Why don't we seem to like Estate Agents and Car Dealers

Why buying a house is as bad as buying a car
…and vice versa

Why is it that we humans seem so against the idea of paying commission to sales people, brokers or agents, and yet are happy to contribute tips – on top of the actual price of their meal – to waiting staff who are presumably just doing their jobs? It’s a very practical demonstration of what behavioural economists are well aware of – that people are not against paying over and above the ‘accepted’ rate for particular services PROVIDED we get to see what or how those services are performed. Let’s look at this in relation to two of the lowest regarded ‘professions’ – who historically have come right near the bottom of league tables when it comes to trust – car sales people and estate agents.

In both cases we have a complicated and stressful transaction nearly always involving some kind of exchange, a large amount of money and some kind of third party, like an external finance provider. The estate agent or car salesperson should be an ‘expert’ middle-man working to help make a deal happen, yet their role appears to be overwhelmingly seen as detrimental to the parties involved!

This perception is because what they do to ‘earn’ their money lacks the transparency of the restaurant. Whether we are well looked after or we are not, we can decide at the end of the meal to either reward the waiting staff (or not) for their ‘performance’. This is not true for a car salesperson. As a buyer we have no idea what their commission is and how it is earned – the sale of the car itself, the finance deal, extra insurance, paint protection, accessories and service plans are all bundled up into the cost. It is this that limits the trust we have and makes us wary.

Customer Experience Estate Agents

The truth is that human beings see ‘value’ as the most important thing in any economic transaction – not just the monetary cost, but all the elements that contribute to get you from the start of your purchase journey to the end. And one of the problems with buying a car, just like buying a house, is that for the customer the journey rarely ends with the sale being agreed. All things are relative: we will only know if the price we’ve paid is too much if some new information comes to light. Without that, our mental ‘value calculation’ is fine. But as soon as we think we’ve been hoodwinked, the whole value edifice comes crashing round our ears and it’s the salesperson or agent who’s right in the firing line.

So, why don’t we seem to like estate agents?

Buying and/or selling a house is incredibly complicated and involves all manner of third parties – mortgage lenders, solicitors, local authorities and surveyors – surely having someone to hold your hand, who understands the local market and can calmly advise and assist would be welcome in these muddy waters? The problem is we can’t SEE what they do, things aren’t transparent, communication is bad, many staff are poorly trained in customer service, perhaps lack the ‘life-experience’ of those they are working for and fail to recognize the intense stress buyers/sellers are under. They see houses as commodities to earn commission, not as the old or new homes of people who have invested years in building their value. And, despite the fact that estate agents fees are described in terms of the percentage of the purchase price – the UK average is 1.3% – that equates to over £3,000 a sale (based on the average UK house price of around £245k). It’s paid at the end of the deal, so it’s very visible, and often when the most important part of the transaction (getting from sale to contract exchange) has proved truncated and difficult, leaving many people suffering from what Purple Brick’s advertising brilliantly describes as ‘commisery’.

In car buying too, many customers are left feeling uneasy about the ‘deal’ they have done, nervous about the smile on the face of the sales person as the order is signed. There’s just too much going on behind the scenes that makes us question the integrity of those we’re dealing with – ‘caveat emptor’ rings in our ears like a warning bell.

Disrupting the Customer Experience

New disruptors in both car sales and estate agency are looking to take advantage of our dislike and distrust of the traditional ways of working. The aforementioned Purple Bricks is looking to revolutionise estate agency by putting customers in control, making extensive use of technology without a physical ‘store’ and switching to a flat fee upfront with ‘additional extras’ to reduce the overall cost. Conventional agencies have responded with a ‘hybrid’ solution – mixing virtual and physical to offer a different range of services at either a fixed price or percentage of the sale rates depending on the customer’s choice. One of the big arguments made in favour of traditional estate agencies – who still make up 90% of the UK market in sales transactions – is that their commission is only payable on completion of the sale, so they will (or should in theory) always act in the best interest of the seller – their best return is if they can sell at the highest price. Both ways would seem to have merit, but neither seems to command the respect or trust of the British public, although when you do find an individual in either estate agency or the auto sector, many people will follow those individuals anywhere, regardless of the brand they are selling or the company they work for. As neuroscience makes clear, people buy from people after all.

When I first started in business, my Dad told me to immediately employ an accountant because ‘they will make you more money than you’ll ever pay them’, but this maxim simply doesn’t seem to extend to estate agents or car sales people. Why has no-one yet disrupted these two market sectors completely – why don’t the majority of us yet buy cars online or sell our houses ourselves?

The answer of course is that we haven’t yet stumbled across the right way to do it, despite millions of pounds of research asking people what’s wrong with the current models and what they want. Surely there’s a clever bunch of computer scientists working on a website that, by aggregating all the past, present and future values of houses in your area and valuing nearby assets like schools, shops, transport links and green spaces, can give you a house price valuation that they instantly match that with buyers it has recruited with the exact requirements and so guarantee a quick sale (there is). Or a car manufacturer who will sell us (or loan, lease or hire us) fixed price cars to fixed specifications straight off a website that are brought to our home/work for a test drive and then delivered where we want and when we want.

CX research and design

All these things are possible now, but there’s a huge risk for any disruptor or traditional business looking to understand how things will change. Without knowledge, solid research and actionable findings how will any board or investor know what to back and what not to? What’s needed is evidence. The kind of evidence that only a forensic investigation of these two market sectors can provide and then followed by a programme created to deliver the improvements identified. This has already been done in the auto sector, where an innovative solution based on biometrics and behavioural economic experimentation in the area of customer and employee experience gave rise to a 30% hike in new car sales AND a 16% improvement in customer satisfaction. The estate agency sector is poised for change, but a similar kind of solution can only come from a better understanding of the current experience in terms of the people that take part in it (both customers and staff); the impact of the place where the experience occurs (be that online, on the phone, via an app on a smartphone, or face-to-face at a valuation, viewing or instore); and the process that’s being utilised to bring the parties together (including the use of technology). These insights can be delivered by the application of new scientific methods and smart experiments to uncover the moments in the current experience where things go wrong – the Tripping Points® – and how these can best be addressed.

With house prices stalling, the number of transactions falling, new legislation restricting letting agent fees soon to come into force and property analysts predicting that up to 20% of UK estate agencies could soon go out of business, it’s surely time for the industry to take stock of how it can best flex and adapt to survive in these uncertain, Brexit-fearful times.

Behavioural science demonstrates that humans are prepared to pay, and pay well, for a service that is supplied with honesty and transparency by people and organisations that inspire trust. Estate agencies haven’t yet earned the right to that trust, but the use of scientific methods to gain a detailed appreciation of the functional, motivational and emotional elements of their relationships with their clients, offers a lifeline to the sector in the current economic climate that would pull them much, much higher up that league table of trusted professions.

CX Lab is pioneering the use of biometrics and the science of experience to allow businesses to understand and improve their customer and employee experience through innovative research techniques and evidence-based design.

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