Redfin Real Estate fined days after appearing on 60 minutes segment

By now you might have heard about the controversial 60 Minutes segment that aired this past Sunday that examined how online real estate brokerages are impacting the real estate industry. It turns out Redfin, one of the companies that was interviewed for the segment, was fined $50,000 big ones for violating its local MLS rules. Redfin claims they were not trying to “stir the pot”. I think they were trying to stir the pot. IJS

Realogy's response to 60 minutes segment

This is a letter written to one of the CBS producers from the President of Realogy, Alex Periello. Which so happens to be the parent company of Coldwell Banker Dallas-Ft. Worth. Thought it was well put. Basically it says the consumers will decide which business models are successful and which are not. Coldwell Banker has been around since 1906. So I’m not too worried.

Dear Mr. Fager:
Your story on the real estate industry that aired on May 13th had more holes than a leaky roof.
Putting aside the inaccuracies regarding "sacrosanct" commission rates, lack of industry oversight and state governments conspiring to stifle competition, the segment grossly oversimplified the complexity of buying and selling a property.
Real estate brokerage is a performance-based industry. Clearly, not all real estate companies are alike. Results will vary dramatically based on a variety of factors, including the experience and track record of the professional you select. Picking an agent to represent you based solely on discount, rebate or other cash back scheme may seem like a good idea at first glance, but not always at the closing table when all is said and done.
The bottom line is that consumers have ample choice when deciding which real estate company and business model they prefer to represent them in a transaction. Competition is good for the consumer and the industry and is the basis of our free market economy. At the end of the day, the companies that offer the best value proposition to home buyers and sellers will prosper.
Respectfully,
Alex Perriello
President & CEO
Realogy Franchise Group

We have a new real estate record!

7037 Vassar Avenue closed May 14^th with an undisclosed sales price. Of course. Ginger Nobles of Briggs-Freeman brought the buyer. I want to see that commission check. Cha-ching! This is certainly Dallas’ most expensive sale EVER according to North Texas Real Estate Information Systems. The next 2 most expensive sales in the last 5 years are pretty impressive too. But not anywhere close to this one! Anyone know the scoop on the buyer??

Stupid seller makes $6,000 mistake

True story that happened a few days ago. Some past clients and good friends of mine called me because they wanted to purchase an investment property in their neighborhood that had just been listed with this discount brokerage. They asked if I would simply draw up the paperwork for them to make sure the contract was written correctly but not to ask for a commission so that the offer will look more attractive to the seller (they would virtually save 3%). Being good friends and past clients I had no problem doing this so I typed up the contract for them and they submitted the offer. My client’s informed me a day or so later the sellers accepted an offer from a builder who was requesting a commission at the same exact price my clients had offered! Then I received this email correspondence in which my clients are explaining to the seller they really just accepted a lower offer. Painful.

Buyer/my clients: “Well congrats on selling your home so quickly. I did want to mention that even though I had a broker draw up the offer contract, if you take a look at the broker section of the contract, our broker was not seeking commission from the $217K offer.”

Seller: “ouch! double ouch! i did look through the contract but didn't notice that part of it -- i guess i just cued on what you and i had discussed and assumed he would want the commission. i thought i was making the best business decision... but perhaps it was not.”

Yeah. A $6,000 bad decision. The seller’s REALTOR® probably never even saw the contract although I can’t blame the REALTOR® completely. This seller wanted to save some money on their commission so they exercised their right to hire a REALTOR® of their choosing whose website states, “We have saved our "smartsellers" over SEVEN MILLION DOLLARS in needless real estate fees.” I’d be more interested in how much money they have LOST for their “smartsellers”.

Discount Brokers

The CBS show 60 minutes aired a piece Sunday evening that is certainly causing a stir within the real estate community. But first let me clear up something that absolutely gets under my skin. The word REALTOR® is pronounced ‘REAL-tor’ NOT ‘Real-a-ter’. Tell your friends. Furthermore, a REALTOR® is someone who is a member of the National Association of REALTORS®. REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent”. So now that we have cleared that up. I did not watch the show but feel inclined to throw in my two cents based on the flurry of blogs and emails I have read regarding the show. The CBS segment led by Lesley Stahl was supposed to examine the impact of online brokerages on the real estate industry. The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin. Both of these companies are flat fee brokerages which are more commonly known as “discount brokers”. A discount brokerage’s philosophy is to give the real estate consumer full service at a discounted price. On the program they stated the 6% broker commission is “sacrosanct” among REALTORS® and the NAR feels threatened by these new online brokerage business models. They feel the NAR is pressuring the public to pay the full 6% commissions and is at the same time trying to force these online brokerage businesses out of the real estate industry thus limiting the consumer’s choices. Interesting that the Dept. of Justice and Federal Trade Commission released this report showing a 5.02% commission nationwide and still said commissions have been relatively inflexible. Leslie Stahl conveniently did not ask the National Association of REALTORS® to be a part of the program. NAR is America’s largest trade organization with over 1.3 million members. There are 2 main reasons for this.

