When real estate agents offer recommendations for home-related services and products, do their home buyer customers listen? You bet they do. And they appear to want much more.

New consumer research suggests that not only do home buyers listen to agents' recommendations, they act on them, often overwhelmingly so. In fact, the evidence is strong that home buyers would follow even more recommendations for home-related services, but that Realtors don't offer them.

The study, conducted as part of the National Association of Realtors' annual Profile of Home Buyers and Sellers, offered no theories as to why agents don't make a broader array of service-provider recommendations to their clients. But it urged agents to do so as a way to enhance their value to buyers and improve customer satisfaction.

According to a survey of a national statistical sample of home buyers last year, fully nine out of ten consumers signed up with the title and escrow, termite, appraisal and land survey service providers recommended by their realty agents.

Over 80 percent of home buyers did the same on recommendations for home insulation, home warranty, lead-based paint and radon inspections, and settlement attorneys.

But for each of these service areas, far fewer real estate agents made recommendations than the actual rate of consumer acceptance of those recommendations. For example, according to the study, just 38 percent of Realtors recommended a specific settlement attorney to buyers, but 84 percent of their customers followed through and hired that attorney. Just 39 percent of realty agents suggested a contractor for radon inspections, but 87 percent of their customers actually signed up with the inspection company recommended.

Similar patterns were documented in lead-based paint inspections (just 42 percent of agents recommended a specific firm but 88 percent of their customers used the firm recommended); moving companies (10 percent of agents made recommendations but fully 50 percent of their clients used the recommended firm.) Just 19 percent of agents suggested appliance or repair companies, but three out of four of their customers later bought appliances or used the appliance repair firms recommended. Just 24 percent of Realtors recommended home improvement contractors, but 75 percent of their customers followed those suggestions.

Even in services most directly-related to the purchase and closing transactions themselves, the study documented that the "buy-through" rates of recommended services is notably higher than the rate of recommendations by Realtors:

  • 62 percent of agents recommended one or more appraisers, but 90 percent of their clients chose one of the recommendations;
  • 73 percent suggested the name of a title insurance or escrow agency, but 90 percent of their customers signed up with the recommended firm;
  • 63 percent of agents suggested a specific termite inspection and treatment firm, but 90 percent of their clients followed through.

The Real Estate Settlement Procedures Act (RESPA) prohibits agents from accepting compensation from service providers solely for the act of recommending or referring them to clients. Within the law, however, agents are free to identify the service providers who'll be of most value to their customers.

Many large real estate firms may already be moving in this direction, offering clients more formalized and extensive recommendations, sometimes even with discounted prices. As an example, one national home buyer-services company, Home-Link.com, has signed up a network of over 50 major realty brokerage firms to offer service and product recommendations and discounts to home buyer clients as ongoing incentives for buyers and sellers to use those brokerage firms.

The trend seems clear: Home buyers want recommendations from agents whose judgment they trust. Realtors, in turn, are gearing up to provide far more of those recommendations as value-added benefits to their own packages of professional services.

Log in to comment