Should Scale Be Considered In Online Real Estate Reviews?

I’ve previously written about my skepticism of online real estate reviews.  The main problem I have with online reviews is that it’s a spot where large corporations can easily game the system and at the same time, publish smaller organizations.  Today, I wanted to demonstrate how scale really matters with online reviews.  For example, if an auto manufacturer comes out with a bad model, you’d think there’d be millions of bad reviews for the particular make and model.  Maybe it’s just me, but I hardly ever hear about a bad car model.  In fact, the only time I hear about a bad car is when a friend tells me they personally had bad experience with a model.  This leads me to believe that scale should be considered in online real estate reviews.

The Automotive Review

The 2015 Jeep Wrangler Unlimited was the “worst car of 2015” according to consumer reports.    There are a few problems with this.  For one, it’s 2019.  How has the Jeep Wrangler Unlimited held up?  Go take a look at Google and search “2015 Jeep Wrangler Unlimited problems”  Edmonds.com  has 36 reviews,  But when you look closer at the reviews, it’s for all Jeep Wranglers.  It carries a 4.2 star rating.  There were 202,000 Jeep Wranglers sold in 2015.   My question;  if it was the worst car of 2015, how did it sell more than 200,000 units and manage to get only 36 bad reviews?

Some Sort Of Review Context

What are we left with?  Is the model that bad, or are the reviews wrong, or what?  Well, let’s look at one huge piece of context:  Time.  I would suggest that the “worst” car label was for what was the worst car you could buy in 2015 given other models and price points.  You can’t then make the correlation between worst value and reliability.  But how many people do you think do?  Taken a step further, what time constraint equals “reliable” and “unreliable?”  Is 5 years too long or too short to consider what a reliable vehicle is?

Brands Matter

Why do we trust Consumer Reports?  It’s a brand.  And the brand is a very big one.  241 million dollars in revenue in 2017, and though it’s a not for profit, I suspect at least a few of those dollars went to salary.  We perceive Consumer Reports to be experts in their field.   After all, the name says consumers are reporting, and who knows a product better than consumers?  Unfortunately, it’s not that easy.  If Consumer Reports got reviewed, what would they look like?  According to consumeraffairs.com, they have  292 total reviews and it is currently at 1 out of 5 stars.  That’s right, the “trusted” review company for products, in this case automobiles, has a worse rating than the vehicle it says is the worst.

What About Real Estate Reviews?

The average real estate agent does 10 transactions a year in St. Louis.  If they get 1 bad review, that is 10% of their business not happy with their service.  For the same bad review to affect a Jeep Wrangler Unlimited, 20,000 Jeeps would have to be poorly reviewed.  We got 36 total on Edmonds.com.  One real estate agency was responsible for 600 transaction sides in 2016, but they would have had to done 60 horrible deals to hit the 10% threshold that the average real estate agent got on just one bad review.  It would be very hard to get 60 bad reviews in one year in real estate as an agent or a broker and stay in business.

Are Real Estate Agents Better Than Review Companies Or Auto Manufacturers?

I don’t know.  But I think scale again has something to do with it.  It’s said that the average person moves every 5-7 years.  I don’t think that’s entirely accurate, but even then, if the person started buying a new home at age 30 and did so until age 90, that’s 15 total purchases.  If you have bought 15 homes, I suspect that you have much more experience on home purchase 10 than you do on home purchase 1.  A good real estate agent in St. Louis is doing more buying in one year than most people will do in their lifetime.  How can someone who bought 1 home in 15 years write a relevant review about a real estate agent’s performance in that single transaction?

Real Estate Review Context As A Home Buyer

Similar to the automotive review context, let’s look at how one rates an agent.  I suspect a real estate agent who is polite would get a higher review.  I suspect a real estate agent who acted in a professional manner would get a higher review.  That’s great, but what are you using a real estate agent for on the buyer side?  Probably to help you find and buy the best home for you.  If 4 years later the house you bought with your agent develops a problem that requires many thousands of dollars in repair, was the agent review still valid?  Is the real estate agent even responsible for your bad luck with the home?  I don’t think so.  Yet, the review was a glowing one.

Real Estate Review Context As A Home Seller

Let’s say that you are going to sell your home.  When you go look at real estate agent reviews online, they don’t distinguish between agents who list your home, and agents who are buyer’s agents.  You could read one glowing review after another when it has nothing to do with listing your house for sale.  Here’s another fun exercise.  What is the criterion for review when you sell your home?  I suspect it’s VERY similar to the criteria used when you review a home purchase.  But you want to sell your house.  Even that isn’t easy to review.  If a real estate agent came to your house and said they could list it for $50,000 more than the next agent, you’d probably pick that agent.  But, that’s buying a listing, as we say in the business.  Let’s say the property doesn’t sell, and you are forced to lower the price over and over.  The entire time, the agent is polite and professional, or at least the person who calls you for price changes is.  Serious question, are you going to give a lower rating to the agent who bought your listing in the first place and sold it for less?

In another home selling scenario, let’s say you agree on an asking price with a real estate and the home gets 10 offers in the first day.  Your agent did great right?  5 star review I’m sure.  But what if that real estate agent just missed on the asking price by $20,000 because they didn’t know the area and didn’t care to learn it?  Is that real estate agent really smart or really dumb?  The agent would get a 5 star review and it would be based on incompetence.

Do Real Estate Reviews Matter?

I really don’t believe in real estate reviews any more than I believe in any other online review.  That isn’t the way I would like it to be, but that is the way it is.  At the end of the day, it’s about how a product or service worked for you.  If you really want to make a decision, I suspect other factors influence that decision more than a review.  After all, how many times have you heard or read a review that said you would never buy from such and such manufacturer again only to buy a product from them years later?  We seem to make decisions and then use random facts to justify those decisions.  I believe that is a form of confirmation bias.  And, just like that, we get the true use for online reviews.