Chipping Away At Realtors' Six Percent

She says she has to spend money to make money for her clients, especially when they're trying to sell a house in today's down market.

To move a property, Arends comes up with a strategy, then creates buzz by blanketing neighborhoods with fliers and sending postcards to notify other agents. She also spiffs up a house for viewing. As an accredited "staging" professional, she polishes, re-decorates and de-clutters.

"It is the single biggest moneymaking thing a seller can do, because getting their own belongings out will allow buyers to imagine themselves in the home," she explains.

When the house is ready, she then targets potential buyers as well as agents, and holds an open house to dazzle them.

"Redfin very proudly says that they returned in rebates $3 million last year to its buyers," Stahl remarks. "You can't boost of anything like that."

"Absolutely not," Arends acknowledges. "I don't know how to answer that one."

Other agents have an answer: try to drive the discounters out of business, which is what happened to Steve DelBianco.

He helped launch the first Internet discounter, eRealty, in 1999 in Texas. No sooner than they were up and running, the local agency in Austin that regulates the industry adopted a new rule that effectively barred e-realty from listing houses for sale on its Web site.

Then, DelBianco says, "They sued us for breaking the rule they created to shut down eRealty's ability to compete."

"Was the main objection, do you think, the cutting of the commission?" Stahl asks.

"That was the only objection," DelBianco argues. "Realtors embrace the idea of some automation and some use of the Internet. But the minute it cuts into their pocketbooks, well, all hell broke loose."

eRealty won the lawsuit. But then it ran into the National Association of Realtors, the industry's powerful governing body. In 2003, the association issued new rules of its own, ones that threatened to block Internet discounters' access to the multiple listing service, or MLS. That's the data base that lists virtually every home for sale in the country. It's the lifeblood of any agent or brokerage, including discounters like eRealty.

"The threat of the new rules meant that our investors closed their pocketbooks and new investors wouldn't answer the phone," DelBianco explains.

"'Cause they knew if you couldn't get access to the MLS, you were dead anyway, and they knew that," Stahl remarks.

"They cut off our air supply. They knew it," DelBianco says.

In the end, eRealty went belly up. DelBianco says the company lost $33 million.

• « Previous Page
• 1
• 2
• 3
• 4
• Next Page »

[Chand_Sultana]

This wont work in long term, the agents get tired of extra work and quit...

[christine3075]

I applaud "60 MINUTES" and Lesley Stauls for this great piece of investigative journalism. It has renewed my faith. I'd like to see another piece focusing on the deceptive and down-right illegal practices of some agents. The best way to avoid being deceived and ripped off is for the consumer to be educated and aware. With realtors being such big newspaper advertisers, there's not a hope that any newspaper would broach the subject. So, "60 MINUTES" will you tackle this?

[KatyTexasRealEstate]

I am a real estate agent in Texas. People who think that finding a buyer, or sticking a sign in a yard is all real estate agents do to earn their fee are ignorant of the entire process. A good real estate agent ensures that the buyer/seller is aware of their responsibilities and rights in order to comply with a contract. Also, there are appraisals, inspections, title issues, repairs, mortgages, insurance issues, local, state and federal ordinances that must be either dealt with or made a non-issue due to regional requirements. Real estate agents get paid for knowledge, just like any other profession. Don't get me wrong; there are some completely STUPID and LAZY real estate agents out there who are not worth a dime just like there are lawyers, teachers and engineers who just don't quite add up.
The reason the discount realty companies got into trouble is because they shun representation responsibilities. Mostly, all they do is put a home into an MLS database then leave the seller out to hang. Talk about getting paid for nothing! Discount companies only advertise for sellers because they get paid for mostly doing nothing but data entry and the more sellers they get, the more they get paid. They could care less if a home sells because they already got paid when they listed it. Sellers think they save money by using these firms but the fact is these discount firms have a lower average sales price on their listings than a full service agent, so do the math.

