The housing market may still be slogging through one of its most dicey and contentious times, but you would never know it from the tributes that have been pouring forth from the clients of real estate agents in Texas. On page after page of the Houston Association of Realtors' website, which publishes ratings of local agents, happy consumers lavish a host of breathless praises on their brokers, with phrases like "guardian angel" and "true gem" popping up fairly commonly. One agent is deemed a "godsend" by an effusive seller; another was "like a big sister holding my hand the whole way through." The Bayou City is even said to be home to the "best real estate agent" ever -- several dozen of them, in fact. In all, the agents in Houston earn an average rating of 4.94 out of 5.
Well, sort of.
In reality, that 4.94 represents the average score of just 12 percent of the association's agents. Another 7 percent participate in the rating program but don't make their results public. The rest -- some 17,000 real estate pros -- don't get rated at all, either by choice or because they haven't completed enough transactions. The group surveys only customers who have closed deals, leaving out everyone who, satisfied or not, walked away. Those qualifications help explain why fewer than 0.3 percent of the Houston agents have been awarded a low one-star rating by their clients -- a figure that seems to defy reality, given all the things that can go wrong in a home deal. (The association says low-rated agents often opt out of the program.)
None of this is lost on Patricia Gant, one of the lowest-scoring agents (who still earns a respectable 4.3 out of 5). She was a 5-out-of-5 gal until a recent survey gave her a 1. The respondent said Gant was unresponsive and didn't have the seller's best interest at heart, which Gant denies. "I would've never sent one to her," she says, "if I'd had any idea that she'd give me one star."
When it comes to critiquing products and services, American consumers are spreading opinions with abandon online. Don't like the lobster bisque at your local seafood place? Air your displeasure on Urbanspoon. Love the way your new leaf blower chases away the neighbor's cats? Rave about it on Amazon.com. Indeed, according to recent surveys, more than one in four adults participates in scoring either services or products on some kind of rating site -- all the more remarkable because such forums didn't even exist a decade ago.
Brokers Without Boundaries
But when shoppers turn to real estate, and specifically to the nation's army of nearly 2 million agents, the Web is practically a blank page; in many ways, critics say, it might as well be 1992. If consumers want to know how many homes an agent has sold, how long those homes were on the market, what they sold for versus the asking price and, especially, one agent's performance compared with those of his or her peers, there's no place online to dig up reliable answers. And the handful of real estate industry groups that do offer some data aren't getting much in the way of competition or pressure from independent-review websites. Even on sites dedicated to service providers, agent ratings make up just a tiny percentage of the content. According to review site Angie's List, for one, the home-related fields of plumbing, heating and roofing are in the top five categories, but the real estate agent category, the ultimate "home" topic, ranks No. 72. And while there are a few sites specifically geared to agent ratings and reviews, they're generally tiny -- most don't get enough visitors to be included in online traffic measurements.
Real estate, of course, is one of the biggest purchases most people ever make, which makes the matter of disclosing customer satisfaction all the more urgent. Despite the lack of resources, people have begun to do more of their shopping for real estate agents online. In 2001 only 3 percent of buyers found their agent on the Internet; today 9 percent do, according to the National Association of Realtors. And in a stressed-out market, customers' displeasure with the service they're getting is running hot. The Council of Better Business Bureaus recently reported that complaints against agents leaped 26 percent last year over 2010. Common gripes include sellers who say their agent oversold a home's investment potential and buyers who didn't like the way their agent handled a bidding war. Regardless of the stakes, comparison-shopping remains rare: Almost two-thirds of consumers pick the first agent they interview and never get a second opinion, according to the NAR. "People put more time into choosing a Bluetooth headset" than they do into choosing a broker, says J. Philip Faranda, a broker in Briarcliff Manor, N.Y.
