May 14, 2007

60 Minutes report on the NAR's MLS monopoly and the dinosaur "six percenter" realtors (real estate clerks)

Here's the 60 Minutes video link.


Goodbye 6%. Anyone think realtors deserve $30,000 on a $500,000 house? Try $5,000. Or $500. And hello Redfin.

The only value real estate clerks added was getting the house on the MLS. If a discounter can do that, or if the MLS can get disintermediated itself (google?), then there is NO reason to pay a realtor a percentage. Maybe an hourly wage for showing houses, but that's about it.

Victory will be ours. 1.2 million realtors around the US, sorry to say, but you're dinosaurs, and the game is over.

Go find new work.

41 comments:

Anonymous said...

In our market the owner's of discount brokerages are disappearing. Gone are HelpUSell and Buyer's Agent, Assist2Sell is the only one left. I spoke with one of the A2S agents, who told me their pricing reduced the margins to the point they couldn't afford to make any profits.
Assist2Sell is grumbling. They charge $2995 + pay the buyer's agent 2.5%. The savings is that great. The agent's hate selling a $500k home and make 1/2 is much as the buyer's agent. The broker is the only one that is semi-knowledgable. The clerks are all rookies and clueless.

Anonymous said...

http://keyetv.com/business/finance_story_134002308.html

Realtors' Commission Fees Are Under Assault

(CBS News) Even with today's housing slump, real estate agents will pull in about $60 billion this year. And the reason is, as any homeowner knows, they charge a six percent commission on the price of every house they sell. So, for instance, a home that goes for a half a million dollars will net agents $30,000 right off the top.

For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years.

But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers – the encroachment of the Internet – is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters

Anonymous said...

http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070512/BUSINESS/705120388

'60 Minutes' puts Realtors on defensive
Report airs Sunday on alternative sales methods and commissions.

By MICHAEL POLLICK



michael.pollick@heraldtribune.com

Using an Internet-based business to slash real estate commissions gets the CBS "60 Minutes" treatment on Sunday, prompting the Sarasota Association of Realtors and its national counterpart to do some advance coaching of their agents.

The local association sent out a set of "talking points" this week that originated at the National Association of Realtors.

"Bottom line is that we don't expect that the segment will make Realtors happy, but it could have been much, much worse," the NAR said in the memo. "Be glad that it's Mother's Day and the show will probably draw fewer than its average 14 million viewers."

According to the CBS News Web site, the segment -- dubbed "6 Percent" -- reports on the premise that "Realtors' sacrosanct commission rate of 6 percent may be in jeopardy due to emerging online competition from Internet real estate sellers and buyers."

Kathy Roberts, who runs both the Sarasota Association of Realtors and the Sarasota Multiple Listing Service, confirmed that her local group picked up the NAR's pointers for dealing with local media and passed them along to its 600 member firms and 4,100 Realtors.

Anonymous said...

Why is this news? Discount brokers have been around for years.

Anonymous said...

Go Go Redfin!

Anonymous said...

LMAO! Discount brokers can't compete, especially in a down market. My prediction is that ALL discount brokers will fold in 2 years. The Remax agent is correct, it's a high touch NOT high tech business.

Anonymous said...

1/3rd of all agents don't make it in the business every year. A starving agent in a down market is uber common. Imagine a Redfin type agent doing nothing to sell a house for a focked borrower. The FB will hire a real agent after a few months of nothing happening. Redfin's success is ONLY a result of a white hot real estate market. They'll be history when the recession takes ahold.

Anonymous said...

But I print up fliers and organize stagings... was the value-added by the realtor in the "60 Minutes" story. Well, a $12 'how to' book can be bought for the same thing, not to mention the myriad of home sale shows on HGTV nowadays.

Realtors' 6% racket seems worse than the mob. I bet the mafia has been jealous of their field for quite sometime. But that is a humorous thought though... imagine a bunch of Italian-American hoodlums doing house showings and openhouses!

I am the man said...

