IDEAS home Printed from https://ideas.repec.org/p/hhs/gunwpe/0692.html
   My bibliography  Save this paper

Real-Estate Agent Commission Structure and Sales Performance

Author

Listed:
  • Gautier, Pieter

    (Vrije Universiteit Amsterdam)

  • Siegmann, Arjen

    (Vrije Universiteit Amsterdam)

  • van Vuuren , Aico

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Do higher real-estate agent fees imply better performance? This study uses a nation-wide dataset of residential real-estate transactions in the Netherlands from 1985 to 2011 to provide evidence against this. Brokers with a flat-fee structure who charge an up-front fee (which is substantially lower than the average fee of traditional brokers) and leave the viewings to the seller sell faster and at - on average - 2.7 percent higher prices. We correct for fixed house- and time effects. We provide additional evidence that the price difference is not due to a seller-selection effect.

Suggested Citation

  • Gautier, Pieter & Siegmann, Arjen & van Vuuren , Aico, 2017. "Real-Estate Agent Commission Structure and Sales Performance," Working Papers in Economics 692, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0692
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2077/51580
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zoran Ivković & Scott Weisbenner, 2005. "Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments," Journal of Finance, American Finance Association, vol. 60(1), pages 267-306, February.
    2. Lawrence J. White, 2006. "The Residential Real Estate Brokerage Industry: What Would More Vigorous Competition Look Like?," Working Papers 06-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 149-185.
    4. Diane Del Guercio & Jonathan Reuter & Paula A. Tkac, 2010. "Broker Incentives and Mutual Fund Market Segmentation," NBER Working Papers 16312, National Bureau of Economic Research, Inc.
    5. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, May.
    6. Gregory Lewis, 2011. "Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors," American Economic Review, American Economic Association, vol. 101(4), pages 1535-1546, June.
    7. Stephen G. Donald & David A. Green & Harry J. Paarsch, 2000. "Differences in Wage Distributions Between Canada and the United States: An Application of a Flexible Estimator of Distribution Functions in the Presence of Covariates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 609-633.
    8. James Albrecht & Pieter Gautier & Susan Vroman, 2016. "Directed Search in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 218-231, January.
    9. 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.
    10. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2009. "The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 51-117.
    11. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, vol. 99(5), pages 1878-1898, December.
    12. Sungjin Cho & John Rust, 2010. "The Flat Rental Puzzle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 560-594.
    13. Alexander W. Butler, 2008. "Distance Still Matters: Evidence from Municipal Bond Underwriting," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 763-784, April.
    14. Han, Lu & Hong, Seung-Hyun, 2011. "Testing Cost Inefficiency Under Free Entry in the Real Estate Brokerage Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(4), pages 564-578.
    15. B. Douglas Bernheim & Jonathan Meer, 2013. "Do Real Estate Brokers Add Value When Listing Services Are Unbundled?," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1166-1182, April.
    16. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    17. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-2131, August.
    18. Gautier, Pieter A. & Siegmann, Arjen & Van Vuuren, Aico, 2009. "Terrorism and attitudes towards minorities: The effect of the Theo van Gogh murder on house prices in Amsterdam," Journal of Urban Economics, Elsevier, vol. 65(2), pages 113-126, March.
    19. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-254, February.
    20. Derek Stacey, 2012. "Information, Commitment, and Separation in Illiquid Housing Markets," 2012 Meeting Papers 401, Society for Economic Dynamics.
    21. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
    22. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-457, May.
    23. Chang-Tai Hsieh & Enrico Moretti, 2003. "Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1076-1122, October.
    24. Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
    25. repec:reg:rpubli:363 is not listed on IDEAS
    26. Ronald Rutherford & Abdullah Yavas, 2012. "Discount Brokerage in Residential Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40(3), pages 508-535, September.
    27. Melvyn Teo, 2009. "The Geography of Hedge Funds," The Review of Financial Studies, Society for Financial Studies, vol. 22(9), pages 3531-3561, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    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. Panle Jia Barwick & Parag A. Pathak & Maisy Wong, 2017. "Conflicts of Interest and Steering in Residential Brokerage," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 191-222, July.
    4. Chris Cunningham & Kristopher Gerardi & Lily Shen, 2022. "The Good, the Bad, and the Ordinary: Estimating Agent Value-Added Using Real Estate Transactions," FRB Atlanta Working Paper 2022-11, Federal Reserve Bank of Atlanta.
    5. Seung‐Hyun Hong, 2022. "Real estate agents' influence on housing search," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(3), pages 563-582, April.
    6. Marcus T. Allen & William H. Dare & Lingxiao Li, 2018. "MLS Information Sharing Intensity and Housing Market Outcomes," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 297-313, August.
    7. Panle Jia Barwick & Parag A. Pathak, 2015. "The costs of free entry: an empirical study of real estate agents in Greater Boston," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 103-145, March.
    8. 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.
    9. Geoffrey K. Turnbull & Bennie D. Waller & Scott A. Wentland, 2022. "Mitigating agency costs in the housing market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 829-861, September.
    10. Simon Loertscher & Andras Niedermayer, 2012. "Fee-Setting Mechanisms: On Optimal Pricing by Intermediaries and Indirect Taxation," Department of Economics - Working Papers Series 1162, The University of Melbourne.
    11. Loertscher, Simon & Niedermayer, Andras, 2020. "Entry-deterring agency," Games and Economic Behavior, Elsevier, vol. 119(C), pages 172-188.
    12. Sophia Gilbukh & Paul Goldsmith-Pinkham, 2019. "Heterogeneous Real Estate Agents and the Housing Cycle," 2019 Meeting Papers 932, Society for Economic Dynamics.
    13. Agarwal, Sumit & He, Jia & Sing, Tien Foo & Song, Changcheng, 2019. "Do real estate agents have information advantages in housing markets?," Journal of Financial Economics, Elsevier, vol. 134(3), pages 715-735.
    14. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    15. Edward Kung, 2020. "Innovation and Entrepreneurship in Housing," NBER Working Papers 26886, National Bureau of Economic Research, Inc.
    16. Kim, Hayoung, 2022. "Heterogeneous effects of information disclosure: Evidence from housing markets," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 359-380.
    17. Simon Loertscher & Andras Niedermayer, 2007. "When is Seller Price Setting with Linear Fees Optimal for Intermediaries?," Department of Economics - Working Papers Series 1014, The University of Melbourne.
    18. Simon Loertscher & Andras Niedermayer, 2007. "When is Seller Price Setting with Linear Fees Optimal for Intermediaries?," Department of Economics - Working Papers Series 1014, The University of Melbourne.
    19. David C. Ling & Andy Naranjo & Benjamin Scheick, 2021. "There is no place like home: Information asymmetries, local asset concentration, and portfolio returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 36-74, March.
    20. Simon Loertscher & Andras Niedermayer, 2008. "Fee Setting Intermediaries: On Real Estate Agents, Stock Brokers, and Auction Houses," Discussion Papers 1472, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    Keywords

    real-estate brokers; broker incentives; housing; agency;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0692. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica Oscarsson (email available below). General contact details of provider: https://edirc.repec.org/data/naiguse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.