Why Aussies think agents lack ethics – and what can we do about it?

Normally ranked near the bottom of the pile, this year, real estate agents has the dubious honour of being perceived as the least ethical professionals in the Governance Institute’s yearly survey.

With a clear PR problem on its hands, the Real Estate Institute of Australia invited Governance Institute chief executive officer Megan Motto to a webinar on 25 October in order to provide insight into why exactly real estate agents get such a bad rap in general, but this year in particular.

Ms Motto gave background into the methodology behind the findings, and made it clear that there were numerous factors at play that could be the reason that agents struggle with how they are perceived.

She shared a curious trend spanning perceptions of all professions, which showed that the closer a person is to the source, the more ethical they are likely to think it is.

“When we ask people about the ethics of occupation, they’ll say things like, lawyers are really unethical, except for my lawyer. My lawyer is really ethical. Proximity bias comes into play. People don’t think big business is ethical, but they think their employer is ethical. The closer we are to the source, the more ethical we think people are,” Ms Motto explained, perhaps putting some agents’ minds at ease that while general attitudes are down, the connections they’ve invested time and effort in are genuine.

And Ms Motto noted that timing is everything. While government officials traditionally compete with agents for the bottom slot, the national events of this year’s rankings were such that agents were probably top of mind. Conducted in June and July of 2023, the new cycle was fairly quiet on government affairs and the Voice campaign had not kicked into full gear. Headlines were instead largely dominated by the cost of living crisis, with the price of housing a regular focus.

Perhaps the biggest revelation to come from the discussion – and the one that offers the greatest number of takeaways – is how money plays into the country’s understanding of ethics.

Australia, as Ms Motto explained, has a very strong opinion on “how we feel about people who earn a lot of money in society and the transparency of how we understand that money is earned”.

“Generally speaking, people don’t think it’s ethical for people to earn a lot of money. CEOs earning over $3 million, irrespective of if you’re running a small organisation or an organisation with 30,000 employees and billions of dollars on the bottom line, not acceptable,” she said.

The ethics expert noted that this opinion has been exacerbated by cost of living pressures that are particularly relevant in 2023, but has always been prevalent throughout the eight years the organisation has been running the survey.

“People, generally speaking, don’t trust people who earn a lot of money. They think it’s unethical to earn a lot of money, and they specifically think it’s unethical because they don’t understand how it’s justifiable to earn that money,” she shared.

“So the more transparency we can get around the breakdown of how we earn money and the reasons why people earn that sort of money, that then can help to unpick that dilemma of ethics,” she noted, adding that agents are not being helped by splashy real estate shows that portray agents living lavish lifestyles.

“The property managers of Sunset Boulevard or New York that are dripping with diamonds and designer handbags and driving around in Porsches – it doesn’t help because it [reinforces] the idea that it doesn’t matter how good you are. [People] think, ‘it’s unethical for you to get paid a lot and for us to not understand what it is that you’re doing to deserve that money’”.

Ms Motto suggested that the industry might examine ways of inserting more accountability and transparency around commission structures, so that people understand where their money is going: what gets paid to the agents, to the agency, and so on?

A commission of the sale of a house might seem like a big chunk of change, but many Australians have no idea how many homes an average agent sells in a year. Understanding that might give them a great appreciation for the ebb and flow of an agent’s annual finances.

To be sure, these facts are also elements many agents might wish to obscure, as the number of homes they sell, and the number of support staff helping them to do so, can be perceived as measures of success. But according to Ms Motto, transparency in financial matters is the big mountain that the industry has to tackle.

And that relates to transparency in pricing, as well.

“We’ve all been involved in transactions in the real estate market and the reality is that it’s not like going into Cotton On and seeing a recommended retail price,” she said.

A lack of understanding around how homes are priced and how guides are determined often cause home hunters to feel that there’s an undercurrent of deception when buyers ask the simple question: “What’s the price?” And get an unclear answer or see sale results that differ substantially from what they were told.

Ms Motto acknowledged that gauging a property’s price is certainly a tricky exercise that requires a level of expertise.

“And that’s exactly why you guys have jobs,” she said.

“The price is determined by market forces, which is the interplay between supply and demand. And that means that there’s a little bit of science to it, but gee whiz, there’s a lot of art to it as well.”

While consumers tend to trust science, it’s the “art” – or showmanship – that they don’t. That looks like playing up a property’s best features while downplaying the rest, showcasing its best angles on domain and generally obscuring any negatives.

Anything that agents can do to draw out the science of how a property price has been determined helps with cultivating trust in relationships with all consumers, according to Ms Motto.

“Try and figure out more ways that you can be more transparent around how much is science and how much is art. That can be something that the industry can lean into to cultivate some of the main hallmarks of ethics: transparency and accountability.