May. 16, 2007 - You Knew This Was Coming
Ok, everybody that watched 60 Minutes last Sunday raise your hands. That many of you, huh? I'm astonished.
Personally, if it wasn't for the fact that I knew they were going to do a hit piece on the established real estate industry I would never have watched it. Ever since the demise of Dan Rather which was brought about by the provably unfair and innaccurate story on The President's National Guard service, I have given up on 60 Minutes and CBS in general but this was going to hit pretty close to home and I wouldn't have missed it for the world. The only reason it took so long for me to get around to this "rebutal" is that I was so damn angry that I could not have kept a civil tongue. It's one thing to have a sharp, scathing tongue when one is pitching a good rant, but I couldn't get out of Southside, street fighting, trash talking, gutter mode and I did not want to offend anyone with profanity and name calling.
Right out of the starting gate Leslie Stahl, who by the way, really needs to comb her hair if she is going to continue misleading people on national television, makes a blanket statement that "traditional" real estate agents charge 6% commission and hold that number sacrosanct. Since I personally never use the word sacrosanct I did not really know what it meant. Don't get me wrong, I kind of knew what the "essence" of the word was, but I couldn't actually define it. To make sure I was not misunderstanding things I looked it up. It means "1. extremely sacred or inviolable. 2. regarded or treated as being above or beyond interference, criticism, etc".
Once I had an understanding of the true definition of the word I was outraged. The folks at 60 Minutes are telling bold face lies on national television. The Sherman Antitrust Act is a federal law that prohibits price fixing. Since REALTORS® are not above the law they must adhere to the law and that is why commissions are negotiable. Let me say it again, there is no such thing as a fixed or a standard commission rate. There may be agents who will not work for less than 6% and there may be real estate brokers who will not allow the agents in his or her office to take a listing at anything less than 6% but that is their personal decision and they have a right to make personal desicions like that. Here in my neck of the woods you mostly find people taking 5% commissions. The truth is that commission rates are set by whatever the market is willing to bare.
Then the piece went on to give Redfin, a kind of an on line brokerage, some pretty good exposure. I decided to look them up. The headline on there website says "Find, Buy and Sell Homes Online". Gee that sounds like fun. Just like Amazom.com or something only for houses. You know what, why don't I just give you a link to Redfin so you can see for yourselves. When you get to their site look for the following cool stuff. In their own words they are a flat fee lister, meaning that you are going to pay them $3000 up front to list your home in the MLS. They will give you some good advise on how to get your house ready to sell, you know, the same kind of information you can get off of my website for free. Right there on the front of their "sell" page they tout a "$3000 flat fee, 100% satisfaction guarantee: a typical customer saves over $12,000".
I sure am glad that they are not in Chicago yet, because they give you a 100% satisfaction guarantee on your $3000 which you pay up front. Or do they? Ah ha, no they really do not. If you hadn't clicked this far you would have never seen the words " Please note that we do not offer refunds just because your listing hasn't sold, which may be due to market forces, but only if you are unhappy with our representation of your listing". On second thought, maybe I should welcome them to Chicago. What would you like better, especially in a sluggish market like we are in now, their 100% satisfaction guarantee that you have to gamble $3,000 on, or my 100% satisfaction guarantee that says if I don't sell your house you simple don't pay me a dime. If you look around their site a little bit more you will see that I am actually going to do a lot more work for you as well, taking the burden off of your shoulders for marketing and showing and such, things which I probably have more experience at than you do anyway.
How about those buyers though. Redfin will actually rebate 2/3 of the commission they make back to them. That sounds like a dandy deal alright except for the fact that when the sellers begin to realize that the buyers of their homes are actually paying them 2% less than the purchase agreement states, thereby not really getting the price that they negotiated for, well I guess those sellers are not going to want to negotiate with Redfin buyers any more. Not only that, but since this 2% rebate is going to have to show on the HUD-1 (RESPA), aren't the lenders going to look at this as an unreasonable inducement to do business? That's against the law in some states. I don't want to hear anybody trying to tell me that it's no different than a seller contributing the buyers closing costs either, because it certainly is. The seller knows from the terms of the purchase agreement that they are contributing 2 or 3%, or whatever is agreed upon, back to the deal and it is coming from the sellers funds up front, not through the brokers back door.
Back to the 60 Minutes segment. Good old Leslie Stahl, who is looking kind of long in the tooth by the way, goes on to interview a "traditional" agent Deborah Arends. Now I have no way of knowing how much editing took place or how much Deborah knew about what was going to be asked, but I am going to send her a link to this post, and maybe if we are lucky she will post a comment on her side of the story. I did try to call her and I did leave her a message but I am sure she has better things to do than to talk to an almost famous real estate broker like me (especially since she is now almost famous herself), so I will just have to tell you what I saw. When asked what she tells people when they want here to work for less than 6% she replyes that maybe she is not the agent for them. You go girl, a very honest answer. I have been know to say the same thing and walk out of listing presentations for less. When asked about the rebate that Redfin boasts about giving back to the buyer (they clain to have rebated over $3,000,000 back) she looked kind of stunned and said she didn't know how to answer that. It looked to me like she didn't even know that that question was coming. It would have stunned me as well, because of the reasons I have previously stated. Most of us "traditional" (You know, I'm kind of beginning to wonder what exactly that means) REALTORS® would feel like we were betraying our sellers and confusing the lenders if we were giving kick backs. Isn't a rebate just a prettier name for a kick back? It's kind of like a dandolion being a prettier name for a weed. Anyhow, Deborah did a splendid job, considering she was being set up as a sacraficial lamb.
Then they had a funeral of sorts, a mourning session if you will, for a flat fee lister who claimed to be the first of the internet flat fee listers. Poor guy claims he was driven out of business by "traditional" real estate, who actually colludes to put nontraditionalists out of business. I would rather believe, and I am sure you would too, that he was put out of business the same way Rambler, DeSoto, Plymouth, Hugo, etc. was put out of business, by not being able to lift their legs high enough to produce with the big dogs. It's not even a David and Goliath story, look at me, I don't work for ERA, Century 21, Coldwell Banker, Re/Max or any of the other corporate franchise giants and I do ok. The fact is, if this guy had a listing somewhere that myself or my client could find, I would be glad to show it to a buyer client, even if he was only offering a 1% cooperative compensation. My duty to the client is to show them what they want to see, not what I am going to make the most money on. So as bad as I feel about this guy going belly up, I have to realistically think that it's because he had an inferior business plan and not because he was shunned by the real estate community. The truth be told, if I thought that there was a business model that was better than the one I am working, I would probably be working it. There just is no easier, softer way to do this job correctly. The consumer needs to realize that you get what you pay.
If nothing else it looked as if 60 MInutes was trying to actually hurt the real estate industry as it exists today by presenting a biased, one sided piece, which was designed to make anything other than a flat fee lister look like a member of the evil empire. If you saw the piece and you agree with my assessment, or if you have had a full service REALTOR® do a good job for you, please follow this link to CBS and give then a piece of your mind.
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