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On the relationship between the number of a broker’s real estate listings and transaction outcomes

Author

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  • Oded Palmon

    (Rutgers University)

  • Ben J. Sopranzetti

    (Rutgers University)

Abstract

This paper documents that sellers who employ brokerage offices that list a large number of properties (“active brokerages”) obtain higher selling prices, smaller negotiated discounts from the corresponding list prices, and shorter times on the market for their listed properties. Sellers who employ active brokerages list their properties at prices that are closer to our hedonic model’s predicted prices. Interestingly, properties that are listed at discounts relative to their predicted prices are snapped up more quickly only if they are associated with brokerages that list a relatively small number of properties. In addition, properties listed by active brokerages are less likely to be listed “as is” and are more likely to have their defects repaired prior to being listed. Moreover, because the efficacy of brokerage services varies across brokerage offices, the results also suggest that the use of an indicator variable for the use of brokerage services is not sufficient to capture the complete impact of the use of a real estate broker on transaction outcomes. In addition, the Appendix discusses the concern for potential endogeneities between the number of brokerage listings and transaction outcomes. It documents that the Durban–Wu–Hausman test indicates that exogeneity cannot be rejected.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:rqfnac:v:49:y:2017:i:1:d:10.1007_s11156-016-0583-z
    DOI: 10.1007/s11156-016-0583-z
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    More about this item

    Keywords

    Agents; Brokers; Brokerages; Housing; Real estate;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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