May 13, 2007
Chipping Away At Realtors' Six Percent
Lesley Stahl Reports How Realtors' Commission Fees Are Under Assault
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Play CBS Video Video Hi-Tech Real Estate Moves In In Full: Realtors' sacrosanct commission rates of 6 percent may be in danger due to emerging online competition from Internet real estate sellers and buyers. Lesley Stahl reports.
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Video Stahl's Reporter's Notebook Only On The Web: "60 Minutes" correspondent Lesley Stahl talks about her upcoming report on how online real estate sales are lowering agent commissions and driving down home prices.
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(CBS/AP)
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Section Real Estate Buying, selling, or just trying to stay afloat? Get the latest on the housing market.
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News Tools Real Estate Glossary A glimpse at some of the terms a home buyer or seller will encounter during the process.
How is he making money?
"The average agent processes eight deals a year. We have an agent that can do that every week," Kelman explains.
"Are you spinning me?" Stahl asks.
"I mean, seriously," Kelman replies.
There's no way to independently check the number of deals his agents close in a week, but it is clear that they do make it easy for their customers who can sit home at night in their pajamas and click on the Redfin webpage to read critiques of houses in their price range, see what comparable homes in a given neighborhood have sold for and to even tour a house they might be interested in.
Redfin displays, for free, information that's part of the package you pay a traditional agent to get. "So, for example, if we were looking for the turkeys in this market, we could find properties that haven't sold in the past 45 days," Kelman explains.
If you like the house, you can click the "start an offer" button. A Redfin agent at his or her computer in the office contacts the seller's agent and negotiates a price. Redfin then coordinates all the paperwork for a loan and closing the deal.
Willis and Takeuchi say the Redfin agent helped them come up with an asking price. Eventually, they sold for $10,000 under, which Willis says they're happy with. It was in their range, he says.
"But perhaps they've left quite a bit of money on the table if it had been put in the hands of somebody that really knew the business," argues Deborah Arends, who has been a top RE/MAX agent in Seattle for 18 years. She says that Redfin customers get the "Wal-Mart treatment" when what they really need is an experienced, hands-on professional. And besides, she says buying a house is a high-touch business, not high tech.
You have to go and see it for yourself. "This is not like buying books on Amazon.com. Real estate is typically people’s largest investment," Arends argues.
"If someone comes and challenges you and says, 'You don’t do enough for the six percent.' What's your response?" Stahl asks.
"My response is, 'I'm not the agent for you,'" Arends says.
Some agents have been known to lower the commission, but Arends says to give clients her ultimate, she needs to charge the full six percent.
"Now here's what Glenn Kelman of Redfin says: 'The price of homes has gone through the roof, pardon the pun, over the last several years. And yet your commission has still stayed at six percent,'" Stahl remarks. "You're not lowering your commission to give the buyers this advantage. You're just raking in the money?"
"Wish that were true," Arends says. "I think what's happened is a lot of expenses have gone up, everything from postage to gas, which affect real estate agents' profits."
Produced By Rich Bonin
© MMVII, CBS Interactive Inc. All Rights Reserved.
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See all 1508 CommentsThe 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.
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
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!!
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.
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.
The amount charged is based on a percentage,
unlike fixed prices the rate can stay the same
and will be adjusted by inflation.
Note that while 60 Minutes wants to point out
home values have quadrupled over the past 25
years she doesn't mention what her salary has done over the past 25 years nor does she say
how much the cost of an advertisement on her
program has increased over the same period or
any other advertising costs for the matter.
As a matter of fact, I don't think you will
find her mention anything regarding the increased costs faced by agents.
While I do agree with stopitnow2 about the
obvious corruption and price fixing in the energy industry.
The NAR does not have a monopoly at all.
The NAR is a trade organization that represents
business members just like your local chamber of
commerce. There a 1000 different independent MLS services that opperate around the country.
These boards are made up of local not just Realtors represented by the NAR but non-realtor
agents as well.
The reason Realtors were upset about discounter
and 60 Minutes was that they have lied to consumers and provided false and misleading statements about our profession. Many of which
have lead people such as yourself to believe
the statements you made. The NAR does not govern the real estate industry, that is done
by the STATE Government, each state has a real
estate commission who enforces the laws passed in each state.
It is sad that people are not familiar enough
to know the differnce between the two and that
a forum such as 60 Minutes was used to promote
such falsehoods.
The NAR does not bar discount brokers but they
it does advocate that they be required to follow the same laws and ethical standards other agents are held to. That would include making false claims and promises to consumers in addition to
making false accusations and claims againts other real estate professionals not just Realtors.
I buy your point about sweat equity, but its the
agents doing the work to sell the home, again if
they don't do the job they don't get paid.
I grew up in WV and am familiar with coal miners too, but even more familiar with the concept of those who live in the past and recall what the cost of something used to be rather than what it
is today.
I am sorry inflation hits people in business hard, those expenses often are not tied to
to your appriciation nor your idea of value
but in cold hard cash.
Again, everyone points to what is charged but not what is being paid out.
By ScottyHal May 22
Sorry ScottyHal, none of the above, rather poke myself in the eye than be a 6%-er. I am the child of a coal miner & a dress factory sleeve-setter who busted butt & passed 2 state bar exams. Worked for the IRS defending Commissioner of Internal Revenue for 7 years until my kids came so I know what it is to be in an unpopular profession. Never liked law anyway because it's another often sleazy profession. Now I work from home mainly as a tax preparer/advisor. Occasionally will do a probate case, a will or a real estate closing for which I charge fair undermarket fees & sometimes don't charge at all if client is elderly, ill, etc. Also am a lithographer/etcher so let me know if you're interested in any original prints, my specialty is animals especially Pugs.
When I quit my job to raise the kids, $$ became scarce so we drive older cars, buy gently worn clothes, eat plenty of rice & beans, and do everything else possible to save a buck. THAT'S WHY I GRUDGE AGAINST ANY INDUSTRY THAT TRIES TO TAKE ADVANTAGE OF OUR HARD EARNED INCOME & SWEAT EQUITY AND WHY I WON'T GIVE YOU 6%.
This board will close soon, ScottyHal, so you have only a short time to use what I wrote & put me down again. Then again, this isn't about me, but you asked...
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