I watched Sunday night’s 60 Minutes segment on the real estate industry and blanched when I heard reporter Leslie Stahl guarantee that Realtors get “six percent on every house they sell…it is sacrosanct.”
Leslie Stahl dared to tread where no Realtor would ever step, because commissions are negotiable and anything to the contrary would amount to price fixing. If I go through the San Diego MLS, I will see commissions ranging from $250.00 to $10,000.00, and from 2 percent to 8 percent of the sales price. It is as far from being “fixed” or sacrosanct as home pricing itself.
60 Minutes allowed Redfin CEO Glenn Kelman to control the show, with back-up chorus from the former CEO of the now-defunct e-Realty. Their premise? Real estate transactions can be handled online, just like a hotel or airline reservation, and a desk-bound agent should be able to handle 8 transactions a week. In fact, Kelman confessed that he had hired an agent who only put five hours into a home transaction she had completed as a full service agent. He further stated that real estate “usually (has a) 3 percent sales commission.
Uh oh.
Response from the real estate industry has only begun to emerge. This letter to hundreds of Windermere agents and staff from Geoff Wood, CEO of the West Coast’s upscale Windermere Real Estate (with 70 percent market share in Seattle), represents the feelings of many and reveals much:
Windermere Agents, Managers, Owners, Staff, Services
From: Geoff Wood, CEO, Windermere Services Company
Date: May 15, 2007
On Sunday May 13th, many of you may have seen that 60 Minutes aired a segment about the impact of online discount brokerages on the traditional real estate industry entitled “Chipping Away at 6%”. The focus was on Redfin, a Seattle-based online real estate broker. An agent from Re/Max represented the full service side of the equation.
When planning for this segment began last December, CBS asked Windermere to participate. We diligently sought out a handful of seasoned and articulate Windermere professionals and presented one agent to Leslie Stahl’s team. That representative was rejected and our feeling was that the agent did not provide the desired spin for their story. As it became clear the story’s direction was very one-sided and becoming a promotional piece for Redfin, we declined to participate. Other major Seattle real estate companies declined participation for similar reasons.
As the 60 Minutes segment attempted to predict the demise of the traditional real estate agent, I’ve never felt more strongly in our position as a full service company. Comparing the discount broker’s use of the internet in a real estate transaction to changes in the book, travel, stock and diamond industries cements our ardent belief in Windermere’s approach to the full service solution. Windermere competes on extraordinary service, fees are secondary. Discount brokers compete on price and services are secondary. The battle for discount mediocrity has been waged in our industry for many years while at Windermere we’ve always strived to take the transaction to another level. Windermere will continue to be an industry leader in new technologies and new processes to streamline the real estate transaction. Our success is predicated on the incredible knowledge and experience our agents provide for their clients. That success is built upon the notion that our agents are counselors, hand-holders, coaches and educators for the vast majority of people who realize that a home transaction is an expensive and complicated financial proposition.
Attached (below) is an article that will appear in the Puget Sound Business Journal that has some excellent talking points in support of our full service value proposition. Even more important is our current branding approach. Our view remains that we are simply in a different business than the online discount brokers. We are in the experience business.
Note 04/24/2018: I have lost that memo, but much of this information is still valid. Redfin, however, has integrated inself much more into the real estate community and has changed its commission structure somewhat–out of economic necessity.
Roberta, thanks for posting Windermere’s response- it is a great representation of the real argument that there is more than one Real Estate model, in fact with 1.3 million Realtors nationwide, (and as TREG asserts on Realtor Wives yesterday)there are ONE POINT THREE MILLION business models. Even within a single brokerage, Realtors (aka independent contractors) execute their personal marketing differently from the moment they shake hands with a new person to the day they attend that person’s housewarming party.
The business theme that most RE bloggers follow is that of full service and I agree that it is the best model for consumers- who wants a call center to “handle” the biggest asset in their portfolio?
There are many alternative real estate services that use technology to cut costs and share those savings with their clients. You’ll find many at http://BetterHomeBuying.com & http://BetterHomeSelling.com
Where’s the attachment?
ARW: What you say is true. We operate on a different business model that agents on either side of our office–and we are all with the same company.
Richard: You help to prove the point about competing models.
Linda: Uh oh….
On the Better Homes model where it states that “you the seller don’t have to pay the other agent, you can negotiate directly with a buyer” Well, I say, “Buyer Beware”. Where is the seller getting all the right disclosures and unless you’ve done this a dozen or so times, the buyer might be at a disadvantage. The question I always think about is what happens if something goes wrong? It’s not uncommon. I remember once at at title company function a discount broker talking about how the consumer was getting hoses by the full service broker. The subject came up about errors and omission insurance. He said and I quote “I don’t have any” Good luck if something goes wrong and the lawyers are waiting.
Unfortunately, these individuals feel that they can take a “Wal-Mart approach” to handling the single biggest investment a person has in their financial portfolio. Glad to see the swift response by some of the industries most respected players.
Next thing you know they’ll have the audacity to suggest self-check-in at Capella (West Paces Hotels) or Ritz-Carlton and interview someone with Holiday Inn to support the idea!
Dave: I cannot imagine a seller or buyer of real estate being represented by someone who had no errors and omissions insurance. The E&O premiums may be expensive, but provide enormous protection for our real estate clients.
Tony: Your analogies aren’t far removed! But if someone wants WalMart representation for real estate, that is a personal choice. It’s the investors in Redfin that may end up losing the most, though. A very recent example would be i-Pay One, who just closed their doors. Redfin presence in San Diego in miniscule. Only one sale so far and their single agent appears to be working out of his home.
They arrived just a bit too late. The days of the discounter were over when the market tanked. Nowadays you need access to a network that only an agent can provide. Otherwise you’re just getting people goofing off on the internet. Real Estate Finance