Real Estate Brokerage Services Research Articles

Buyer Satisfaction with Residential Brokerage Services

This study employs ordered probit to estimate a model of buyer satisfaction with real estate brokerage services. The model provides evidence that (1) satisfaction falls with length of search; (2) s...

Economies of Scope and Density in the Market for Real Estate Brokerage Services

Using a multiproduct translog cost function, this paper examines the case for economies of scope and density in the market for residential real estate brokerage services. Earlier research that treated output as a homogeneous commodity reported modest economies of scale for this industry. The results of this study suggest that the composition of output is an important source of these scale economies, rather than simply the size of the firm. The economies of scope which we find imply that a balanced mix of listing and sales is the least costly type of operation, a result borne out by the product mix found in our sample. The results also show product‐specific diseconomies of scale, suggesting that specialization in either listing or sales may be sub‐optimal under the current institutional arrangements present in the market. Finally, market density appears to be, at best, only a nominal source of savings for real estate brokerage firms.

The market for residential real estate brokerage services: Costs of production and economies of scale

Although the market for real estate brokerage services has been the subject of intense scrutiny for many years, little empirical evidence has been forthcoming regarding the performance of this market. This paper employs a translog cost function to model the underlying production function for the residential real estate brokerage industry. The results indicate that, except for very large firms, modest economies of scale persist throughout almost the entire range of output. Our results also indicate that while average firm size is increasing, many real estate firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as fer as unit costs are concerned.

The Principal‐Agent Relationship in Real Estate Brokerage Services

This article investigates the principal‐agent relationship between the owner of a house and her real estate broker. The principal's (owner's) problem is to design a contract that induces the agent (broker) to adopt a selling strategy that maximizes the owner's expected return. A sequential search model is utilized to analyze this principal‐agent relationship. Three different systems for paying the broker are considered: fixed‐percentage commission, flat‐fee, and consignment. Both the discount factors of the owner and the broker and the net costs of ownership incurred while attempting to sell the house play a central role in determining the nature of the optimal contract. The analysis demonstrates that the fixed‐percentage commission system is the only one of the three systems considered that can induce a first‐best, incentive‐compatible contract. A numerical analysis provides insights regarding the effect of the fixed‐percentage commission system on competition in the real estate brokerage industry.

