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The Real Estate blogosphere is busy buzzing about the 60 Minutes piece on the 6% commission and Redfin’s assault on the commission’s of Realtors.
I was unable to catch the full piece, but saw the 13 minute clip up on 60 Minutes’ web site. Here is my brief summation of the piece:
- Realtors are way over paid the majority of the time they sell your home. While an agent typically doesn’t get 6%, they usually get 3%. That is usually too much for what they do. They should be paid less. Home prices have skyrocketed, commissions should come down.
- Redfin isn’t any better than any other real estate sales office. First, if they are taking the full 3% buyer’s commission and refunding it to the buyer they are still hosing the seller of the house. So they have no problem ripping off the home seller for the full 3% simply because they aren’t a Redfin customer? Doesn’t sound very much like the "change the industry" bravado coming out of Redfin CEO Glenn Kelman’s mouth. It sounds like a rebate, which is fine, but its not changing anything.
- As with anything, there are service models for everyone’s needs. It is difficult to compare a large purchase to a small purchase (i.e. houses to books). It is a little easier to compare a large purchase to other large purchase (i.e. houses to cars). Some people want to pay more for personalized service and an upscale experience. Some people want to save money and get the best price possible. Mercedes seems to be doing just fine thank you, and Saturn isn’t doing too shabby either. There is room for both business models.
- Realtor’s shouldn’t get so defensive about their 3% commission. They shouldn’t defend it like a birth rite - they should just go out and provide knock-your-socks-off service that doesn’t make any one question how much they charge. Do you think the people at Mercedes get grilled over price? Do you think Nordstrom gets grilled? I don’t think so. And you never hear them defending their prices. You just hear them talk about the value they deliver. Realtors should take a clue from them - stop defending - start wowing.
Personally I like Greg Swann’s response over at Bloodhound (where I am a contributor, he owns the site, I don’t get paid to write there) to the issue. His position? The home buying process is broken, it needs to be fixed, Redfin isn’t fixing it, the best way to fix it is to separate the buyer commission from the seller commission. I think, in short, he is right.
