Is the property management team in your business an asset that’s growing the value of your business or an anchor that’s holding you down?
New research shows that for close to 25% of Australian real estate agencies, their property management team is actively damaging their business and that poor levels of service are helping perpetuate the stereotype of dodgy agents as a whole.
The Perceptions of Property Managers data examines how landlords and tenants experienced the quality of service from real estate agents.
56% of landlords received great service
It found that while the majority of landlords – 56% – received good or excellent service from their property managers, 16% of landlords experienced poor service, with an additional 28% describing the service from their property managers as average.
Tenants had an even worse time of it with 10% saying it was disastrous, 23% stating their experiences with their property manager were poor and an additional 32% claiming it was average – a total of 65% experiencing substandard service. Only 35% of tenants experienced good or excellent service.
Property managers make their commissions from the services they offer landlords, so why do we really need to care about tenants?
Only 14% of tenants receive excellent service
The Property Manager Perceptions research is the third in a line of studies examining how consumers experience real estate agents across selling, buying and now renting. It has found there is a distinct hierarchy of service across the real estate industry, where sellers are most likely to receive the best service (31%), followed by Landlords (16%), then Buyers and Tenants equal on 14% receiving excellent service.
Now I can hear you saying, “Agents get paid to service sellers and landlords. The data makes complete sense. We’re just putting the effort where the money is.” And that is true.
But it’s the degree of these experiences that provide the most useful insights into the industry into where our vulnerabilities lie and how we need to address them. And how much money we are throwing away in the process.
44% of landlords are questioning their services
The research shows that 44% of landlords are questioning why they’re paying for services that are substandard in an industry that is being disrupted by startups such as :Different, Cubbi and Snug here in Australia.
What’s the size of that problem in dollar terms? According to CoreLogic, the value of residential property is $7.6 trillion, of which, the ABS tell us 31% – or 3.1 million properties – are rented. Based on a median rent of $429 per week and a 5% commission level, that’s a $3.5 billion commission pool annually for property managers.
$560m in rental commissions are at risk
If we apply the size of the dissatisfaction of landlords to these numbers, we discover that $560m annually in rental commissions are actively looking to walk out the door, followed by an additional $980m from those who experienced average service and would be willing to consider an alternative.
Tenants are also more likely to go online and vent on sites such as Yelp, Google and Facebook creating a digital trail of social proof that can undermine your reputation across other areas.
When landlords were asked if they would use the agency who manages their property to sell it when the time came, only 28% said yes, definitely. The research shows 39% said they would definitely not use their managing agency, while 33% were on the fence.
31% of tenants would never sell through their agency
Tenants were even more scathing with 31% stating they would never sell through their agency, and 62% saying they would never recommend their agency.
The tenancy perception is important when we look at the primary reason why a landlord will choose an agent. The survey shows that 34% of landlords chose their agent because of their access to tenants. Take away that tenant access due to reputational issues, and the industry takes a hit.
The research also found that tenants are changing in ways that challenge the old stereotypes. Far from being students and sharehouses, 75% of the tenants surveyed were renting with families or partners, 40% had an income over $120,000 and 36% were saving to buy their own property.
Why don’t principals feel more compelled to lift the game of their property management team? The research shows there are some major wins to be had from improving service levels and that with good structures, automation and service ethics, the requirements are relatively straight forward.
Both landlords and tenants want honest reliable agents
Both landlords and tenants want property managers to be proactive, have good communication skills, be prompt in their response times, be honest and trustworthy, and most of all, reliable.
And there is huge upside for the agencies that manage to crush it.
The research found that 38% of landlords used the agency that they bought their property through to manage it, with a further 38% interviewing just one agent when making the decision to rent out their property. This shows for more than a third of the investor market, landlords are trusting those that they are purchasing from and expecting an ongoing relationship. It’s time to deliver on that promise.