16 Minutes This week, 16 Minutes takes you behind the scenes at RedPin, a “revolutionary” new way to buy and sell real estate… Time: 06:08

60 minutes recently ran a segment (see satire video above) about online brokers such as Redfin, Century 21 Clickit etc who offer the customer (not clients as they have no fiduciary obligation) a way to put a property in MLS and sell it themselves while saving all or some of the commission charged by a professional, full service real estate agency. Sadly, they didn’t even have a comment from NAR or other folks like myself who can clearly see the dangers presented by this so-called “discount” brokers. I thought I might point out a few of the dangers myself:

1) Liability: When you use a Realtor to list your home, it greatly limits your liability as a homeowner (at least if you choose a good one). Good Realtors have lots of training and a fair amount of experience, usually selling at least 15 homes a year; most homeowners do approximately 5-6 in their lifetime. How does using a Realtor limit your liability? Really in two ways:

a. They keep homeowners within the legal and ethical confines of a transaction that are defined by state law and the Realtor’s Code of Ethics

b. In the event that there is ever a claim against a homeowner that listed their house with a Realtor, whether its 3 months or 3 years after the transaction, the Realtor will be there with their client to assist. We even have E&O insurance to protect ourselves… most homeowners don’t.

2) Exposure: The general feeling among homeowners is that if they get property in the MLS through one of these discount brokers, they’ll be able to get the same exposure as homes listed with Realtors. True! They will get the same exposure through marketing outlets etc. but one of the real truths of this business is that it is AGENTS not ADVERTISEMENT that sells houses. This is important to note because any agent with a little experience under their belt has more than one story about nightmare transactions with Unrepresented Sellers (FKA FSBO’s until Realtors pointed out that EVERYTHING is for sale by owner). This being said Realtors aren’t typically interested in showing the properties owned by Unrepresented Sellers, for obvious reasons.

Obviously Realtors have a fiduciary obligation to their buyer-clients to show them what they’d like to see. Most people interpret this as dealing only with the physical characteristics of the home but it actually includes a great deal more. Buyers of real estate are always interested in physical characteristics, but they are also usually interested in a smooth transaction. Aren’t we all? So usually, clients listen when a Realtor says, “I’m happy to show that house to you because I know you’ll like it. I want to forewarn you, though, that we’ll be working directly with the owner of the house and transactions dealing with directly with unrepresented sellers are typically very difficult,” most buyers say, “let’s skip that one, then.” So at the end of the day, the unrepresented seller isn’t really getting the exposure he hoped for.

3) Lost marketing time: Here are several FACTS documented by the Keller Williams Realty Institute in a nationwide study of over 1.32 million transactions:

a. “Discount Broker” listings are 36% more likely to expire. To me this sounds like a good way to lose the $500 that it takes to get the property in the MLS and fail to get to your next destination on time.

b. DB listings took 20% longer to go under contract.

It’s interesting to note that in the same study it was clearly evident that full service brokerages sold houses for more money (on average) than discount brokerages and in less time yielding greater customer satisfaction. I guess the old adage is true; you get what you pay for!

This entry was posted on Friday, May 18th, 2007 at 1:30 pm and is filed under Rants and Raves. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.