My Response to 60 Minutes' Segment from 5/13/2007

In a segment on CBS’ 60 Minutes show which aired on May 13, Leslie Stahl reported on the decreasing consumer need for traditional, full-service real estate agents. She interviewed the startup company, Redfin, a Seattle-based online flat fee brokerage that alleges its virtual agents are able to provide better customer service than the average Realtor at a fraction of the price. I find it extremely dissatisfying that 60 Minutes and Leslie Stahl hold such little regard for fair journalistic reporting that they failed to allow the National Association of Realtors (the nation’s largest trade association, not its governing body like 60 Minutes suggested) to represent its point of view. Many accusations and statements were made in this segment, all portraying to the consumer that full-service real estate brokerages are simply out to make more money, regardless of the impact on the consumer.

The reality is that while housing prices have increased in most markets in recent years, so has the cost of the real estate transaction. And no, the cost of the real estate transaction does not solely consist of “driving around to show properties, making a flyer and hosting an open house” as CBS and its RedFin client interviewees suggested. In fact, there are several other factors to the overall cost of a real estate transaction including: the increasing cost of Errors & Omissions insurance premiums (which is necessary in this litigious society), increasing gas prices and the increased cost of marketing properties with the growth of consumer needs and wide-range of marketing opportunities that exist, among other things.

In the segment on 60 Minutes RedFin talks extensively about how their business model saves the consumer money by charging a flat fee versus a traditional commission. However, are the sales associates who work for Redfin knowledgeable experts who are going to help a consumer properly stage a house or negotiate fiercely on their behalf? Many times over the years I have personally seen how discount agencies charge a low, flat rate but in the end the consumer is worse off because they got less for the house they sold, or paid more for the house they purchased because of shoddy representation.

My company and I are in full support of NAR’s logical explanations which address the inaccuracies as they were reported but I do think it is important to make one final point. Using a Realtor is the choice of the consumer – no one is, or ever will, force the consumer to choose or not to choose a full-service Realtor. My suggestion is that consumers shouldn’t treat hiring a Realtor any differently than hiring a lawyer, or accountant, or doctor or investment manager. Do you simply look for the cheapest option when hiring any of the aforementioned? Or, do you take the time to interview the people who are going to look out for your best interests, who are the most knowledgeable about their given field and who have the education and training background to ensure you get the results you want? Much like consumers have the choice between shopping at Wal-Mart, Macy’s or Nordstrom for clothes, they also have the choice of which route to take when buying or selling real estate. Each of the three may fit for different needs or consumer-types but people should be given the option. It seems to me that CBS chose to only highlight the “Wal-Mart” business model when they spoke exclusively with a company like RedFin.

At Realty Executives International we make it a priority to invest in finding the right broker/owners and the right Realtors who are ready to provide their clients with unsurpassed support, negotiation prowess, marketing skill and interpretation of information - more than you could possibly get on the internet. All of which enable the consumer to garner the best results.

Realty Executives has always stood by the point of view that it is our goal, and the goal of the industry, to compete on a level playing field – making it a better experience for both the consumer and the industry alike.

Ultimately, CBS has participated in doing the consumer a disservice by only reporting one side of a complex industry and that is unfortunate.

Real Trends - Gathering Of Eagles - Needs New Energy

I left the Real Trends conference on Thursday, a day early, after a snooze of a General Session. I remember in the past, exciting dialogue among competitors in the open forum and passionate debate between regulators, brokers and service providers. None of that was present at this session. I was surprised and disappointed, because the real estate industry is in such turmoil right now. There could have been great exchanges of differing opinions so attendees could form their own positions on many topics. However, this meeting was dull, at best. There were an abundance of attendees who should never have gotten past the front door. For example, there was one publisher of a real estate magazine who continually interrupted meaningful conversations to try to impose his low-class product on people who had no interest in it. I have a feeling that he was allowed in just to receive another registration fee. He was not an "Eagle" by any means. Vendors and obvious "new product" sponsors should be banned, or limited to an "exhibit hall" of sorts. They should not be allowed in the meeting sessions or cocktail and meal functions. The registrants should be monitored and limited to those people who are truly the top people in the industry. The "Eagles" have been infiltrated by numerous "vultures" and "turkeys."

Steve Murray should take the stage for half a day and state his views, knowledge and observations about the industry. He should then challenge others who may take opposing views to some debate. My registration fee would be worth it just for that session. It used to happen, but this meeting has slipped into mediocrity.

Steve, please revamp, re-energize, re-invent this gathering.

Real Estate Market Conditions

Topic #2 from the Real Trends Gathering of Eagles: Market Conditions

First of all, it is important to note that there is no such thing as a "national real estate market." All markets are much more local. Most experts agree, though, that the real estate markets throughout the US (with some exceptions) bottomed out in the 4th Quarter of 2006. However, there has not been much of a recovery yet; inventories are still high and prices are still soft.

The NAR reported that transactions were down only 9% in the 3 Quarter of 2006. This number is suspect because most other sources, including Realogy and Real Trends reported a 16 to 18% drop. The average should be somewhere in the 16.5% range.

Also, for the 1st time in 16 years, the median commission rate INCREASED. I believe this is because the consumer really doesn't want to "do it themselves" and are willing to pay for professional marketing and representation in their real estate transactions. This becomes even more important to them during slower markets.

Also, a representative from Countrywide Mortgage reported that he believes the current market doldrums will continue through the middle or to the end of 2008. Inventories will continue to increase and prices will continue to soften. However, this is great news for buyers, even though some lending criteria will get tougher, especially for 1st time buyers. The popularity of private mortgage insurance is rising and will allow those buyers more ways to qualify.

Department of Justice and NAR Suit may Drive Brokers Out of MLS

The first session of the Real Trends Gathering of Eagles was the "Billionaire's Club" meeting. This is only for those owners of companies that sold more than $1 Billion in real estate in the past year. Steve Murray, our host, started out the meeting with some personal opinions and observations about issues in the industry.

Topic #1: NAR and DOJ lawsuit. The DOJ's point of view is simple; it believes that the broker should have no right to opt out of the MLS. The NAR and Steve Murray conversely believe in the fundamental right of the broker to advertise where ever and when ever they want. Steve then went on to suggest that if member brokers of the MLS are forced by the DOJ to comply with posting everything to the MLS without choice, brokers would leave the MLS system. He contends that industry members would find new and creative ways to advertise their inventory without MLS. Steve also reported that the DOJ said "Brokers will never leave the MLS." With that comment, the room was filled with cynical laughter...the people in the room were those decision-makers for the most successful real estate companies in the US.

This echoes my writings regarding this subject last year; if the government wants to stick its nose into the MLS structure, the MLS structure will fail and the industry will find other ways to fulfill the needs of their companies and their customers.

Topic #2: Market conditions , and Topic #3: Valuations of Brokerages and the landscape for acqusitions. I will address these in future posts.

Real Trends - Gathering Of Eagles - Anything New? or Same Old Thing?

I will be attending the Real Trends - Gathering of Eagles again this year and I hope it has a new formula...I do enjoy the networking and exposure to new ideas and companies. Steve Murray is a great host, but in the past, many of the presenters were there pitching their products and services. It has felt like advertorials on TV to some degree.

I was invited to speak 3 times in the past and always took a point of view to create dialogue with my peers. I am optimistic that the speakers this year will do the same.

I will update my blog from the meeting this week, to let you know how it is going.