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60 Minutes & The 6-Percent Solution
Last night, 60 Minutes ran a story on the state of real estate service and commissions…and one company’s efforts to upset the apple cart.
The story highlighted the efforts on an Internet startup company, Redfin, that is currently operating in Seattle, Boston, LA, San Diego and San Francisco. Redfin is a pure online, discount real estate brokerage, providing web-based access to home searches….and making offers. No agent needed for home tours or other pre-offer services. Redfin’s big claim to fame is that their buyers’ agent service refunds 2/3 of their sale commission back to you.
60 Minutes portrayed Redfin’s efforts as similar to Amazon, Expedia, and ETrade’s transformations of their respective industries. In particular, the program attacked the ’sacrosanct 6%’ commission and the efforts of full-service real estate agents.
It was a great PR moment for the company and its outspoken CEO, but as a ‘consumer protection’ story, 60 Minutes was a little light and free with some facts. (See real estate agent responses at ActiveRain.)
A few personal thoughts:
- The “sacrosanct” 6% commission figure “on every house they sell” comment is misleading, to say the least. The national average is 5.2%. And you have brokers in Portland that work for flat rate, 1% seller fees, and up to 6% (or more) for ‘full service’. The local consumer has many choices, ranging from price-conscious to service-conscious offerings.
- Oregon residents: Before you ask your buyer’s agent to refund 2/3 of their sales commission back to you, be aware that such rebates are currently illegal here. For better or worse, Redfin won’t be coming to Portland soon.
- Are homes considered a commodity product like airline tickets, books, and stocks? I continue to hear that real estate is the next industry to be transformed by Internet-based business models, but haven’t met anyone that did not want to visit, inspect, and thoroughly consider their next home or investment property with a knowledgeable agent. See Kris Berg’s excellent post at Bloodhound Blog.
- I found it interesting throughout the interviews that Redfin agents (and CEO) refer to their real estate activities as ‘deals’? My clients don’t consider themselves or the purchase/sale of their home as ‘deals’.
Redfin and others with similar business models will be appreciated by the tech-savvy, independent, and most of all, the cost-conscious and experienced homebuyer. But the majority of consumers will probably prefer something more ‘traditional’–a hands-on level of service offered by knowledgeable, engaged agents out in the market, not behind computer screens.
Here is the 60 Minutes video.
For another Oregon agent opinion, visit ProseCity.
[tags] 60 Minutes, real estate, commissions, homes, houses, buyers, sellers, NAR, Redfin [/tags]
Image by fernando_graphicos. Used under Creative Commons license.
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8 Responses to “60 Minutes & The 6-Percent Solution”
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There are many innovative companies that are using technology to cut costs and share those savings with consumers. Check out http://BetterHomeSelling.com & http://BetterHomeBuying.com
No offense, but I see little in the way of innovation or technology involved. Just like many discount offerings….nothing new.
Thanks for the well-written article. This segment has sparked a lot of response throughout to the blogosphere. Thanks for including a link to the ActiveRain “60 Minutes — “Et tu, Brutae?” post.
Ron; I’ve never understood the real estate commission structure. It’s all wrong. The commission by definition puts the realtor’s interest and the seller’s interest at cross purposes. The realtor gets “x” percent, and it almost always happy push for a quick sale and a lower price, where me the seller is usually interested in maximizing the price.
I’d love to hire a realtor and pay them 25%, 35% or even 40% commission on the part of the sale where they are actually adding value. In other words, pay a much larger percentage on every dollar above a negotiated baseline. “I could sell the house myself for $xxxx”. I’ll give you 40% of every dollar above that amount plus a base fee for expenses.”
This would line of the incentives of the real estate person much more closely with mine.
Why isn’t anyone doing something like this?
[...] Read more… [...]
[...] The only thing disappointing with this release is that it reminds me that Redfin won’t be coming to Portland any time soon. [...]
Give me a break, this site is a bunch of real estate agents whining. The selling of a house is easy, as is buying one. I have bought and sold 4 houses on my own. It is a “deal”.
Real estate is the easiest job in the entire universe. Sure, people have to hustle it out right now because people aren’t buying, and inventory is just sitting, but the actual job is simple.
Kudos to this guy, and his company.