It turns out homebuyers just want to see houses. It doesn’t matter how it happens. Who shows a potential buyer houses, while important, isn’t as important as their desire to see the properties. We hate to break this to agents, but buyers don’t “agent shop.”
Sorry to burst your bubble.
Recently, Movoto Real Estate interviewed more than 100 homebuyers about their experience immediately after they purchased their homes. Our goal was to better understand the homebuying process from beginning to end. We wanted to know questions such as…
- What do homebuyers do first when searching for a home?
- How did homebuyers find houses?
- Did homebuyers work with a real estate agent?
When the interviews were completed and tabulated, we came to three conclusions:
- Unsurprisingly, homebuyers love the Internet
- Homebuyers follow a distinct pattern for choosing an agent
- Homebuyers don’t always judge agents on their professional experience
The Internet is the first place homebuyers look to when they finally decide to upgrade from apartment living. This finding falls in line with other major reports about homebuyer activities from organizations such as the National Association of Realtors.
We found the majority of homebuyers’ first stop in their search was to Google (or Bing for the other 30 percent). Most homebuyers searched for “[My City] Homes for Sale.” This was followed by search terms that included a homebuyer’s neighborhood or zip code.
This means the Internet has usurped other avenues of searching for homes. Lagging behind this so-called series of tubes are agents and friends. Newspaper classified ads are all but ignored.
Other ways people search for homes with the Internet included:
- email updates;
- mobile alerts; and
- through websites such as Movoto Real Estate, and a soon to launch entirely new version of theFrontSteps.com
Homebuyers Don’t Shop for Agents
What happened when it finally became time to see a home, when buyers got the ravenous urge to be inside the house they just Googled?
They absolutely did not call an agent. Curious home shoppers submitted a form to a website…
We thought homebuyers would want to know the person who will help them make the biggest purchase of their lives? As it turns out, not really.
This is what we learned: Homebuyers don’t shop for an agent.
- We’ve heard it time and again, but it’s worth repeating: the prevalence of the Internet has opened the world to information. It’s possible, with only a few clicks of a button, to access consumer review sites such as Yelp or Angie’s List. If you’d like to read three reviews about the quaint bakery you’re brunching at, go ahead. But when it comes to agents, good luck. There isn’t a definitive website for homebuyers to discuss their experiences. Instead, agent reviews are scattered among online real estate sites such as Movoto, Zillow, or Trulia.
The other piece of the problem might make more sense.
- Buying a house isn’t about the agent. Shoppers want to see houses. They don’t care if a seeing-eye dog takes them on the tour, as long as they get to visit the property.
Another Piece of the Pattern
Eventually, either through a real estate website or through their own channels, homebuyers find agents (yes, multiple agents).
We found that about 45 percent of people used two or more agents in their housing search. The good news is that universally they did not use two agents at once. The bad news is that, like life, first impressions matter.
Nevertheless, we noticed a pattern for when homebuyers kicked an agent to the curb. What were the most common reason homebuyers found a second or third agent? The agent they had worked with was unprofessional. This is a broad statement, but we can break it down into two areas. When looking for a house, potential buyers wanted an agent who:
- Replied quickly to questions, and
- Was present to show a house.
That’s it. If these demands weren’t met, buyers went to the bullpen.
Smile, You’re Being Judged
It turns out homebuyers’ perceptions of an agent’s quality don’t accurately reflect abilities.
From here things get weird.
When we asked buyers about the quality of their agent, their opinions were almost entirely based on emotional associations. A typical response we received was “She was great! I really enjoyed her company.” Or, “He wasn’t a great agent. We didn’t connect.”
The problem was homebuyers continued to work with “low quality” agents. When we followed up with buyers to learn why they still worked with the agent, we received responses such as this, “He answered all my questions and helped show me all the houses I wanted to see.”
What we took from this was that, again, homebuyers just want to see houses. Agents might be frigid, but as long as they answer questions quickly and show houses, they are likely to thrive–just don’t expect great reviews.
Guest post by Movoto Real Estate
Well, the ultra-low cost solution to private school is–I bet you guessed it–public school. And because private schools are so stupidly expensive, people are willing to pay more for a home in a good public school district so that they can get an equivalent education for their children at 0% of the cost. A home buyer can afford to pay more for a house if they don’t have to pay for school.