Uncertainty, Efficiency, and the Brokerage Industry

Previous articleNext article No AccessUncertainty, Efficiency, and the Brokerage IndustryMichael S. KnollMichael S. Knoll Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The Journal of Law and Economics Volume 31, Number 1Apr., 1988 Sponsored by The University of Chicago Booth School of Business and The University of Chicago Law School Article DOIhttps://doi.org/10.1086/467156 Views: 8Total views on this site Citations: 18Citations are reported from Crossref Copyright 1988 The University of ChicagoPDF download Crossref reports the following articles citing this article:Lu Han, William C. Strange The Microstructure of Housing Markets, (Jan 2015): 813–886.https://doi.org/10.1016/B978-0-444-59531-7.00013-2Oz Shy Real Estate Brokers and Commission: Theory and Calibrations, The Journal of Real Estate Finance and Economics 45, no.44 (Dec 2010): 982–1004.https://doi.org/10.1007/s11146-010-9296-6Oz Shy Real Estate Brokers and Commission: Theory and Calibrations, SSRN Electronic Journal (Jan 2009).https://doi.org/10.2139/ssrn.1475315Mark J. Garmaise, Tobias J. Moskowitz Informal Financial Networks: Theory and Evidence, Review of Financial Studies 16, no.44 (Aug 2003): 1007–1040.https://doi.org/10.1093/rfs/hhg025Leonard Zumpano The Possible Consequences of Bank Entry into the Real Estate Brokerage Market: What the Research Tells Us, Journal of Real Estate Literature 10, no.22 (Jun 2020): 243–262.https://doi.org/10.1080/10835547.2002.12090115Carl Gwin, Seow-Eng Ong, Carol Gwin Seller versus Broker: Timing of Promotion, Journal of Real Estate Research 24, no.11 (Jun 2020): 27–46.https://doi.org/10.1080/10835547.2002.12091085Timothy Jares, James Larsen, Thomas Zorn An Optimal Incentive System For Real Estate Agents, Journal of Real Estate Research 20, no.1-21-2 (Jun 2020): 49–60.https://doi.org/10.1080/10835547.2000.12091035Danielle Lewis, Randy Anderson Residential Real Estate Brokerage Efficiency and the Implications of Franchising: A Bayesian Approach, Real Estate Economics 27, no.33 (Sep 1999): 543–560.https://doi.org/10.1111/1540-6229.00783Randy Anderson, Robert Fok, Leonard Zumpano, Harold Elder Measuring the Efficiency of Residential Real Estate Brokerage Firms, Journal of Real Estate Research 16, no.22 (Jun 2020): 139–158.https://doi.org/10.1080/10835547.1998.12090946C.F. Sirmans, Geoffrey K. Turnbull Brokerage Pricing under Competition, Journal of Urban Economics 41, no.11 (Jan 1997): 102–117.https://doi.org/10.1006/juec.1996.1095T.L Yang, Joseph Trefzger, Lawrence Sherman A Microeconomic Study of Commercial Real Estate Brokerage Firms, Journal of Real Estate Research 13, no.22 (Jun 2020): 177–194.https://doi.org/10.1080/10835547.1997.12090871Paul M. Anglin Contracts for the sale of residential real estate, The Journal of Real Estate Finance and Economics 8, no.33 (May 1994): 195–211.https://doi.org/10.1007/BF01096991ABDULLAH YAVAŞ Economics of Brokerage: An Overview, Journal of Real Estate Literature 2, no.22 (Jun 2020): 169–195.https://doi.org/10.1080/10835547.1994.12090040Leonard V. Zumpano, Harold W. Elder, Glenn E. Crellin The market for residential real estate brokerage services: Costs of production and economies of scale, The Journal of Real Estate Finance and Economics 6, no.33 (May 1993): 237–250.https://doi.org/10.1007/BF01096960 Saul Levmore Commissions and Conflicts in Agency Arrangements: Lawyers, Real Estate Brokers, Underwriters, and Other Agents' Rewards, The Journal of Law and Economics 36, no.1, Part 21, Part 2 (Oct 2015): 503–539.https://doi.org/10.1086/467287 Alan O. Sykes Some Thoughts on the Real Estate Puzzle: Comment on Levmore, "Commissions and Conflicts in Agency Arrangements: Lawyers, Real Estate Brokers, Underwriters, and Other Agents' Rewards", The Journal of Law and Economics 36, no.1, Part 21, Part 2 (Oct 2015): 541–551.https://doi.org/10.1086/467288Michael A. Arnold The Principal-Agent Relationship in Real Estate Brokerage Services, Real Estate Economics 20, no.11 (Mar 1992): 89–106.https://doi.org/10.1111/1540-6229.00573Thomas J. Miceli The Optimal Duration of Real Estate Listing Contracts, Real Estate Economics 17, no.33 (Sep 1989): 267–277.https://doi.org/10.1111/1540-6229.00491

The Real Estate Brokerage Market: A Critical Reevaluation

This paper presents an analysis of the theories and evidence regarding the structure and performance of the market for real estate brokerage services. Some of the theoretical models found in the literature appear to suffer from logical inconsistencies, while others lack empirical support for their underlying assumptions and/or their predictions of market inefficiencies. Moreover, several important legal and institutional changes that have occurred recently have not been given sufficient attention in the existing literature.Although some new evidence on this market is presented here, additional empirical research is warranted in at least two areas: the current pricing structure and the underlying production and cost functions of the real estate brokerage industry.