Reviews have significant impact on agent commissions, says NUS research

By Cecilia Chow / EdgeProp. August 18, 2017

It has become routine to read customer reviews and ratings before making a dinner reservation, booking a hotel or downloading a movie. Restaurant owners, hoteliers and Airbnb hosts know only too well the impact these reviews have on their reputation and business.

Recognising that this trend will likewise disrupt the real estate industry, Singapore-based real estate agency OrangeTee became the first mover in launching a proprietary platform, Property Agents Review (PAR), in February 2016 to enable customers to rate and review its property agents.

Just how these ratings and reviews affect an agent’s performance, in terms of sales commissions and transaction volume, were measured over time by professors Ong Seow Eng, Calvin Chua and Davin Wang from National University of Singapore’s Department of Real Estate, School of Design and Environment. They presented their findings at OrangeTee’s town hall meeting on Aug 11.

Early adopters saw significant increase in commissions

Out of 2,364 OrangeTee real estate agents last year, 400 were early adopters of the PAR system. The NUS researchers compiled their commissions and transaction data for the six-month period before they adopted the PAR system in March 2016, and compared it with that for the following six months, as well as data for the subsequent six months to March this year. The aim was to gauge the impact reviews and ratings had on agents’ performance pre- and post-adoption of PAR.

The 400 early adopters received a total of 1,600 ratings and reviews between last March and September. Of the remaining 1,964 agents, a control group of 497 were selected as a basis for comparison. The performance of the control group was also tracked over the same six-month periods.

The NUS findings showed that the adopters saw an increase of $4,434 in commissions during the first period (March to September 2016) compared with the second (September 2016 to March 2017), while the control group saw an increase of just $770 over the same period. Meanwhile, commissions for rental transactions increased by $1,349 over the six-month period for the adopters, while the control group saw a drop of $788.

Overall, adopters saw their commissions increase by $5,783 on average, compared with that of the control group, which saw a slight drop of $17. This shows that PAR adopters performed significantly better than non-adopters.

Impact of reviews on sales leads

In addition to higher commissions, the early adopters also saw an increase in sales leads. Prior to adopting PAR, they had 4.6 sales leads; post-adoption, the figure was 5.3. In terms of rental leads, PAR had an even more significant impact — 5.65 pre-adoption and 10.56 post-adoption. For the non-adopters, while rental leads fell from 9.16 to 6.56, sales leads doubled from 3.16 to 6.56 over the same period. Ong attributes this to the “spillover effect” of the adoption of the PAR platform on the agency as a whole.

For adopters, however, PAR has impacted their bottom line in terms of an increase in transactions and commissions received. “This is the way towards greater transparency,” he says. “You put yourself at risk by asking your clients to write a review. The majority of the reviews were positive, hence, the results were tangible.”

Another interesting finding was that moderate reviews had limited impact on consumers. On the other hand, any review that had a strong negative or positive tone had a direct impact on the agent in terms of sales leads or ability to engage new clients, says NUS’s Wang. “The number or size of the deals may not be that important to customers.”

Today, the PAR portal has 5,352 reviews, more than thrice the 1,600 garnered in its first six months. When OrangeTee first thought of implementing the system in 3Q2015, its top management wrestled with these questions: Would their competitors follow suit? And would the system be recognised as it is not independent, unlike TripAdvisor?

“We believed that as long as we based our reviews and ratings on transactions, [PAR] would be more credible than being merely a review platform,” says Steven Tan, managing director of OrangeTee. A more important consideration was whether the reviews would be useful to both new and existing customers. They felt it would be and went ahead with the launch. “Having first-mover advantage was important,” he adds.

For a review platform to succeed, the company and its agents must have a service-oriented culture, Tan says. “If most of the agents are aggressive and purely commission-driven, we assumed a lot of top agents would leave if we launched such a platform. We also realised it would take some time for others to follow. Until now, none of the others have really followed suit.”

Heading towards greater transparency

One of the questions raised at the forum was: What can one do with a poor rating or bad review? The PAR platform, while proprietary to OrangeTee, is run independently, according to Tan. Hence, he assures agents who receive a bad review or low rating: “Even a six-star hotel will occasionally get a bad review or a one-star rating. If it’s just one bad review [compared with] many more four- or five-star ratings and positive reviews, the customers will, in fact, feel that this is a more genuine platform.” Ultimately, the objective is to raise service standards and help customers make informed decisions, he adds.

Lee Kwong Weng, executive director of the Council for Estate Agencies (CEA), an invited guest at the town hall meeting, notes that PAR adoption has had a positive impact on the performance of OrangeTee’s property agents. What is more important is that the research findings are backed by NUS. “The transparency of the system has enhanced consumer experience in the industry,” he says.

Lee also feels that PAR is very much in line with the government’s Real Estate Industry Transformation Map (REITM), announced in March, which aims to transform and raise the level of professionalism in the industry.

Second Minister for National Development Desmond Lee raised the issue of transparency in property transactions last week. He proposed the idea of agents tapping government data to verify information such as property ownership, floor area or prospective foreign tenants’ immigration status. While this is still under study, it is part of REITM’s push to use technology to boost productivity in the property transaction process, says Lee.

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