The extra demand causes homes values to rise in areas with great public schools, because more people want to live there. All parents know this. School districts are important when thinking about the location, location, location of real estate.
We wanted to know by exactly how much a quality public school can affect home prices. So we went to the drawing board.
Two Kids, A Dog, and $1,000,000 More for a Mortgage
Two key assumptions:
Assumption 1: Each child goes to private school their whole life, which makes schooling a fixed cost for the entire period of time owners live in their home.
Assumption 2: Assume all that school money can go directly to a mortgage. No increase in property taxes or whatnot.
And the math:
- The average American family has 1.5 kids. We rounded up to 2 kids.
- Top notch private schools cost an average of $33,708/yr.
- That translates into $67,416/yr for both kids
- Therefore, a family could afford $5,618/mo more in mortgage payments. (67,416 / 12 mo)
- Today’s interest rates for a jumbo loan are somewhere south of 5%, but we are going to use 5% to be cautious.
- Using a handy dandy mortgage calculator, a $1,000,000 loan would cost $5,368/mo.
- Thus, a family could afford $1,000,000 more in property value if they do not send their child to a top-notch private school.
A San Francisco Example
Take for instance two websites: GreatSchools.com and Movoto’s home search tool. Go to GreatSchools and look up schools in San Francisco, ranked highest to lowest. In this case, it appears as if the top schools listed are Clarendon Alternative Elementary on Clarendon Avenue, followed by Lowell High School on Eucalyptus Drive and then Robert Lewis Stevenson Elementary on 34th Avenue.
Using our search tool, we entered the school’s addresses and found great homes in the area. However, being San Francisco, most are either off market or sold. Go figure!
This could be a great way to merge two website searches into one useful (and possibly life changing) tool. (Movoto does have basic school information, but at this time, you can’t rank schools top to bottom.)
Does Money Even Matter to Families with Kids in Private School?
The whole rationale for this analysis depends on the idea that people who send their children to private school are cost conscious. Put differently, these consumers would need to actively care about the price of private school. If they have enough money that their kids would go to private school no matter what, then they would not put upward pressure on property values near good public schools.
We have discussed previously how people put too much value on views and big houses, and not enough value on the commute to work. It may be that people acknowledge the importance of quality public schools, but do not do the required mental calculations to find its true value. The result would be lower than expected values in areas with high-quality public schools.
Are Quality Public Schools a Deal?
Given the implicit value people place on private school, it may be that homes in a quality public school district are, in fact, under priced! Even in places like Palo Alto CA, Millburn NJ, and Brookline MA, property values do not fully encapsulate the value of high quality public schools.
I think we may have just found the Moneyball equivalent of real estate.
This is a video that every home seller everywhere, in every market, in every price level needs to watch. There is so much good information along the lines of “you just gotta do it”, and take the advice of the expert (your Realtor) when doing so. We know what we’re doing, and we’re here to get you the most money possible when we list your house for sale.
One very notable quote in regards to getting inspections done on your own home prior to listing it for sale, and fixing those items, “For every dollar it’s going to cost me to fix something, a buyer is going to want three.”
The video will play (on a new page) after you get through the annoying ad. But trust me, if you’re at all considering selling your home, you need to watch this. Keep in mind Barbara is flush with lots of money, and she could afford to simply walk away from the home, but she’s taking the advice and doing it right.
This wonderful two-level single family alternative only a par 4 from the oh-so-hip NOPA district of San Francisco, and situated on the edge of the Lone Mountain district is currently listed off MLS until the sellers can find a suitable replacement property (if you know of any, don’t be shy). Asking $1,125,000, the home (its 3 beds, 2 baths, remodeled kitchen, fireplace, hardwood, steam heat, and charm) is truly awesome, as are the two decks, the views, the massive two car garage with heaps of additional storage, the east facing backyard, and the location.
If you, or anyone you know, is interested in more information about this property, click this link, and get the deets…
My clients just sent me the link to this property on Downey and asked if it was in contract. It is, but I got hung up on this photo….
Contemplate for a minute all that is going on in this photo…or not going on in the year 2012. Perhaps a warm cappuccino or cold beverage (depending on when you find this post) will stimulate your imagination.