“60 Minutes,” an investigative television news program, tackled the issue of real estate commissions, discounters versus full-service companies, and industry competition in a segment that aired Sunday night — and the dust hasn’t yet settled.
Dozens of comments poured into the CBS Web site related to the segment, titled, “Chipping at Realtors’ Six Percent” — some praising the show for highlighting the price that consumers typically pay for real estate services and others condemning the news segment as slanted toward the perspective of discount firms and against those agents who tend to charge higher fees for service.
The real estate industry had been anticipating the airing of the real estate segment — the show’s producers had been pursuing the story for many months, and the National Association of Realtors sent a notice to all of its local Realtor associations to prepare them for what to expect in the content of the program.
Association officials met with the show’s representatives to discuss an antitrust lawsuit filed in 2005 by the U.S. Department of Justice and other issues, and the show briefly described the lawsuit, which relates to association-approved rules for the online display and sharing of property listings information.
Realtor magazine, a National Association of Realtors publication, today reported that the news show “misses the mark” with its real estate industry report, and the association is sending a letter to the network “demanding an opportunity to correct any errors and misrepresentations,” such as the characterization that the 6 percent commission is “sacrosanct.”
According to the magazine report, “The CBS show ’60 Minutes’ gave the National Association of Realtors the empty chair treatment in a May 13 segment that examined 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, but no one from NAR, even though NAR twice offered and prepared association spokespersons for interviews” with the segment’s correspondent.
“NAR expressed disappointment that CBS made the decision it would rather interview opponents and let them make unanswered — and inaccurate and unfair — accusations about Realtors and NAR policies. NAR staff spent nearly a year working with CBS, briefing producers on the issues involved. Yet, still the segment was full of major errors, NAR says.”
The news segment prominently featured Redfin, a real estate company that offers discounts in the commission rate — which traditionally has ranged from about 5 percent to 7 percent of a home’s selling price — by offering flat-fee services to sellers and commission refunds to its buyer clients.
The show concludes, “For Realtors, the 6 percent commission is sacrosanct. It’s remained in place, even as the price of homes has quadrupled over the past 25 years. But … things are beginning to change. What happened to travel agents, stock brokers and book sellers — the encroachment of the Internet — is beginning to affect real estate agents. And the sacred 6 percent is under assault from online discounters.”
Deborah Arends, a Realtor for RE/MAX Northwest Realtors who appeared for an on-camera interview in the “60 Minutes” segment, said today that the news segment “was obviously slanted in one direction — it did not give equal times to full-service versus the discount model.”
Arends said she spent about 10 hours over three days with the news program’s crew, and that was condensed to about two minutes on-air. She first met with Leslie Stahl, the “60 Minutes” correspondent who reported the segment, in January, and the latest filming of her working on the job was in April.
She said that while she was pleased with some aspects of the coverage, the value in hiring a full-service agent could have been better explained. “When you’re hiring a full-service agent you’re getting skill, you’re not just getting service.”
There will always be a segment of the population who bases their decisions on cost alone, she said. “There is a huge majority of the population that really wants somebody who’s professional and knowledgeable in handling the biggest transaction in their life.”
Also, Arends said that agents who charge more for their services than some discount companies can in some cases earn more money for their clients overall based on the selling price of their homes. “You can pay an agent very little and still end up losing money over paying a qualified agent 6 percent (commission),” she said.
About half of the money she makes in commissions is spent in marketing the home, she also said. Arends is the leader of a four-person real estate team that works in the Seattle area.
The response since the segment aired has been positive, she said, and she has received about 60 e-mails from agents across the country thanking her for sharing her views for the program, she said.
Redfin CEO Glenn Kelman, meanwhile, said he spent the night after the show at the office answering calls, and the phone lines “were all lit” this morning. There was some negative reaction to the segment from real estate professionals, he said, adding that the consumer response has been positive.
The show’s producers spent about two weeks in total time with Redfin, he said.
“We feel that (the show) was fair. ’60 Minutes’ exists to challenge money interests and big corporations so naturally they’re going to focus on the issue from a consumer’s perspective. We thought they had a balanced piece.”
As for the negative reaction by some real estate professionals, “Nobody ever feels that ’60 Minutes’ is going to tell the story as they would have told it,” he said, adding that some real estate professionals may never be satisfied with the media coverage that the industry receives.
While the news segment suggested that the 6 percent real estate commissions is somewhat set in stone, some real estate professionals who viewed the show retorted that commissions are negotiable and price-fixing is illegal. Kelman said, “There are some agents who will negotiate their commission and there are many who won’t.”
The show may be good for Redfin’s business — already the company has received requests to expand to other markets from consumers who saw the show, Kelman said.
While Kelman said in the news segment that the average agent processes eight deals a year and “we have an agent that can do that every week,” Kelman said that no Redfin agent consistently participates in that many transactions in a week.
Ellen Katzman, a Realtor for Prudential California Realty in Calabasas, Calif., said she believes the show “was very skewed.”
“I think if somebody who was inexperienced in the world of real estate watched it they would be at a great disadvantage because they wouldn’t understand what a real estate agent really does.
Also, Katzman says she earns her pay and has no regrets about the rate she charges for her services. The segment appeared to “paint our profession with a very broad brush as being overpaid and undermotivated,” though it failed to highlight what an agent does to earn his or her pay, she said.
“I’m very proud of what I do and I have no guilt at all about how much money I make. I earn it.” Katzman also said she was “surprised and very disappointed” by the show.
Meanwhile, Suzanne M. Watts, a real estate consultant and attorney who offers flat-fee real estate services in the Phoenix market, said she was happy to see “60 Minutes” take on the real estate industry’s commission issue. “I think it really is time for a change.”
While some homes have doubled in value in her market area, Watts said she doesn’t believe that real estate agents’ costs have doubled in providing service for those properties.
She said she also questions whether full-service Realtors who charge a commission of about 6 percent are providing a range of services that warrant the cost. “I understand how much work it takes to sell a house — I get it,” she said.
Randy Brown, an independent broker who works in the Denver metro area who previously participated in a “60 Minutes” segment related to the Columbine school shootings tragedy, said that the real estate segment “was ridiculous.”
While Brown said he is not opposed to discount brokerage companies, he said there is definitely a value in hiring an experienced real estate professional — and he believes the show overlooked this.
“Brokers earn their money because they know so much about the real estate business,” said Brown, who has worked in real estate for 28 years.
The term “discounter” can be misleading, he said, as he has often discounted his own services to help close a transaction for his clients though his company is not a typical real estate discount firm.
“Commissions are completely negotiated. In the old days maybe they were 7 percent or 6 percent but they aren’t anymore,” he said.
He said he questions whether consumers are well served by business models that favor technology over personal interaction with clients.
The “60 Minutes” segment, he said, “devalued an entire profession” and appears “one-sided.”
The 6 percent commission is definitely not locked in, as the news segment seemed to suggest, said Rick Pezzner, broker-owner for Laptop Real Estate, which operates in the Kirkland, Wash., area. Pezzner said his company offers different service options and a variable fee structure.
“In this business we sign in as (having) a fiduciary responsibility to either the buyer or seller. That’s where they should stand. The consumer wants options on how they can best get into a property or save money,” Pezzner said.