Real estate agents, while labor is involved, get paid for knowing the market swings and how to successfully coordinate a transaction through the process while keeping their client from getting sued later. Marketing and advertising creates a quicker sale at a higher price if done properly, but once again most agents do not know how to market a home well and/or do not want to spend the money to advertise. Selling a home is not an easy process in today's litigious society. Using the wrong contract form in transaction is enough to cost you thousands of dollars these days.

I offer full service AND discounted service. After people learn of my full service package, they usually pick it over the discount. Now some smarty-pants idiot will probably come along and throw dirt on my entry in one way or another. This is the type of person a buyer or seller has to be protected against if their transaction is not done properly. This type of person always selfishly cries foul when they don't get their way or they just like to argue to cause kaos because that is their life game. Play it safe. ALWAYS interview at least two real estate agents before you buy or sell to see who knows their stuff and be protected against lawsuits and idiots.

[nick_the_new_guy]

As for ignorant Katy, you are right, most buyers and seller believe a real estate agent will do all the hard work as far as the legal stuff is required. Here is the truth, I have a 550k house at 7.5 percent so for 40k I get 40K worth of services, but if I had a 100k house I would get the same treatment and services. Agents list, they hope to sell one side of the sale ( selling agent side, buying agent side) so a buying agent would split the sale of my house, 20K, for doing a showing. Now the legal stuff, the bank handles it, all of it, my last agent took his check at closing, put it in his pocket and left, not even a hand shake. This was on a house he hand been in only once. Don't try to kid us with all you mumble jumble about what you do. You are smooth with your 50 cent words but the reality is you have no legal of moral obligation to the buyer or seller out side of pre-established state and federal real estate laws. And by the way, the dirt I am throwing at you is only made up of your greed and laziness. I have moved out side of the agent world and have gone the for sale by owner route. I,a person of integrity, have not had any bad recourse from any sale I have done. Quite the opposite, the buyer agents involved have created BS to deal with to look as though they are earning there commission. Creating turmoil over cracks in a drive way was one of the show stoppers I had to deal with, had the lazy jack ass asked what was going on he would have known a plan was in place to seal the drive when the snow melted. An amendment the bank could have added into the paper work, and in the end did. Katy, don't break your arm patting your self on the back because you work in an industry that has well dressed used car sales men selling house instead. Your job exist because your industry has sold the pubic on the fear of going into a "bad deal". The only bad deal I see here some one showing up at my for sale by owner and telling me that the prospective buyer isn't interested unless I pay you 20K. Sleep well, they need real estate agents in hell, Satan sells it to the lawyers.

[lindaleon]

Hi - I just wanted to comment on all the comments. As a professional home stager, I am always prevented from doing the work that I could do - to get the house sold quickly and easily - either directly by the realtor themselves (realtors don;t want to upset the sellers - or they fear they will lose the listing)...or indirectly - influenced by the commission of the realtor.

I have always felt that realtors would be a great "link" to my getting more clients - but it seems that they are the barrier to my entry!! I know what needs to be done to a home to get it sold (and also when I look online at a listing - I could even tell the realtors exactly what is wrong with the photos - and how to improve the presentation...very easily)...but, time and time again - I get "sidelined" by the realtors.

I wish there was a way for me to tall=k to, to get to the homesellers - and to let them know that they could do x and y to their home (which for some reason the listing agents don't tell them - at least in NY) - and to let them know there are other alternatives to selling their home.

I believe that a service, such as Redfin, will succeed - if the buyer learns to take command of the marketing - and the Internet...and if they utilize the extra money they save on commissions to update their homes in a practical and buyer-focused way.