There was a time in the mid-1990s when the NAR appeared to be getting hip to the Internet. It invested a reported $13 million in a database called the Realtors Information Network, which was intended to have thousands of listings. But it ended up being a financial flop, after failing to catch on with agents. The network was revamped into what eventually became Realtor.com, which today is mostly a site for promoting home listings. In the meantime, the industry has remained generally leery about online information sharing. Indeed, it took a lawsuit by the Justice Department, settled in 2008, to get traditional firms and the new guys on the block, online brokerages, to share information. (The Justice Department alleged that the lack of competition could lead to higher prices for consumers.) For its part, the NAR says the suit "had nothing to do with consumer access to online information," adding that while the group encourages customers to do research, "we try to remain neutral in terms of picking one Realtor over another." There's no doubt consumers can learn much more about homes online than they could five years ago, but most of those resources tell them relatively little about any agent's strengths, weaknesses or track record.
Jessica Ko and husband James Lue's home-buying experience reflects the frustration consumers can feel with so little to go on. Spotting a $1.4 million Craftsman home in Belmont, Calif., that struck her fancy, the user-interface designer immediately checked out the listing agent online. That broker had all favorable ratings on Yelp, Ko discovered, but she couldn't find anything else. Ko contacted the agent, who told Ko that her firm represented the seller but that she could help the couple negotiate the deal. Yet when Ko asked about lowering her bid after the appraisal revealed smaller overall square footage, the agent discouraged it, Ko says, and she ended up paying full price. She has since learned that cases of so-called designated agency -- where a brokerage represents both buyer and seller -- often end up with higher sale prices. (The brokerage says the arrangement was clearly explained to the clients, to avoid "any inherent conflict of interest.") Ko now says her biggest regret is that she didn't do enough homework on the agent.
To be sure, agents have no shortage of reasons -- some even rational -- for being reluctant about airing their history. No real estate transaction goes off without a hitch, and the process can leave consumers frustrated. Buyers and sellers with multiple transactions under their belts are relatively rare, pros say, making many reviews uninformed or naive (it's not the agent who processes your loan, guys). Jay Thompson, director of social media at real estate website Zillow, says that while he doesn't object to ratings, "a lot of things are out of the agents' control." And a pilot review program in California is hitting a different snag: Only 19 percent of the more than 150,000 agents in the state's Realtors association have enrolled, says Don Faught, president-elect of the association. In fact, he adds, the effort may not even be funded after this year.
Last year it briefly looked as though Seattle brokerage Redfin had broken down the information barrier. It released Scouting Report, an online tool that provided performance metrics on more than 1 million agents, based on data from the multiple listing services, or MLSs -- databases of real estate listings and transactions available only to real estate pros. Scouting Report showed consumers, for the first time, information that brokerages have long kept close to the vest: how many homes an agent sold in the past three years, how long it took them to complete a deal and how successful they were in negotiating prices. Some consumers immediately leaped to use the tool. When Mark Roberts was selling his Washington, D.C., home, he found a slew of mistakes in the contract. Through Scouting Report, he learned that the buyer's agent had no experience in D.C., information that headed off misunderstandings. "It helped get the deal done," he says.
But as many infuriated agents pointed out, Scouting Report's source data -- the listing services -- were unreliable. Many transactions didn't get registered in the databases, so agents didn't get credit for them on Scouting Report. Similarly, an agent who was part of a team may not have gotten credit. Within a week, Redfin took down the tool. "It went down in the history books as our great defeat," says Glenn Kelman, Redfin's CEO.
This spring NeighborCity, a referral and brokerage website located in San Francisco, launched a similar tool that ranks about 850,000 real estate agents on a scale of 0 to 100 based on more than a dozen attributes, such as number of listings sold and how close the sale price was to the asking price. It gets this information from a mix of public records and data from brokerages, says CEO Jonathan Cardella. But like Redfin, the site has caused a ruckus. In April, MLS companies filed lawsuits against NeighborCity, alleging that it used data and listing information without the MLSs' authorization. (The litigation was partially funded by the National Association of Realtors, which says the suits are "of significance to the industry.") Cardella says the site tried to get the data from the services but had to turn to the brokerages after the MLSs denied them access. "It's not by coincidence that there's a concentrated effort among MLSs for agent ratings and rankings not to become public information," Cardella says. NorthstarMLS and Metropolitan Regional Information Systems, the MLSs bringing the suits, declined to comment.