I have blue balls from leslie stahl.
Realtors are doomed.Maybe they can get a job stocking shelves at walmart next.

I will only use discount broker or sell myself.

Morgan said...

The only things I don't like about Redfin are:

1. They still charge the full 3% to the seller of the home if they are not a Redfin customer. I mean WTF is up with that? If they are looking to change the industry, change it! Taking 3% from a seller is no discount. They should stop painting themselves as revolutionaries when they aren't changing a thing.

2. They try to make money from you by coordinating and/or closing your loan for you. Can anyone say "YIELD SPREAD PREMIUM"? Funny how that bit was swept under the rug.

I don't like Realtors - I think they are paid to much, but let's not annoint a new king in Redfin when all they are is a new spin on a system that is total crap.

Let's junk the system and start from scratch is what I say.

Anonymous said...

I read many supposed 'for industry only' real estate forums and this could not happen to a more loathsome stupid bunch. Honestly, these people just make my skin crawl. Go Redfin, indeed!

devestment said...

Yea baby! Go Red Fin, todays new household word.

How about the transperency of the pro NAR realtor?

On the other hand...
There is backlash for this in that there will be a big adjustment for buyers and sellers in the new marketplace.
It's the Wild Wild West.

Anonymous said...

Anyone think realtors deserve $30,000 on a $500,000 house?

if you have $500,000 to waste on a house, another $30,000 is chump change. realtors, as long as you can find one who's a straight shooter, might save you from making a bad investment. my realtor's grim assessment of what I was looking at made me forget about buying anything. maybe he thought he could upsell me?

anyway, it'll be interesting to see how many people buy houses without the influence of the industry's "marketing tactics," since they're often like a date rape pill.

Indeed, I get emails from a realtor who spouts a lot of baloney but I have to believe that someone likes the hype and acts on it!

in a post realtor world, I expect "buy reality" spam to outpace "buy viagra" spam!

Anonymous said...

6% has been a dinosaur for at least 5 years. In calif. I would estimate that the actual ave. fee is closer to 4% than 6. The next major move in the industry will be towards salaried agents and lower fixed cost of overhead with agents working from home connected through web. Redfin will not survive with its current structure. Personal relationships and local knowledge of the market (seeing the local inventory and understanding local economy) is critical. I forget the name of the company that was on 60 minutes (e-realty ?) complaining that he was discriminated against in Texas. His company lost 30 million because his business model did not work. If the consumer wants the company to succeed it will.

Anonymous said...

Let em eat cake.

Mark said...

The part about the Dept. of Justice going after the NAR for practices harmful to consumers is the best thing I've heard in weeks. Monopolizing the MLS... bastards. I hate realtwhores and I've yet to see one who actually earned their commission.

Anonymous said...

As somebody that's been looking to buy I think this online stuff is rather ineffective. Seattle is still hot, over here in New England nobody's in a rush and I want to see the damn place and work with a person. Also, thoses assit2sell, helpusell sites are stagnant, homes just don't move on them. Six percent is ridiculous but if I were selling in a down market I'd do it the traditional way.

Joey in NH

Anonymous said...

SAN DIEGO -- An auction of nearly 100 foreclosed homes here Saturday showed that mortgage lenders are having to accept huge discounts in some cases to unload such properties.

A surge of foreclosures over the past year or so has left lenders struggling to sell a growing backlog of homes. Rather than relying on real-estate agents, the usual practice, some are turning to large-scale auctions to speed up the sale process.

• The Situation: Surging foreclosures over the past year or so have left lenders with a rising backlog of homes.

• The Strategy: Some lenders are turning to large-scale auctions rather than the practice of relying on real-estate agents.

• The Consequence: Mortgage lenders are finding they must accept big discounts in some cases to unload properties.

Real Estate Disposition Corp., the Irvine, Calif., company that organized Saturday's auction of lender-owned homes, plans similar sales May 19 in Los Angeles and May 20 in Riverside, Calif.

At the San Diego sale, houses and condos typically sold for about 30% below the previous sale or appraisal prices. In a few cases, the discounts were around 50%.

