Redfin, the online realty company, was featured on 60 Minutes last night. I have written a couple of posts about discount real estate brokerages recently; see Selling Your Home May Get Cheaper and Competition For The Six-Percenters. It was good to see the subject get some national attention. If you missed 60 minutes, you can get the full story, Chipping Away At Realtors' Six Percent, on CBSNews.com.

They featured a couple that both sold their old home and bought their new home online. They saved $26,000! Redfin charges the seller a flat fee of $3,000. And, when they represent the buyer they only keep one-third of the selling agent's split of the commission and they refund the rest to the buyer. Redfin claims to have refunded over $3 million dollars to their customers.

One of Redfin's agents had this to say about her experience as a traditional real estate agent:
 

"I had done quite a few deals where I spent maybe five hours total working on the deal. I never saw the house. My client found it online and, you know, I would make $12,000 for four hours of work. And I thought this cannot keep going on like this. Someone, I felt like I was going to get caught! You know, someone’s going to see that this is happening and I think a lot of them hold that truth inside of them right now. They’ve got the clients that are finding houses on their own. They make $20,000 and did 10 hours of work."

With a six percent commission there is a lot of fat that can be cut - a lot of money that home sellers can save. Its not really all that surprising that someone would try to leverage the power of the Internet to try to find a better solution. But, as you might suspect, traditional Realtors and the National Association of Realtors aren't exactly excited about the concept. Leslie Stahl, the 60 Minutes correspondent, spoke with a traditional Realtor. She asked the tough question:
 

"Now here's what Glenn Kelman of Redfin says: 'The price of homes has gone through the roof, pardon the pun, over the last several years. And yet your commission has still stayed at six percent,'" Stahl remarks. "You're not lowering your commission to give the buyers this advantage. You're just raking in the money?"

You will have to visit CBSNews.com for the full story. Its worth the read.

People are starting to see that a six percent commission is absurd in a housing market that has seen home values quadruple in the past 25 years. It was the perfect set-up. There really weren't any alternatives and the seller pays the whole commission. Thus, there were always plenty of buyers who couldn't care less about the six percent commission. Now, the numbers have gotten so big and there are some alternatives out there. Its only a matter of time until the "new" brokers dominate the market. Will the traditional Realtors lower their commission to compete? Competition is a good thing, isn't it?

Robert A. Franco
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rfranco@sourceoftitle.com