Thursday, May 17, 2007

60 Minutes - debunked.

Under all is the land. Sounds simple enough.. but a very powerful statement. It is the preamble to the Realtor Code of Ethics. Land. Its right up there with oxygen, nutrition and hydration. After all, we have to live somewhere don't we? I would imagine there are some happy homeless people but have you ever met one? What the heck is in my craw now you may ask. It is the assault on Realtors and professional real estate representation. "Sixty minutes" latest hit piece last Sunday targets the Professional Realtor. Realtors are going the way of the dinosaurs, the video stores, retail book stores and travel agents, they claim. The role of the Realtor will soon dwindle to nothing, and be replaced by on-line transactions. Now we all know that 60 minutes is not known for their fair and unbiased approach to a topic. Dan Rather might disagree, but he isn't around anymore. The Sixty Minutes "News" team grabs hold of a subject just like a pitbull, and doesn't let go, completely oblivious to outside influence. Representatives from the National Association of Realtors colluded with 60 Minutes for over a year while this hit piece was underway. Unfortunately, the NAR position did not conform with the purpose-driven agenda of CBS, and no statements from NAR officials aired.

Leslie Stahl, the correspondant, was just appalled that Realtors charge on the average 6% of the homes sales price. (No mention of her income, by the way). Outrageous, they proclaimed. But had they presented a fair and balanced approach they would have also reported that Realtors, by virtue of the fact they are trained professionals, more often net the Seller far more than they would have netted without representation. Sixty Minutes failed to mention the duties, risks and responsibilities the Realtor undertakes to protect their sellers from future liability and inappropriate pricing.

Furthermore, comparing the sale of real estate to the sale of videos and vacations is idiocy. Last week, one of my Netflix DVD selections arrived and it didn't work. You know what happened? I went to Blockbuster and got another one. And one time I booked an international flight on-line and realized too late that the name I used to book the flight didn't match my passport. You know what happened? I re-booked it at a cost of an additional $99.00. Oh, and how about the time I ordered a book through and when it arrived there was a huge tear in the cover and it took me over a month to process a refund. Bottom line: there are a lot of people out there who won't trust the internet on a big, life-changing purchase. Small stuff? Perhaps. To further this point google "Paypal problems". Paypal is the largest on-line banking institution with billions of dollars of assetts worldwide.

I have been selling homes for nearly twenty years now. Not a day goes by that I don't learn something new and significant. Title issues, financing, surveys, emotions, environmental concerns, legal and liability issues all play a pivotal role in what we deal with as professionals everyday. Realtors are extensively trained in all of these areas in an effort to reduce the practically limitless exposure to harm and liability that is inherant in every real estate transaction. The inexperienced and unrepresented seller is in a perilous position on the learning curve. Not only in terms of potential lost profits but in risks that might not be realized until years later.

Still so sure that selling your own home is a piece of cake? What do I hear? Ah, your doorbell is ringing. A stranger wants to see your house. He has a gang symbol on. Should you let him in? What if he is a minority with a gang symbol? Do you still have to let him in? Make sure you don't violate any fair housing laws as you are making your decision and good luck.

I've gotta close. Gotta keep my appointment for an on-line tooth extraction.


Chef Kevin said...

Guess they got tired of ripping on the restaurant business and needed a new target :)

Diane Vespa said...

The problem is that they are doing the public a lot more harm than good by irresponsibly reporting that selling a home is a much simpler matter than it really is.

Jennifer said...

I agree. Buying a house is most people's biggest investment, in terms of dollars and in terms of quality of life. I can't imagine going through the process without any guidance.

Anonymous said...

I have used Realtors for the three homes I have bought, and the two I have sold. In general, I believe they provide an important service, and I doubt I would try to do it on my own.

I also didn't see the 60 minutes piece, so I won't comment on it.

But I will say the 6% commission issue is, at best, inconsistent, and at worst OUTRAGEOUS!!! It also contributes to the murder of our neighborhoods.

Here's what I mean... when I bought my first house in Peoria, is cost $65,000 (in 1995 dollars), and the Realtor got a 6% commission. When I bought my latest house for $235,000 my Realtor got 6%. Now tell me, did Realtor #1 work any less hard than Realtor #2. No. As a mater of fact, she likely had to work much harder to sell a house south of Forrest Hill.

The percentage commission is flawed because Realtors want to list $400,000 homes, and will avoid $40,000 homes like the plague. And don't give me that BS that buyers of higher-end homes are persnickity and demand more from Realtors than $40,000 home buyers.

Realtors should be compensated fairly for their time. But price of house should have very little to no impact on how much they make from the transaction. I would love to see a flatter fee schedule for Realtors instead of a straight commission.

Maybe Peoria area Realtors would be less likely to steer clients out of the older parts of the city into higher priced homes if the commission was the same on Hanssler Place as it is on Talus Court.

Diane Vespa said...

Interesting point of view...and I thank you for it. The problem is that if a Realtor charged a "flat fee" for the sale of every home, the owner of the $60K home probably couldn't afford it. Realtors have significant expenses with their board and MLS, their franchise affiliation, their advertising, office and transportation expenses. Oh, and did I mention liability insurance? If they averaged their salary and expenses equally across the board... the seller in the lower priced home would pay a disproportionate share. Pretty much the same reason why a "flat tax" is so unpopular. There are flat fee Realtors out there... you just have to find them, interview them, compare what they offer to the full service Realtor, and make your decision.

Anonymous said...

Ms. Vespa:

I agree that Realtors provide a valuable service, and need to be compensated for their time. I don't believe Realtors are overpaid. I just think something that was less commission based would be in order.

Right now, it benefits a Realtor for a buyer to overpay for a house. Granted, the laws of supply and demand will rule in the long run, and prices go up only if someone is willing to pay for it.

Maybe a flat fee isn't the answer. Maybe a tiered structure would be more appropriate.

Maybe what really needs to happen is buyers and sellers need to become more educated. How many people interview a few Realtors before choosing one? I know I didn't the first couple times I used one I didn't.

I will never forget one of the Realtors I called when selling my last home and asked them if I could interview them, and their response was "We don't do that. That just isn't done." I didn't select them.

If more sellers askied potential Realtors "What will I get from you if I list my mhome with you?" that would make a lot of things better.

Diane Vespa said...

Yes, you make some very valid points. I agree that many sellers choose a Realtor simply because they knowthem but they may not be the best Realtor for them. I call it the "Uncle Louie" factor. However your contention that Realtors make more money if they sell at a higher price isn't necessarily true. Keep in mind that the longer a home is on the market the higher the costs of marketing and managing that home. A Realtor will not extend the market time of a home just to get another thousand or two in price. Holding costs for the Seller and the Realtor are generally more than that. The goal is to get the home sold quickly, at a fair price and with the least amount of problems. I guarantee you Realtors aren't sitting around calculating their commissions any more than you sit at work adding up your salary. The vast majority of Realtors are truly interested in serving their client well and ethically. Thanks again for your insights.