Response from 60 Minutes
May 18, 2007
Steve:
I received your e-mail last night, and I'm sorry that you and your colleagues at the National Association of Realtors feel our report was one-sided. I respectfully disagree. We made a real effort to be fair and I believe our report reflected that. For example, the segment pointed not only to the comparative price advantage of online brokers like Redfin, but also to various comparative service advantages of traditional real estate agents. Thus, Redfin's own customers said on camera that they felt Redfin wasn't as aggressive about selling their house as a traditional real estate agent would have been and that, indeed, they wound up getting less than their asking price. We also interviewed a traditional real estate agent in their community who asserted that the Redfin clients might have gotten more money for their house had they worked with a seasoned, traditional agent. We then devoted a sizable portion of our report to describing the services provided by traditional agents, showing and telling how the agent highlighted in our piece puts together a marketing strategy to create buzz among would-be buyers and their agents and how she is an accredited staging professional who spiffs up a home for open house, and so forth.
As for the Department of Justice's lawsuit against the NAR, we did not want our piece to be a legal story, so we summarized the nature of the Government's allegations and, similarly, your organization's response. We did not delve into the details of the Government's accusations or its evidence, nor did we report in detail NAR's Internet listing display policy and its justifications for that policy. We did not interview a Justice Department official on camera just as we did not interview anyone from the National Association of Realtors.
Regarding the 6% commission issue, our research shows that there is no good, reliable data on the actual commission agents charge their clients. What we did find is that real estate agents generally try to keep the 6% commission in place. Are they always successful? No. And that's exactly what we reported in the body of our segment.** (see FOOTNOTE at the end of this letter)
Now let me turn to your complaint about our characterization of NAR as a "governing body." Our understanding is that NAR is a trade association that promulgates rules that, in fact, govern the business practices of its members and its member boards. Indeed, our characterization mirrors that of the Justice Department and of NAR itself in its own court filings in this case:
In its amended complaint, the Justice Department asserted, "NAR's policies govern the conduct of its members in all fifty states, including all Realtors and all of NAR's member boards. NAR's member boards control approximately eighty percent of the approximately 1,000 MLS's in the United States."
In its answer to the Justice Department's Amended Complaint, NAR acknowledged that "it adopts certain policies that govern the conduct of the implementing local association of Realtors and its members. NAR admits that associations of Realtors control a substantial percentage of MLS's in the United States."
Which brings me, finally, to the MLS question. The salient issue here is not the number of MLS's, but broker access to the listings and other information contained in the MLS's. As mentioned above, certain NAR policies govern the conduct of its member boards, which control a substantial portion of the nation's approximately 1000 MLS's. NAR denies that the policy is illegal and anti-competitive, and we reported that in our segment.
We are planning to post the following Editor's Note on our website, which I hope will resolve the concerns that you have raised:
Editor's note:
After our broadcast we heard from Steven Cook, a Vice President of the National Association of Realtors. In his letter he said, "All real estate commissions are negotiable and the average is 5.1 percent, according to the most recent available data." That number came from an industry trade publication, REAL Trends, and was an estimate of average commissions charged by the nation's top 500 brokerages.
A critique of that survey, written by John C. Weicher, Director of the Hudson Institute's Center for Housing and Financial Markets, found REAL Trends' commission data limited by its focus on the largest brokerages and most expensive homes; the most likely situation in which agents charge a lower than 6 percent commission fee.
And, the Government Accountability Office -- Congress' investigative arm -- reported in a 2005 study that commission rates continued to be about 5 percent to 7 percent of a property's selling price "regardless of local market conditions, housing prices, or the cost or effort required to sell different properties."
Finally, in Cook's letter to us, he wrote, "The National Association of Realtors is a trade association and does not "govern" the real estate industry, and, there is no such thing as a national multiple listing service." In fact, there is no national Multiple Listing Service, instead according to the Justice Department, there are about 1000 multiple listing services, 80 percent controlled by members of the National Association of Realtors and governed by its policies.
(End of Editor's Note)
Most sincerely,
RICHARD BONIN
Producer
CBS News -- 60 MINUTES
2020 M St., N.W.
Washington, D.C. 20036
**FOOTNOTE: As I understand it, the NAR does not collect data on the actual commission agents charge their clients, nor does the government. The most widely cited source on real estate commissions is a survey by REAL Trends, the industry publication and communications company. They give the 5.1% figure that you cited in your letter to us. But an independent critique of this survey shows that REAL Trends data are fraught with discrepancies and limitations, while its methodology is questionable in that it focuses on the largest brokerages and most expensive homes, which -- the critique asserts -- skews the commission data REAL Trends produces; namely, that agents selling the most expensive homes are more likely to charge a lower commission than those agents representing clients selling more modestly-priced homes. The critique, "The Price of Residential Real Estate Brokerage Services: A Review Of The Evidence, Such As It Is," was published on June 15, 2006, by John C. Weicher, director of the Hudson Institute's Center for Housing and Financial Markets. (Prior to joining the Hudson Institute, Weicher served in the current Bush Administration as Assistant Secretary for Housing-Federal Housing Commissioner at the U.S. Department of Housing and Urban Development).
Meanwhile, the GAO, the Government Accountability Office -- Congress' investigative arm -- reported in a 2005 study that "past analyses and anecdotal information suggest that commission rates have persisted in the same range -- roughly 5 percent to 7 percent of a property's selling price -- over long periods, regardless of local market conditions, housing prices, or the cost or effort required to sell different properties."
