Is 6% sacrosanct?

Posted on May 14, 2007 by grim

From 60 Minutes:

Hi-Tech Real Estate Moves In (Video)

Realtors’ sacrosanct commission rates of 6 percent may be in danger due to emerging online competition from Internet real estate sellers and buyers.

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3 Responses to Is 6% sacrosanct?

  1. James Bednar says:
    May 14, 2007 at 6:06 am

    From CBS News:

    Realtors’ Commission Fees Are Under Assault

    Even with today’s housing slump, real estate agents will pull in about $60 billion this year. And the reason is, as any homeowner knows, they charge a six percent commission on the price of every house they sell. So, for instance, a home that goes for a half a million dollars will net agents $30,000 right off the top.

    For realtors, the six percent commission is sacrosanct. It’s remained in place, even as the price of homes has quadrupled over the past 25 years.

    But as correspondent Lesley Stahl reports, 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 six percent is under assault from online discounters.
    …
    “Real estate, by far, is the most screwed up industry in America. And we feel like things that Amazon or eBay or Yahoo have done of other industries, we can do for the real estate industry.” – Glenn Kelman

  2. chicagofinance says:
    May 14, 2007 at 11:40 am

    Ultimately, this argument cuts both ways, and I actually think that 60 Minutes presented a very biased piece. It was run to try and create outrage, when in reality [not realty :)] this situation is a mere natural evolution. If this industry was such a ripoff, then you would find scores of wealthy realtors everywhere. In fact, this condition does not exist.

    The savings is also overstated in my opinion, because you cannot assume that using this service provides a different NET NET ex-post result [supports my BIASED accusation].

    I also think that the “refund” prohibition in Oregon is reasonable, because, as we are well aware, such a policy would taint selling prices. Further, why REFUND, just charge 1%. Something smells in there…..where there is smoke.

    I don’t make these comments blindly. I worked on the business model of a prime brokerage platform, and understand the implications of margin compression and disintermediation on an industry.

  3. LaCohiba says:
    May 15, 2007 at 8:26 am

    My (major broker) volunteered to take 4% this year while pitching the brokerage. House was sold after 2 months this year.

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