60 Minutes, NAR and Real Estate Commissions
On CBS the other night, 60 Minutes ran a story that featured a real estate company called Redfin. Redfin is not the traditional real estate brokerage business model and the focus of the story keyed on how commissions are charged by different models. Needless to say, it didn’t go over very well with many Realtors who believe that you can’t possibly pay enough for their services.
In NAR’s May 14th response to the CBS 60 Minutes story, they listed a few issues where NAR felt that the "facts" presented by 60 Minutes were less than accurate.
Here is one such example:
Error: The six percent commission is "sacrosanct."
Fact: All commissions are negotiable. The average commission rate is not 6 percent, but 5.1 percent, according to Real Trends.
After playing Point/Counter Point, NAR then hits on some other points that they believe 60 Minutes misrepresented or overlooked:
NAR supports all business models and favors none. Our 1.3 million members include REALTORS® who work on a full-service basis, as well as those who consider themselves to be limited service, fee-for-service, minimum service, and discounters. We think it’s great that consumers have a choice today.
The used the following labels:
- full service
- limited service
- fee-for-service
- minimum service
- discounters
All but the last one, ‘discounters’, refers to service. ‘Discounters’ refers strictly to commission. Why even have it on that list?
When you state that all commissions are negotiable, but then use the label ‘discounter’, just what do you think is implied?
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I think that seller’s ability to negotiate their commissions is part of the business and is required to remain competitive. As you have noted the average commission rate is 5.1%, but I suspect with the slowdown of the San Diego real estate market that this number will be raising a little due to the need for additional marketing, time and overall investment into getting a property sold.
However, “discounter” used in connection with rate negotiation tells me that you will be getting service and support that is less than full service. I also believe that these ‘discounters’ are going away and we are coming back to a full service mentality due to the added difficulty in selling in this highly competitive market.