A four-bedroom home in Oceanside, Calif., attracted a high bid of $495,000 at the auction, 33% below the sale price recorded in November 2005 for the property. One condo in San Diego sold for $120,000, less than half of its previous value.


*Burn in Hell* Real Estate investors!!!

showmenouns said...

A lot of RE clerks didn't sleep too well last night. They finally been "caught".

Cate said...

I love how the realtor referred to Redfin as the Wal-Mart of real estate like that is supposed to scare people away. The only people who are critical of discount realty services are other realtors who are terrified of losing their scam.

Benjamin Franklin said...

if you have $500,000 to waste on a house, another $30,000 is chump change.

Problem is, most people DON'T have "$500k to waste on a house", and they're incredibly over-leveraged on the purchase, as it is, stretching well beyond prudent limits to buy (especially now that houses are starting to depreciate: getting under water on a loan is going to be pretty common).

What happens is once the borrower accepts they'll be borrowing $500k (an obscene amount of money in real-world terms) on a 'zero-down' 40 -year loan, then suddenly people are willing to say that $30k is "chump change".

It's kind of like how politicians get numb to the amounts of taxpayer's money they're handling; what's the old joke that says, "spend a few billion here, and a few billion there, and after awhile we're starting to talk about some REAL money"!

Where I'm from, $30k is A LOT of money to most citizens: so much, that most people are unable to save anywhere close to that for a down-payment!

$30k is more than many people MAKE in one year!

$30k will get you a rather nice car (another large-ticket item most people will NEED to finance, UNLESS they're a realtor who just got a commission check).

So thinking of that 6% commission in those terms, is the value added by a real estate agent so great that you'd give her a brand-new car as a measure of your gratitude, or fork over a year's worth of paychecks to her? What is this: a game show where she wins a "brand new car"?

I didn't think so.

Benjamin Franklin said...

I forget the name of the company that was on 60 minutes (e-realty ?) complaining that he was discriminated against in Texas. His company lost 30 million because his business model did not work.

No, watch the interview again, and you'll see he says he went out of business after the realtor association sued him. A large organization like NAR has a gaggle of lawyers who can bury a small firm.

Hence why the Department of Justice is getting involved, and taking on the NAR itself: an industry as corrupt as the real estate business needs to be tackled by the government's anti-trust regulators (and I'm surprised Bush hasn't called the DOJ and gotten the kabash on enforcing anti-trust laws, as he probably thinks they're not laissez-faire, either).
prevent him from competing

Anonymous said...

The part about the Dept. of Justice going after the NAR for practices harmful to consumers is the best thing I've heard in weeks. Monopolizing the MLS... bastards.

Yeah, well the board of appraisers in one Western state tried to sue zillow.com for operating in their state as an unlicensed appraiser.

Fortunately, the local lawmakers saw it for what it was: an attempt to block free trade, as well as free speech.

Cate said...

The NAR decided to try to do some damage control ahead of the 60 Minutes piece and sent a memo with talking points to it's member offices. I guess it's making them sweat. Here is a link to the memo:

http://tinyurl.com/2qlm2j

I love the line that says:

"Bottom line is that we don't expect that the segment will make Realtors happy, but it could have been much, much worse. Be glad that it's Mother's Day and the show will probably draw fewer than its average 14 million viewers."

Geoff said...

Apparently Redfin's servers were overwhelmed by traffic last night after the segment ran. A lot of people are interested in not getting screwed.

There is a company out of Miami called Homekeys that is similar to Redfin. I guess we will be seeing more of these companies pop up.

Anonymous said...

As somebody that's been looking to buy I think this online stuff is rather ineffective. Seattle is still hot, over here in New England nobody's in a rush and I want to see the damn place and work with a person. Also, thoses assit2sell, helpusell sites are stagnant, homes just don't move on them. Six percent is ridiculous but if I were selling in a down market I'd do it the traditional way.


Hey, Cant you buy pet food online too? Pets.com? ooops, my bad. sorry.

