Do Real Estate Agents Compete on Price? Evidence from Seven Metropolitan Areas
HOUSING MARKETS AND THE ECONOMY: RISK, REGULATION, AND POLICY, Lincoln Institute of Land Policy, Edward L. Glaeser & John M. Quigley, eds., 2009
41 Pages Posted: 7 Nov 2009
Date Written: 2009
The extent of competition in the real estate brokerage industry has been the subject of much debate among scholars, policy makers, and the popular press over the past few years. Critics have claimed that “traditional” full-service brokers have restricted competition from discount and limited-service providers in order to maintain artificially high commission rates. Other analysts have countered that the brokerage industry is highly competitive, and that the emergence of alternative service offerings has given home buyers and sellers more information and more choices than ever before. Despite the intensity of the debate, relatively little is known about the current structure of commission rates or the extent to which they vary in ways that are consistent with price competition. This paper uses Multiple Listing Service (MLS) data from seven metropolitan areas to examine variations in buy- side commission rates within markets, across markets, and over time. Our results challenge the prevailing notion of a “fixed commission” world. Although our parameter estimates vary from market to market, our regression analysis suggests that commission rates vary in ways that are both predictable and consistent with market-driven pricing.
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