The nearly 900 MLSs operate with separate standards, which means problems can start with the listings themselves. While some agents measure a house room by room, others rely on property tax records, which may not be up-to-date. So it's not unusual for, say, the square footage to be smaller than what an agent's listing sheet says. What's more, because the listings primarily serve as advertisements for prospective buyers, it's not likely that anything negative will pop up. "You're never going to see a sheet that says 'a triple homicide happened here,'" says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.
The lack of uniform reporting, industry insiders explain, also lets agents tinker with certain numbers. Frank LLosa, a broker in D.C., says it's not uncommon for an agent to take a listing off the market for a day, only to relist it under a different MLS number. The switch can make it look like a new listing, because many sites use that number to calculate how many days a home's been on the market. Another popular measure of a selling broker's skill, the sales-to-list-price ratio, can also be misleading. If an agent lists a home at $500,000, drops the asking price to $450,000, and sells it for $445,000, he could report that it sold at 99 percent of list price -- not at 89 percent of the original price. Some brokers confirm they do just that, saying it represents the market more accurately. But critics say the practice just inflates an agent's performance. Says Plymouth, Mich., broker Michael McClure: "Without a uniform way of reporting sales, everything is questionable."
A few groups are after the real estate consumer holy grail: ratings that don't rely on listing service data. On Social Search, a feature of real estate portal Trulia, consumers can find agent recommendations via Facebook. Still, only about half of reviews come from homebuyers and sellers, says Trulia. (Others are from fellow brokers or family and friends.) Take Los Angeles agent Jane Peters, who has the most recommendations of agents in her area. Not one of her 17 reviews comes from a former client. Peters says she asks clients to only recommend her on her own website, rather than pestering them for multiple reviews.
Other would-be activists are operating on a smaller scale. Michael and Krista Becker rarely make a decision without reading online reviews, whether searching for gluten-free restaurants or puppy schools for their rambunctious Cavalier King Charles spaniel. But when the couple tried to find a real estate agent to sell their condo on the outskirts of Philadelphia, they went with a friend's suggestion -- and ended up regretting it, ultimately firing the agent. Instead of whining about their experience at cocktail parties, Michael, a Web developer, built an online directory of Realtors called MountainOfAgents.com and launched it last summer. People can search for agents by zip code and see how consumers rate pros on attributes like "market knowledge" or "helpfulness."
The site has its flaws, however. Agents can "reserve" a zip code for $35 for three months -- Becker's way of generating revenue. Agents who buy in stay on the first page of search results, regardless of how good their ratings are. There's also no space for comment. And because Becker, being a civilian, doesn't have access to multiple listing service data to prove that a client worked with an agent, there's no way to tell whether an agent is getting five-star ratings from Grandma and his bowling team. (Becker says the site "is not an end-all solution.") In a bid to get around such problems, the firm teamed up with a service called Verified Agent, run by McClure, the Michigan agent. To earn verified status, an agent must have completed at least 24 transactions in the past three years and have 10 client recommendations. At the moment, though, the service won't confirm how many agents are verified; it recently lowered its price, perhaps in an attempt to wangle more participants.
For now, most of these efforts remain little more than embryonic. Still, the Houston Association of Realtors, at least, is galloping ahead with its online ratings program -- with or without agent support. The association requires those who opt in to the program to survey their clients within 10 days of a transaction. If they don't, they get a reminder giving them an additional five days -- after that, the agent is suspended from the program until the surveys come back. Wayne Stroman, the group's chairman, says he's used a variety of software and Web tools to boost the business of his own firm, Stroman Realty. The way he sees it, agents better get on board. "If Realtors don't put together their own system, someone else will, because consumers want ratings," he says. "They're not going away."