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International Residential Real Estate Brokerage Fees and Implications for the US Brokerage Industry

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Abstract

It is commonly understood that residential real estate brokerage fees in the US tend to run 6% or 7% within local markets for existing property resales. Exceptions to these historically uniform going rates are starting to appear, and utilization of the internet will provide new efficiencies that should lead to lower commission rates in the future. One possible indication of where the long term commission rates may head, should price competition increase, is provided by a review of commission rates around the world. This study is a first attempt to gather such data and begin the process of global comparisons. Most industrialized country brokerage rates are significantly below those of the US, although there are clearly differences in the services provided, red tape, and liabilities, as well as information access. An exploratory model attempts to explain variations in fees around the world and deepen our understanding of possible equilibriums for US firms should price competition increase.

Suggested Citation

  • Natalya Delcoure & Norm G. Miller, 2002. "International Residential Real Estate Brokerage Fees and Implications for the US Brokerage Industry," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 12-39.
  • Handle: RePEc:ire:issued:v:05:n:01:2002:p:12-39
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    1. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
    2. Lawrence Hannah & Kyung-Hwan Kim & Edwin S. Mills, 1993. "Land Use Controls and Housing Prices in Korea," Urban Studies, Urban Studies Journal Limited, vol. 30(1), pages 147-156, February.
    3. Chang-Moo Lee & Peter Linneman, 1998. "Dynamics of the Greenbelt Amenity Effect on the Land Market-The Case of Seoul's Greenbelt," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(1), pages 107-129.
    4. Hamilton, Bruce W., 1978. "Zoning and the exercise of monopoly power," Journal of Urban Economics, Elsevier, vol. 5(1), pages 116-130, January.
    5. Thorsnes, Paul, 1997. "Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing," Journal of Urban Economics, Elsevier, vol. 42(1), pages 98-108, July.
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    Cited by:

    1. Mayer, Chris & Piskorski, Tomasz & Tchistyi, Alexei, 2013. "The inefficiency of refinancing: Why prepayment penalties are good for risky borrowers," Journal of Financial Economics, Elsevier, vol. 107(3), pages 694-714.
    2. Panle Jia Barwick & Parag A. Pathak & Maisy Wong, 2015. "Conflicts of Interest and the Realtor Commission Puzzle," NBER Working Papers 21489, National Bureau of Economic Research, Inc.
    3. repec:aea:aejapp:v:9:y:2017:i:3:p:191-222 is not listed on IDEAS
    4. Beck, Jason & Scott, Frank & Yelowitz, Aaron, 2010. "Competition and market structure in local real estate markets," MPRA Paper 27531, University Library of Munich, Germany.
    5. repec:eee:jhouse:v:36:y:2017:i:c:p:8-24 is not listed on IDEAS
    6. Kaplan, Greg & Mitman, Kurt & Violante, Giovanni L., 2017. "The Housing Boom and Bust: Model Meets Evidence," CEPR Discussion Papers 12215, C.E.P.R. Discussion Papers.
    7. Prince Christian R. Cruz, 2008. "Transaction Costs and Housing Affordability in Asia," International Real Estate Review, Asian Real Estate Society, vol. 11(1), pages 128-150.

    More about this item

    Keywords

    Brokerage; Commissions; International; Internet; Future;

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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