Linda Leyble
www.beautifulstagedhomes.com

[Redlew1]

I just want to respond to some of these real estate agents and to motivate people to sell there homes on there own. My first home I sold through a real estate agent and from watching what she had done and how much leg work I had done on my own, I came to the conclusion that the house was going to sell itself!
I moved into my second home and after a duration of living there and renovating I decided to sell it on my own and after advertising through signs, flyers and the internet I didn't even make it to an open house and got more than asking price! Once again proper renovations and the ease for someone to move in with out updating made me realise houses sell themselves! I have now sold 3 homes and looking to start selling my 4th in a buyers market with just as much confidence! this home will sell itself.
I have never heard of a real estate agent getting 6% I would never agree to more than 4% which could be 2% for each agent I guess.
My opinion is that there is always some selling and there will always be someone buying only I won't pay someone to unlock my door to show the work I have done on my own!! and really if you put it on the market on your own for a month you can always sign up to an agent later they will never say "NO" to the oppurtunity of stealing your money!!

[cityservice]

Mooven

I am happy to also report that in our first year and a half in business, we have closed over 60 transactions and have SAVED our Clients over $350,000 - either by our 3.49% total listing commission (vs. 6%) or buyer rebate!
While traditional offices hope we "go away" we will continue to grow because we have the industry's most valuable asset on our side - the real estate consumer who is fed up with paying too much for too long.

[nymommy-2009]

neeruam - you got lucky..and it was in a hot market.. try it now in the buyers market.. you won't be so lucky.. oh . I know what you're answer will be..something about our commissions being "too high" in that hot market. guess what..commissions went DOWN.. AND are NOT 6% like this ridiculous story reported. So back to our original complaint that this story is a load of poop the media is shoveling and you're eating up. Bon apetit!

[neeruam-2009]

"neeruam - you don't 'see" the value..cause you have NO IDEA what you're getting into. So.. good luck trying it on your own. Come back and post how long it took you to sell and your final price. you'll see.. it will be twice as long as your local realtors and for alot less money.. oh. and you would have spent money on marketing, not to mention a lot of wasted time showing your home to buyers that weren't even real buyers.. so you'll loose your "sweat equity" and your time plus marketing expenses. in the end, you may not even sell and will be turning to a realtor to do the job for you. I've seen it a million times."
Posted by NYMommy

NYMommy, do you read before you post? Don't taunt me about selling on my own, I said I already did that with my last house. The realtor caravan disparaged my asking price as too high, but I got it & $5K more. We did own ads & marketing & spent $150 on such. We did an open house & sold in 9 days & the most wonderful thing was that buyer had no realtor either, so we paid 0% commission. I paid an attorney $1000 for helping pick the best buyer from multiple offers, he worked with us through the paperwork, the inspection negotiations, & he attended the closing. His fee worked out to .006%, not even 1% and he was terrific, but not greedy. The realtors tried to scare us just like you are, but with education about the process & people like Leslie Stahl, we will never again, despite your taunts, pay a realtor. You don't deserve 6% of my sweat equity.

[nymommy-2009]

neeruam - you don't 'see" the value..cause you have NO IDEA what you're getting into. So.. good luck trying it on your own. Come back and post how long it took you to sell and your final price.. you'll see .. it will be twice as long as your local realtors and for alot less money.. oh.. and you would have spent money on marketing, not to mention a lot of wasted time showing your home to buyers that weren't even real buyers.. so you'll loose your "sweat equity" and your time plus marketing expenses. in the end, you may not even sell and will be turning to a realtor to do the job for you. I've seen it a million times.

[deffector]

If Sellers want to change the sales commission, one logical place to document what is expected in return for the commission is the listing agreement. Article 9 states: %u201CREALTORS., for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing.%u201D Are there any Realtors. out there who failed to give a copy of the contract to their clients WHEN they signed it? Did all of your clients happen to read their listing agreement that stated the sales price and commission in clear language? Did it say that the Realtor. was going to put a sign in the yard, put the listing in the MLS, advertise in the newspaper, show the property, et cetera; OR, did it say that the Seller "gives permission%u201D or %u201Cauthorizes%u201D the Realtor. to do all that stuff?