Ben Dover said...

Never bet against the internet.

Anonymous said...

This is old and somewhat incorrect news. Discount Realtors have been around for awhile. And the 6% being "sacrosanct". Give me a break. It depends on the market and location but in the hot market days Realtors were lucky to get 2.5%. Now that it is a buyers market they are asking 5-7%.

The real story is the NAR attempt to block access to the MLSs to the discount brokers. I believe that NAR will ultimately fail on the legal front.

IMOHO full-price Realtors are paid way too much for the "service" they provide. But you sometimes don't get much going the discount route either.

What the story did NOT cover is that a buyer or seller can hire their own competent appraiser to assist them in valuing thier sale or purchase for $300-500.

In the end, the market will decide. I suspect that it will be a wide spectrum of services offered with fees to match.

bubbleglum said...

""Bottom line is that we don't expect that the segment will make Realtors happy, but it could have been much, much worse," the NAR said."

Only the NAR knows the real story of just how rotten their industry is.

Anonymous said...

I sold my last rental property in March in Phoenix.

I paid a discount broker 199.00 for an MLS listing, with 8 photos, a lock box and options for an additional 100.00 if I needed closing negotiation help.

I offered a buyer’s agent 2% if they brought in a buyer.

All inquiries were redirected to my personal phone from the discount broker.

I made my own sign and flyers. I staged the home, held my own open houses and put the house up on free Internet sites everywhere.

I sold the property in 3 weeks. Not one buyer's agent showed the house.

I had good traffic on the open houses and pretty good response off my ad in Craigslist.com.

We closed using a known lender and the title company my wife works for.

I paid the closing costs for the buyer. They purchased a 30 year fixed loan and had good credit.

All in all, it cost me about 1200.00 in advertising, flyers, MLS listing etc.

I did lose approx 2% paying the buyer's costs, but I sold at asking price.

The bottom line is that I pocketed close to 26000.00 in unrealized real estate commissions and I most likely would have had to drop my price and still pay the closing costs had I gone that route.

Let them rot in hell.


Happy baby boomer in Glendale AZ.

Charlie In LA said...

I sold my home in Los Angeles for 305K in January 2004. I had offers from the first 2 people who looked and accepted one. The realtor handled both ends for 4% total. If it would have another realtor who was a buyer agent, it would have been 5%.

I had no complaints on this realtor he did a good job. The transaction was smooth and fast. Fees can be negoiated in some cases.

bickerer said...

...and I'm surprised Bush hasn't called the DOJ and gotten the kabash on enforcing anti-trust laws, as he probably thinks they're not laissez-faire, either).

I'm not sure what you're trying to say here Ben, but DEFINITELY yes.

This is a perfect example of where Bush likes to turn his back on the American people and side with big business (and this is a republican speaking). Doesn't even matter that the NAR supports Democrats 10/1 over Reps.

Bush has a stubborn streak like no other.

Like having that McClellan as press secretary. I can hear it now, "Mr President, you can't appoint someone who can barely speak as press secretary".

Bush: "Yes I can, it's done".


I'm a little off subject here, what were we talking about, housing?

Anonymous said...

North Americans get ripped off.

We paid 1.45% to sell our house in London. In Hong Kong you pay 1%.

But in North America they 'need' 6% to do a good job?

Well, the architect who designed the house didn't make 6% (because he only gets paid on the building and not on building + land).

So how is it that the Realtwhore needs more than the architect to do a good job?

Think about it. It's just a monopolized rip off.

Haggis

Anonymous said...

Realtor bashing. You can get legal information on the internet (not to mention NOLO press), so lawyers are now obsolete. WebMD made doctors obsolete. Ebay made car salesmen obsolete. Home Depot and the DIY network made contractors obsolete. Not really. Realtors will never be obsolete. Those who add value to a transaction will continue to be employed. Those who do not will starve. I actually think you'll see a weeding out of the idiotic clerks who just drive people around all day. To add value to a sale, you actually need to understand and communicate the complexity of a real estate transaction. Realtors who use the new technology to their advantage have the potential to become more efficient. Commissions always have been, and always will be negotiable. With a lot of realtors and few sales, commissions should go down. But they can also go back up if the situation reverses. If you want to do it yourself, go for it. Personally, I'd rather have someone who does 10-20 transactions a year helpgin me, than someone who does one transaction every 7-10 years (myself).

