I already have a house that I am looking for below but my problem is communication with the agent.”
— A client that found a house “in a five minute Google search”
That “communication” issue is a particular problem with international real estate, but it is a variation on the same theme: They have already made a decision to buy property, and now “all they want” is someone to explain the documents to them. That’s “all.” “All they need” is someone to help them negotiate the title process. “Just one question or two” about some legal aspect to the deal. That’s all. And those issues are simple enough, but those “little things” are often part of the service that an experienced buyer’s agent will provide.
My friend Abe is an example of this kind of self-service buyer. He found a vacation home online. He contacted the agent representing that property, using information he found online. He made an offer. In retrospect, Abe doesn’t like that he paid a commission to the agent who was already earning a commission from the seller of that property (in Japan, we call that practice “dual agency”). As I see it, the real potential for adverse consequences in Abe’s transaction was not over-paying on the commission, but poor choices based on a lack of expertise in the local market. Was that the best choice available to him? Did he get the best price?
Buyers should slow down, and get help (even if they think they have identified “the perfect property”) before they buy property they find online.
When a buyer like Abe finds a piece of property on a website that lists online property for sale, that buyer knows they like that property, but they typically know very little about other comparable property in the area. They often know little-to-nothing about real estate trends in that area. Why would they? Even a mediocre local real estate agent can provide perspective and choices. The best agents can not only help you identify better property choices, but might give you an education that can change your goals.
Online property listing websites are notoriously incomplete - they do not show all of the available property in that area. When you work with an agent, they can not only provide access to a more complete range of properties in the area (typically via the local multiple listing service, or MLS), they can also help you slow down, to think more critically and carefully, to consider your options before you buy. Yes, you like that property. And yes, instant gratification feels good. But what if there are other properties that might better fit your needs that you haven’t seen yet? Is there a better value available? Are there any reasons why you might not want that particular property (even if the “pictures look great” and it was “easy to find”)?
What starts as an urge for instant gratification leads a buyer to the internet; “five minutes later” they have found the perfect property online, they are emotionally primed to make a very big financial decision, with no expertise advice, and typically before they have even seen the full range of choices in that area.
But wait, wait… it gets worse.
When a buyer contacts the seller’s agent from an online listing, they are talking to an agent that represents the seller’s need to sell that particular property, and not their needs as the buyer. For a buyer without their own buyer’s agent, this creates a conflict of interest. Can you see it?
A seller’s agent managing an online listing has every reason to sell that particular piece of property, will (only) emphasize it’s attractive qualities, and will not suggest other (possibly better) alternatives. An agent that represents an online property listing will lose their commission (and disappoint the seller) if they suggest other property to a buyer.
Compare that process to a buyer that has their own agent - an agent that can earn a commission on any property the buyer purchases. A buyer’s agent is free to provide guidance and opinion for or against a particular choice, can suggest alternatives, and can help the buyer see the bigger picture. A buyer’s agent can also help a buyer negotiate price (which a seller’s agent is very unlikely to do). Buyer’s agents truly represent the needs of the buyer, whereas the seller’s agent usually cannot.
Agents that represent both sides of a real estate transaction are incentivized to complete a particular transaction, and to down-play the (often conflicting) needs of one side or the other. The trend toward buyers using online property listings is creating more of these conflicts of interest. Buyers are indeed finding speed and convenience online, but often end up with unforeseen problems as they buy less-than-ideal property, pay too much for it, or both.
Again, the point I would emphasize is expertise. Most buyers will benefit from a buyer’s agent’s experience, from their access to more property, and from the quality of advice these agents can provide when there is no conflict of interests. If being an educated buyer is important (and it is), instant gratification isn’t always the best path to sound investment decisions. Working with an agent may require a little more patience, the process may take a little more time, and in big-dollar real estate transactions that is a good thing.
The temptation to “jump online” is normal. And for activities like researching a location, or even using property listings to plan your budget for property in a given area, the internet can be ideal. But as a buyer is prepared to look at property:
Use websites for property information, use your own buyer's agent for transactions.
Self-service is ideal for transactions like buying books or doughnuts online, but will be less ideal for high value transactions, costly and consequential transactions, or any transaction where expertise offers real value. The seller’s agent for a particular piece of property is not incentivized to educate you, or to help you see your options, but a buyer’s agent is… if you slow down, and take the time to ask for their expertise.
For most buyers, a buyer’s agent will use their expertise to help their client make one of the biggest financial decisions of their lives. That is something “online listings” just can’t do.