Discount Brokerage in Residential Real Estate Markets

Real Estate Economics, June 2012

Posted: 19 Apr 2011

See all articles by Abdullah Yavas

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Ronald C. Rutherford

University of Texas at San Antonio - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2011

Abstract

Transaction costs are thought to affect asset prices and market liquidity, but the direction and magnitude of these effects continues to be the subject of debate. In the single family residential market discount brokers offer to list a house for a lower price and thus reduce the transaction costs associated with obtaining a match. In this paper we obtain empirical estimates of the price and liquidity impact of a seller selecting a discount broker to market a single family residential property. The unique data set allows for the identification of residential properties that were listed by a discount brokerage firm. The empirical results confirm the predictions of our theoretical model. Using a sample of 318,211 listings and 243,625 sales, we find that houses listed by discount brokers sell at prices similar to non-discount brokerage listings, but are less likely to sell and when they do sell, take approximately 3 days longer to sell. The results indicate that lower transaction costs do not impact housing prices in this market, but are related to asset liquidity.

Keywords: Discount Brokerage, Residential, Real Estate Prices, Time on the Market

Suggested Citation

Yavas, Abdullah and Rutherford, Ronald C., Discount Brokerage in Residential Real Estate Markets (April 18, 2011). Real Estate Economics, June 2012. Available at SSRN: https://ssrn.com/abstract=1814231

Abdullah Yavas (Contact Author)

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Ronald C. Rutherford

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States

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