September 3, 2006

The Last Stand of the 6-Percenters?

WHEN David and Annette Wolf decided that their family was outgrowing its Seattle area home, they also decided that they did not need much help finding a new one. They combed Internet listings of homes for sale until they spotted a four-bedroom house on a cul-de-sac with a three-car garage and 2.5 acres.
But the seller’s agent refused to show it to them. Why would she turn away an eager buyer? Not because of the Wolfs’ race, creed or color. Instead, Mr. Wolf, a software engineering manager at the online directory InfoSpace, said he and his wife were shunned once the agent learned they used an online broker called Redfin.

Mr. Wolf said they turned to Redfin because it gives two-thirds of its sales commission (which is usually 3 percent of the sale price) to its customers. “I didn’t want to pay 3 percent for the opening of a door,” he said. But customers like Mr. Wolf — affluent and comfortable with the Internet — are a frightening prospect for real estate agents who, as a group, reap at least $60 billion a year in commission income.

Redfin and other innovators, including ZipRealty and, are using technology to reduce costs and to save time for their brokers. Agents don’t find and recommend homes — customers do that on their own, using Internet listings — and that enables agents to charge less for the services they do provide, chiefly handling the paperwork and negotiations.

The Internet has radically changed the way consumers buy books and airline tickets, trade stock and learn news. But the real estate industry has resisted change — and protected its commission structure — by controlling the information on its Multiple Listing Service database of properties for sale.
“ You can find out more on the Internet about an eBay Beanie Baby than you can about a $1 million house,” said Glenn Kelman, chief executive of Redfin, a licensed broker in Washington State and California.

The MLS. is the only place that contains nearly all the homes for sale in a community. Only brokers can post there, but agents can also display selected information about a listing on their own Web sites and on, a site that works with the National Association of Realtors.


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