--Chet

Anonymous said...

LOL. Listen to the realtwhores in here in full spin mode, comparing themselves to doctors and lawyers. Well, I guess the car salesmen comparison was accurate. Those aren't needed either.

'I'll repeat what Michael, my ASM, told me about Caucasians . He said white people never come into the dealership. "They're all on the Internet trying to find out what our invoice price is. We never even get a shot at them. I hate it."'

Anonymous said...

Would you rather spend 6% and have an expert's advice in selling your house? Or would you rather sit on the market with a discount broker paying your monthly mortgage payment for 6 months? It's your choice.

Discount brokers and FSBO's don't make it in a down market.

Anonymous said...

Most of you complaining are perma-renters wanting to buy a house. Sorry for your misfortune. Housing prices are coming down, but you'll still not be able to buy. The interest rates will skyrocket and banks won't loan you money. Wages will fall along with prices. Tough luck, you should have moved out of state.

Natural Eyebrows said...

You can't argue with success, and Redfin appears to be successful. And I have been among the most skeptical that anyone could make discount brokerage work. We'll see how they do in a down market.

Their success may actually force commissions up for the people who go the full service route. Easy deals subsidize the hard deals. When all the easy deals get skimmed off the top, full service brokers may have to charge more for the hard deals.

Anonymous said...

When real estate was at a average of 100k I don't think people minded paying 6% or 3k to the selling agent and 3k to the buying agent . The selling and buying agents usually give a cut to the real estate company which could be as high as 1/2 of the 3% that they make .This would mean that each agent would get $1500 in pocket with the Company usually paying for the advertising costs on a 100k property sale .

Sometimes a Real Estate Company just sells office space to the real estate agent at a monthly fee and takes a lessor cut of the action .

When the real estate went sky high the commissions skyrocketed .30k for a average Ca. home of 500k for a commission was a little much based on hours spent and advertising and costs considered .

The RE agents and the Loan agents were making more money than deserved on the inflated property ,no question, especially because of the quick easy no-brainer way houses were selling during the high appreciation of homes from 2000 to 2006 .Easy money to be sure .

Also many real estate transactions were taking place during the boom making the realtors/lender agents even richer on volume of business . More agents were getting into the business trying to get a piece of the pie as it became a easy money get rich quick business , That volume of agents cut into the piece of the volume pie as time went by .

My point is now on the down-side real estate is going down so sellers don't have as much to work with to pay big commissions and sellers don't have the wealth effect ,waste money kind of feeling anymore . Paying a high commission can make the difference between selling you property and not selling your property if you have little equity and need to sell .

Sellers will just not be as willing to pay these fees and buyers will not care about the costs sellers have to sell a house because they will be looking for vlaue .As long as real estate is going up sellers feel they have the money to pay . Same with loans , as long as real estate is going up borrowers pulling out equity dont seem to piss and moan about costs to get a loan .

So while buyers and sellers need the services of realtors and loan agents they will not be willing to pay as much because of tigher margins and profits on selling a piece of real estate .

The public will take it out on realtors for real estate going down .Sellers will seek out cheaper ways of marketing homes including discount brokers .

Anonymous said...

"Most of you complaining are perma-renters wanting to buy a house. Sorry for your misfortune. Housing prices are coming down, but you'll still not be able to buy. The interest rates will skyrocket and banks won't loan you money. Wages will fall along with prices. Tough luck, you should have moved out of state."

LOL. Living off other people's money is all you homedebtors know. And then there are those of us who aren't losers and actually have our own. Tough concept, I know.

jt said...

NAR responds:

http://tinyurl.com/38s3yh