Real estate rebels

Don’t scroll right on past this in your subscription list!  Just hear me out for a second.  I even put in a link to a Lego symphony just to make this post worthwhile for the most apathetic among you.  🙂 

Because of my roommate, I’ve recently watched Why We Fight, the corporations documentary, and the Enron one.  He also filters the 60 Minutes episodes for me and points out any good ones.  As you might imagine, a lot of this stuff is about some little guys fighting the incumbent big boys and these nasty battles often impact the consumer (you, me, and our cats and dogs).  Anyway, check this out…

Say you sell your house for $300,000.  6% of that is the standard realtor commission, so that means he/she gets

300,000 x 0.06 = 18,000

eRealty wanted to save you some of that money, and they tried, but the head honchos in Austin changed up the local market rules to say that eRealty couldn’t post houses for sale on its website.  Since eRealty didn’t have a contingency plan in place to start selling cumquats or something else besides houses on its website, they were sued for breaking the rule.  Fortunately, they won the lawsuit.  After that, the National Association of Realtors (do you hear Imperial March from Star Wars?) said eRealty wasn’t allowed access to the housing database they lost $33 million dollars on their way to bankruptcy.  At least the Justice Department is protecting us by suing that assocation of fat cat realtors. 

So now there’s Redfin, and they want to be operating in every state by the end of next year.  However, several states have laws in place to keep online realtors out, so that’ll have to change for them to succeed.  Why should we be happy about companies like Red Fin, and why are so many commercial interests against them?  Well, remember that $18,000 you’d have to pay?  Get this:

Red Fin charges a flat $3,000 commission on every deal! 

Home prices have been rising for years, and realtors keep charging the same 6% commission (meaning they make more and more money).  Most real estate agents close no more than 8 deals per year, but Redfin handles almost everything online and their agents complete hundreds of deals.  Not only do they make money, but they also save all of us lots of money!  So who is losing out?  The fat cat traditional realtors who aren’t adapting to technological advances.  Because Red Fin is so efficient, they have even been refunding 2/3 of the commission that the buyer typically pays! 

Last fall, I wondered what all my realtor does to make the money she obviously has.  I’m sure she puts in many hours, and a company like Redfin obviously threatens her livelihood, but plenty of other workers have to adapt when innovation changes the way things can be accomplished in their industry.  No doubt this is up for debate, but one guy claims that real estate is the most screwed-up industry in America. 

 

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24 Responses to “Real estate rebels”

  1. I thought that healthcare was the most screwed-wrong industry…  When you get a headache, the doctor (who never came in to see you) can prescribe you a (expensive) drug for a condition (which you don’t have). Then you’re out of your money (which you didn’t have to begin with). A realtor could not tell you that you just imagined having a house… could he?? Let us pray that they don’t adapt to the industry in that way… gosh that wouldn’t be fun!

  2. there are some good realtors out there. we know a couple. but it is still highway robbery. that is why we have our place up for sale by owner. it’s worth the try.

  3. Good point, Marian. Michael Moore’s next documentary is targeting the health-care industry. Right now, the US government is threatening him with a huge fine for going to Cuba to work on his film.

  4. yeah my mom is a realtor and def one of the good ones out there 🙂 there are always good and bad guys in any industry, for surehaha nope def not. keep doin it b/c it makes a world of difference to people

  5. oops, and as to the 2nd line:i meant that in reference to what u said in my post 🙂

  6. After seeing that figure, all of a sudden I REALLY want to be a realtor…

  7. I once considered being a realtor… but there’s too much drama in it for me…
    Nice picture though.. love the bed head.

  8. Realtors will have to change — in fact I’ve started seeing some realtors offer 4% or 5% commissions, or even to refund some of the commission back. There’s a chapter in Freakonomics that even suggests that realtors may not be working on getting you the highest sale price that you can get!

  9. glad i read to the end – nice pic..and as for real estate, i just hope they’re not in cahoots with the car salesmen!

  10. RYC:  We’re definitely not ultimate fighting fans, either, and I doubt we ever will be.  However, it was more interesting than I expected and I’m glad we were able to support our friend.

  11. Interesting post, by the way.  I like the point at the end about people in industries having to be willing to change.  There is no sacred promise stating that the career you choose will always function the same and you can always expect to work the same way you have been.  For some reason many people think that is the case. 

  12. Agreed, aguafresca.  The same holds true for education– I wish that people in traditional schools could also see the need for innovation and be willing enough to change.
    I think the Lego symphony made my day.  How long did it take you to find everything and put the post together?

  13. RYC: Dare I publish the Brown anti-cheer?  Brown is…

  14. when one of my friends told me that with my personality i would make a great realter, my dad responded, “if you want to sell your soul to the devil, it’s the perfect job”. i think he’s a little jaded, but nevertheless classic pic made the post worth the read.

  15. well, when you sell your house you have to pay 3% to your realtor and 3% to the buyer’s realtor.  so, if you cut your figure in half, that’s what most realtors actually get.  and that $300,000 for a house is a pretty nice house, at least in houston.  if you have such a house, you probably wouldn’t see that $18K as that big of a deal.
    and it’s true that some realtors will give you discounts.  find one of those guys but remember, when a realtor makes a percentage of what your house sells for, they are more likely to try to sell high.  if the realtors made a flat fee like this red fin company, they lose all motivation to sell quick.  you want your realtor to be motivated or you will be stuck with a house that you don’t want and you will end up paying more than you save on the commission.
    when we bought our house, we bought straight from the buyer and that saved everyone a bunch of money because we would have had to pay that cost indirectly.  i suggest selling houses yourself.  http://www.forsalebyowner.com
    how does an online realtor show you a house?  i mean when you are buying a house, you need more than just pictures.  so, if the owner is the one showing the house to potential buyers, why wouldn’t they just go through “for sale by owner”?  it’s cheaper than the $3K red fin is charging….

  16. Anonymous Says:

    Ok my family is getting rid of the house. 6% of 1.5 mil is too much money!

  17. I love the picture!!!

  18. Your picture makes me think of that children’s book “Where the Wild Things Are” for some reason…

  19. could redfin become the carmax of the real estate industry? i agree with mindy. i’m not sure how online realtors would be able to accurately show a house because it’s so easy to put up pictures of only pretty parts of your house. Even by going on har.com you have a hard time really getting a feel for the house by just looking at the pictures. there were plenty of times when i thought i was looking at a super cute house and it turned out to be a dump, or across the street from retail buildings surrounded by barbed wire fences….. not so good.

  20. by the way, that picture needs to be your new profile pic, sir stevo

  21. Realtors do often add value. The realtor has access to more buyers and can do the close that is a hassle for you. There are details a layman might not know.If the realtor gets you a higher price then he could easily be worth his 6%. On bigger deals like the 1.5 mil house the percentage is often negociable. We did a contract when the realtor’s % was higher depending on the actual sales price.Selling yourself is a bit of a hassle. But a lot of people are trying it. I’m not sure I will when the time comes. There will be so many tire kickers whose calls you have to answer or return.

  22. Cool post.  I think Mindy has a good point about the motiviation that getting a percentage of sale price gives a real estate agent.  FSBO is fine and all, but all those websites that don’t have access to the MLS seem to have crap selection.

  23. Hmmm…maybe I should’ve jumped back into this conversation sooner. My understanding is that if you go through Redfin to buy a house, the actual owners of the house will host an open house, etc, so you’ll definitely be able to stop by and check it out before you buy the house!

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