Common mistakes property investors make mistaking cheap fees for quality service

11-Nov-2013

In property management we see many property investors making the mistake that all real estate companies are the same, and all offer the same service so the best way to differentiate between them is to get cheaper fees. 

We have found a common pattern among agents is the cheaper they get, the lower their service levels.

Here is a simple step by step analysis of how cheap fees lead to poor service levels;

  1. Cheap fees is the starting line - unfortunately the perception is that agencies all do ‘the same thing’, we collect rent, get repairs done and find a tenant. With this perception we then might be attracted to a cheap agent, or one that substantially discounts their fee to impress you to win your business. 
  2. The property manager must manage more properties - because the agency has a much lower revenue base now because of their cheaper fees, the property manager is now well overloaded with too many properties to justify the same salary as the other ‘more expensive’ agency down the road.
  3. Burnout and resignation - the overload of managements causes the property manager to become disillusioned, not coping and causing ‘burnout’, struggling to meet investor expectations of service levels, with the end result being resignation.
  4. Good property managers now avoid this agency - once word of mouth spreads amongst property managers that to work at this agency you must manage so many more properties and so the good property managers steer clear of this business. Therefore the only people the principal can employ is either inexperienced or poor performing property managers who can’t get a job in good agencies.
  5. Poor service levels - due to this factor of now lower expertise levels, the result is poor service all around and disillusioned property investors who thought they had a ‘bargain’!

The end result is the property investor is now quite willing to go and find a quality agency and realise they need to pay a bit more to get better service and peace of mind.