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The Multiple Listing Service, Commission Splits, and Broker Effort

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  • Thomas J. Miceli

Abstract

This paper examines the impact of split commissions on broker effort in MLS sales. The joint effort of brokers to find a buyer for a given listing is maximized when the broker who locates a buyer first receives the entire commission. In contrast, splitting the commission between the listing and finding broker (when they differ) maximizes the joint profits of brokers. When competition among brokers to acquire listings is considered, however, the split brokers most prefer entails a smaller (though still positive) share for the listing broker in order to reduce wasteful competition for listings. While sellers still prefer to pay only the broker who finds a buyer, brokers may not be willing to acquire and share listings under such an arrangement.

Suggested Citation

  • Thomas J. Miceli, 1991. "The Multiple Listing Service, Commission Splits, and Broker Effort," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(4), pages 548-566, December.
    • Handle: RePEc:bla:reesec:v:19:y:1991:i:4:p:548-566
    DOI: 10.1111/1540-6229.00567
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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. Thomas Miceli & Katherine Pancak & C. Sirmans, 2007. "Is the Compensation Model for Real Estate Brokers Obsolete?," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 7-22, July.
    3. Jia Xie, 2022. "Importance of Professional Networks in Trade: Evidence from Real Estate Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 882-900, September.
    4. Xun Bian & Bennie D. Waller & Abdullah Yavas, 2017. "Commission Splits in Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 165-187, February.
    5. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    6. Lynn Fisher & Abdullah Yavas, 2010. "A Case for Percentage Commission Contracts: The Impact of a “Race” Among Agents," The Journal of Real Estate Finance and Economics, Springer, vol. 40(1), pages 1-13, January.
    7. Ronald Rutherford & Thomas Springer & Abdullah Yavas, 2007. "Evidence of Information Asymmetries in the Market for Residential Condominiums," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 23-38, July.
    8. Ying Li & Abdullah Yavas, 2015. "Residential Brokerage in Hot and Cold Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 51(1), pages 1-21, July.
    9. Vickie L. Bajtelsmit & Elaine Worzala, 1997. "Adversarial Brokerage in Residential Real Estate Transactions: The Impact of Separate Buyer Representation," Journal of Real Estate Research, American Real Estate Society, vol. 14(1), pages 65-76.
    10. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    11. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    12. Anglin, Paul M., 1997. "The Contribution of Buyer Brokers," Journal of Housing Economics, Elsevier, vol. 6(3), pages 277-292, September.
    13. Rutherford, R.C. & Springer, T.M. & Yavas, A., 2005. "Conflicts between principals and agents: evidence from residential brokerage," Journal of Financial Economics, Elsevier, vol. 76(3), pages 627-665, June.
    14. Peng Liu & Jia Xie, 2021. "Optimal Contract Design in Residential Brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 493-530, June.
    15. Luis Arturo Lopez, 2021. "Asymmetric information and personal affiliations in brokered housing transactions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 459-492, June.
    16. Shiawee X. Yang & Abdullah Yavas, 1995. "Bigger is not Better: Brokerage and Time on the Market," Journal of Real Estate Research, American Real Estate Society, vol. 10(1), pages 23-34.
    17. Hilde Patron & Kenneth Roskelley, 2008. "The Effect of Reputation and Competition on the Advice of Real Estate Agents," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 387-399, November.
    18. Lingxiao Li & Abdullah Yavas, 2015. "The Impact of a Multiple Listing Service," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 471-506, June.
    19. Bruce L. Gordon & Daniel T. Winkler, 2017. "The Effect of Listing Price Changes on the Selling Price of Single-Family Residential Homes," The Journal of Real Estate Finance and Economics, Springer, vol. 55(2), pages 185-215, August.
    20. Bucchianeri, Grace W. & Minson, Julia A., 2013. "A homeowner's dilemma: Anchoring in residential real estate transactions," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 76-92.
    21. David Scofield & Jia Xie, 2023. "Network Formation and Effects: Observations from U.S. Commercial Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 487-504, February.
    22. Anida Duarte & Annette Craven & J. T. Norris, 2015. "Real Estate Agent Commission Disputes," SAGE Open, , vol. 5(2), pages 21582440155, June.

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