Bringing More Competition to Real Estate Brokerage
AbstractThis paper provides an economic analysis of the residential real estate brokerage industry. We find that the traditional model for residential real estate brokerage services may be dated, and could be improved substantially with some public policy interventions that spur innovation. We believe that there are numerous barriers to entry that are slowing the emergence of new models for serving consumers. Some of these barriers are likely to be anti-competitive. Examples include discrimination against new brokerage models and online brokers who wish to join multiple listing services; state legislation that would require minimum service requirements, effectively preventing "a la carte" offerings; and prohibitions by real estate commissions on providing rebates to customers. In our opinion, none of these practices should be allowed. We offer three broad policy recommendations: First, federal and state antitrust authorities should carefully scrutinize efforts to limit competition in the residential real estate brokerage market. Second, state governments should refrain from adopting laws or rules that inhibit competition in real estate brokerage. Third, Congress should allow the Federal Reserve Board and the Treasury Department to permit banks, which have long been natural potential entrants into this business, to offer residential real estate brokerage services through separately capitalized affiliates. We do not know which business models are likely to succeed in the marketplace for residential real estate services in the future. We do believe, however, that judicious public policy interventions could have a marked impact on improving services and lowering costs for home buyers and sellers. Click Here for a shorter version of this paper, published in The Milken InstituteReview .
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Bibliographic InfoPaper provided by Regulation2point0 in its series Working paper with number 532.
Date of creation: Jun 2005
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- Bruce, Donald & Santore, Rudy, 2006. "On optimal real estate commissions," Journal of Housing Economics, Elsevier, vol. 15(2), pages 156-166, June.
- Thomas J. Miceli & Katherine A. Pancak & C. F. Sirmans, 2006.
"Is the Compensation Model for Real Estate Brokers Obsolete?,"
2006-23, University of Connecticut, Department of Economics.
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- Heski Bar-Isaac, 2007. "Breadth, Depth, and Competition," Working Papers 07-20, New York University, Leonard N. Stern School of Business, Department of Economics.
- Anupam Nanda & Katherine A. Pancak, 2009. "Broker Duty to Clients: Why States Mandate Minimum Service Requirements," Alumni working papers 2009-01, University of Connecticut, Department of Economics.
- White, Lawrence J., 2007. "Should Wal-Mart, Real Estate Brokers, and Banks Be in Bed Together? A Principle-Based Approach to the Issues of the Separation of Banking and Commerce," Working paper 453, Regulation2point0.
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