1) NAR has consistently pursued minimum service laws for real estate agents across the country. Eight states, including Texas, have "minimum service laws" that require REALTORS® to provide a minimum level of service for their clients. i.e. If your home is listed with a REALTOR® all negotiations must go through your listing broker as it is unlawful for the seller to negotiate directly with the buyer’s agent. The discount brokerages certainly did not cheer when Gov. Perry passed this bill in 2005. Can you feel the love from this discount broker’s website?

2) Real estate commissions are 100% negotiable (again, look at the DOJ/FTC report). People have a plethora of choices when it comes to listing their home. These discount broker business models began popping up all over the country 3 to 5 years ago so I don’t understand the attack on commissions. Here in Dallas if you want to list your home in the MLS and get it on Realtor.com then go here. For $299 (plus the buyer’s agent commission) you’ll only have 1 picture and it doesn’t come with a lock box or a sign. Or you can go to this brokerage and for as little as $495 (plus the buyer’s agent commission) you can get your home in the MLS and a “for sale” sign but no Realtor.com presence.

So if I listed my home for $200,000 in the MLS for $495 and offered a 3% commission to the buyer’s agent I would save $5,505. But I would have to meet every showing since there is no key box. And with only 1 picture on the internet people are passing right by it in their nightly internet searches. Those looking for homes on Realtor.com expect multiple photos so when a property only has 1 photo, chances are they’ve already moved on to one of the other 68 listings with multiple photos. And with no sign in the yard weekend drivers casing the neighborhood for new listings have no idea it is on the market. One can only assume a home listed this way will result in many months on the market. When you calculate your monthly mortgage, taxes, etc. the $5,505 you saved by listing with a discount brokerage doesn’t seem like a savings anymore after 5 months on the market. Check out this listing. $2.9 million with no pictures and a poor description. This isn’t service but it’s what the consumer paid for. Have you ever heard of the old phrase, “You get what you pay for?” However we’re not talking about the discount tile guys you called in the Yellow pages to retile your bathroom for $500, did a terrible job then spent an additional $1,500 having it done right. We’re talking about what is most likely your largest financial asset EVER. So although I don’t understand why a person who obviously has the business sense to own a $2.9 million home would want to try to sell his home without pictures and a limited amount of service, I do understand it is his choice to do so. Click here for a true story and a perfect example how a discount broker can actually lose you money.

Redonkulous!

The U.S. Federal Trade Commission and U.S. Department of Justice just released a "Competition in the Real Estate Brokerage Industry" report that calls for a repeal of real estate laws, rules and regulations that limit choices for consumers, limit competition for new brokerage models and don't appear to provide any justifiable benefits for consumers. The report also suggests that industry commission rates have been relatively inflexible and calls for an in-depth study of commission rates and fees.

(Written with sarcasm) I can certainly see why! The commission fees in 1991 were $9,389. In 2006 they were a whopping $11,549! And when that 5.02% commission is split between 2 cooperating brokers that is a mind boggling $1,080 raise for each broker after 15 years. This is an outrage and real estate agents certainly do not deserve such a lucrative increase in income. It is very clear why our federal tax dollars should be spent on such an in depth - and expensive - study. Kudos to you DOJ & FTC. Kudos.

What's behind door number three? A dead body

There are so many things wrong with this story I don't even know where to begin. Ok I'll give it a shot:

A Janesville [Wisconsin] real estate agent can't believe she didn't realize that a form on the bed at a house she showed Monday night was a woman who apparently had been dead for two weeks."I've smelled death. I know what death smells like," she said. "I can't believe my sinuses were that bad."

What??? Who says that??? Then the agent had to be coerced to "call someone" so naturally she calls - no not the police - but the listing agent. Wait. It gets better. The Realtor's client was the one who eventually called the police hours after spotting the corpse. So did they make an offer or what?

Mark Cuban gets deep

Cuban gives us his take - albeit not a new one - on today's online society and how our memories and past experiences are constantly being recorded and documented which may actually a good thing.

Lead: "You are what your search results return. We are living in an age where Life is an Open Book Test. Like the open book test in school where you just needed to know where to look to find an answer, today everything we need or might want to know is presumed to be a Search Engine Query away."

Thought provoking? Not really. Our reality? Yup.