60 Minutes Takes A Shot At Realtor Commission

60 minutes recently ran a piece about how Realtors have a set 6% commission and how discount online brokerages save sellers money. If you think about it, is this any different than an owner that decides to sell their home themselves? The online brokerages are offering a form of advertising to the sellers of real estate for a fee. Some online brokerages offer lock boxes, signs and fliers, but as with most "on-line" services, you lose a lot of the hands on support. Algorithms and programs take the place of an actual market analysis for pricing. One needs only to look at how a site such as Zillow averages a number of homes in a given area regardless of builder, sub-division or upgrades. In a market such as ours, where prices vary greatly by subdivision, the money saved on "doing it yourself" may not be such a bargain.

The crux of the 60 minutes piece revolved around a "set commission", apparently they didn't realize that there is no such thing as a "set commission". Commissions by law are negotiable and can not be set as a standard. Reducing a commission has become part of doing business in the market today. The CBS story didn't mention the fact that the commissions and Realtor income have been declining steadily since 2005. This means only one thing, full service Realtors have been discounting their listings and providing their services for less money. Discount and online brokerages make up less than 10% of the National Association of Realtors membership, yet commissions have decreased 25% over the last ten years. It would be impossible for a segment that small to have effectively reduced commissions that much. Again, the concept of a discounted commission structure is nothing new, but it was an excellent marketing technique to convince consumers that full time Realtors don't earn their keep, as well as a good angle for a bit of a smear piece by 60 Minutes.

Paying a commission or a flat fee for listing services is obviously up to you. Just like making improvements to your home, you can build a patio cover yourself if you have the know how, or you can even get the information on how to build one. The difference is that if you hire a licensed contractor, you wont be swinging the hammer, you'll have someone on-site that has built hundreds of patio covers before and that most likely will be able to save you money on materials and in time. Most importantly you'll have someone involved that understands the ordinances and codes and how to get the proper permits. Using a full service Realtor isn't that different than using a licensed contractor. A full service Realtor doesn't just get clients from the internet, though the internet has become a wonderful tool for marketing properties to consumers, but they work in the communities in which they sell homes. In other words, they know if your home is in a sub-division that is worth more than a house of the same square footage across the street. The Realtor puts together a proven multi faceted marketing plan to sell your house, that include a lot more than a web site and a sign in the yard. Unfortunately the internet is not the be all and end all of advertising. It is an incredible informational tool that can help shape decisions, but as a marketing tool it is only one facet of available marketing avenues.

I have routinely saved my clients money in more ways than offering a discounted commission. I have seen things that seem harmless on the surface in an offer, that equate to loan fraud and could have cost my client money from fines as well as possible criminal charges. Catching a mistake by a home inspector because I'm on-site during an inspection such as, "The HVAC system is broken and needs to be replaced", this was fixed when I showed the inspector to the vacation switch in the off position. A silly mistake that would have cost at least a service call fee or worse the sale of the house from the buyer assuming the house was in bad shape. I have been able to dispute low appraisals by supplying comparable homes the appraiser missed, as well as showing differences in subject properties based on upgrades. Mistakes are even made at closing, because the contract wasn't followed exactly. These are all examples of what having a Full Service Realtor brings to the table, and the great thing is that there is no "Set commission". You can negotiate what you think is fair and get an on-site, full service Realtor that doesn't just rely on the internet to sell your home.

Another thing the CBS story failed to highlight was the cost and liability a Realtor takes on when taking a listing. The internet marketing, the flier creation and production, the newspaper advertising, the postcards and direct mail advertising as well as the cost for the print advertising all come out of the Realtors pocket BEFORE the house is sold and the Realtor receives a commission. Additionally, if a buyer that does not have a Realtor wants to view the home, the listing agent has the ability to pre-qualify the buyer to ensure the individual isn't just casing the joint. Also, a Realtor can be liable for the cost of a home should there be litigation involved in which the Realtor is found to have been at fault.

What I tell my clients is that in hiring me, you get expert on-site advice, proven marketing and advertising to sell your home in the quickest way possible, many years of experience in selling real estate and someone that has a vested interest in getting you the most money for your home.

The 60 Minutes piece also tried to make it sound like there was a conspiracy against on-line or discount brokerages. Real estate is a competitive business, but conspiring to put another brokerage out of business is ridiculous.

For a response to this I will quote directly from Blanche Evens of the Realty Times she refers to Leslie Stahl in her editorial as well as Redfin online brokerage and erealty online brokerage.

Redfin makes a strong case that other brokers and the real estate associations are trying to put the company out of business. As proof, Stahl dredges up Steve DelBianco, who helped co-found eRealty in 1999.

"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 website," said the CBS report.

"They sued us for breaking the rule they created to shut down eRealty's ability to compete," Delbianco whined to Stahl. Commissions were "the only objection," DelBianco told Stahl. "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's venture capital dried up; the company lost $33 million and went belly up, sums DelBianco.

Is this revisionist history? Realty Times remembers the story a little differently.
What really happened was that eRealty took the Austin MLS feed without permission and put it on its website as a lead generator. While technology allowed them to do so, they didn't have permission from other brokers, which is why they got sued. The suit was settled out of court and eRealty immediately made a deal with Yahoo! to give it MLS listings in exchange for being the exclusive broker. Now, other brokers don't share their listings to give others a competitive advantage; they share to get the listings sold, which was NOT eRealty's first agenda. Their agenda was to create a marketing advantage using other brokers' listings as lead generators.
eRealty didn't go belly-up, but was sold to Prudential. Their CEO Russell Capper works for Prudential today.

Why didn't Stahl do a little fact-checking to find out if DelBianco were telling the truth? Anyone at the Austin Board of Realtors or the Austin MLS would have been happy to explain their side of it, except for a little problem -- they are under a gag order by the court, the same one that eRealty and its principals are under - except when they talk to CBS.

Here's the thing, if you want to try selling your home yourself, then by all means give it a shot.

If you want a discounted listing, then don't feel like you can't ask for one. There is no such thing as a "Set commission"!!!