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Efficiency and Incentives in Residential Brokerage

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  • Raymond Brastow
  • Thomas Springer
  • Bennie Waller

Abstract

The literature on broker intermediation in residential real estate has shown positive pricing effects associated with the use of a broker and mixed results as far as the pricing effects of nonstandard commission structures. On the premise that real estate broker incentives emanate from two primary sources, factors that increase broker operating efficiency and negotiable features arising from the relationship between the listing broker and the seller, this study assesses the degree to which these incentives affect the marketing time, probability of sale, and selling price of single-family houses. Of particular interest, this study investigates efficiency and broker intermediation effects on residential property associated with a broker concentrating his listings into a service area. Empirical results show that properties within an individual broker’s GIS-determined service area are more likely to sell, sell faster, and sell with an associated price premium. These effects are more concentrated in the market for higher priced homes. Also, additional compensation favorably motivates the broker with higher-priced properties, but has no effect on the sale of lower-priced properties. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Raymond Brastow & Thomas Springer & Bennie Waller, 2012. "Efficiency and Incentives in Residential Brokerage," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 1041-1061, November.
    • Handle: RePEc:kap:jrefec:v:45:y:2012:i:4:p:1041-1061
    DOI: 10.1007/s11146-011-9308-1
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    References listed on IDEAS

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    Cited by:

    1. Zhaohui Li & Qiang Li & Hua Sun & Li Sun, 2022. "Diffused effort, asset heterogeneity, and real estate brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 707-742, September.
    2. Stephen L. Locke, 2020. "Paying for a Name? Comparing the Performance of Franchised Real Estate Brokerage Firms," The Journal of Real Estate Finance and Economics, Springer, vol. 61(1), pages 115-128, June.
    3. Marcus T. Allen & Justin D. Benefield & Ronald C. Rutherford, 2023. "Co-Listing Strategies: Better Transaction Outcomes?," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 517-544, October.
    4. Matthew Cypher & S. McKay Price & Spenser Robinson & Michael J. Seiler, 2018. "Price Signals and Uncertainty in Commercial Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 246-263, August.
    5. Oded Palmon & Ben J. Sopranzetti, 2017. "On the relationship between the number of a broker’s real estate listings and transaction outcomes," Review of Quantitative Finance and Accounting, Springer, vol. 49(1), pages 65-89, July.
    6. Darren K. Hayunga & Henry J. Munneke, 2021. "Examining Both Sides of the Transaction: Bargaining in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 663-691, June.
    7. Turnbull, Geoffrey K. & Waller, Bennie D., 2018. "(What) do top performing real estate agents deliver for their clients?," Journal of Housing Economics, Elsevier, vol. 41(C), pages 142-152.
    8. Kimberly R. Goodwin & Ken H. Johnson, 2017. "The Short Sale Stigma," The Journal of Real Estate Finance and Economics, Springer, vol. 55(4), pages 416-434, November.
    9. Natalya Bikmetova & Geoffrey K. Turnbull & Velma Zahirovic‐Herbert, 2023. "Ethnicity in housing markets: Buyers, sellers and agents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 196-232, January.
    10. Randy Anderson & Raymond Brastow & Geoffrey Turnbull & Bennie Waller, 2014. "Seller Over-Pricing and Listing Contract Length: The Effects of Endogenous Listing Contracts on Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 49(3), pages 434-450, October.
    11. Andrew Haxby, 2021. "The ambiguity of price and the labor of land brokers in Kathmandu, Nepal," Economic Anthropology, Wiley Blackwell, vol. 8(2), pages 247-258, June.

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