Conflicts of Interest and the Realtor Commission Puzzle

51 Pages Posted: 25 Aug 2015

See all articles by Panle Jia Barwick

Panle Jia Barwick

Cornell University - Department of Economics

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Maisy Wong

The Wharton School, University of Pennsylvania

Multiple version iconThere are 2 versions of this paper

Date Written: August 2015

Abstract

This paper documents uniformity in real estate commission rates across markets and time using a dataset on realtor commissions for 653,475 residential listings in eastern Massachusetts from 1998-2011. Newly established real estate brokerage offices charging low commissions grow more slowly than comparable entrants with higher commissions. Properties listed with lower commission rates experience less favorable transaction outcomes: they are 5% less likely to sell and take 12% longer to sell. These adverse outcomes reflect decreased willingness of buyers' agents to intermediate low commission properties (steering) rather than heterogeneous seller preferences or reduced effort of listing agents. While all agents and offices prefer properties with high commissions, firms and agents with large market shares purchase a disproportionately small fraction of low commission properties. The negative outcomes for low commissions provide empirical support for regulatory concerns that steering reinforces the uniformity of commissions.

Suggested Citation

Barwick, Panle Jia and Pathak, Parag A. and Wong, Maisy, Conflicts of Interest and the Realtor Commission Puzzle (August 2015). NBER Working Paper No. w21489. Available at SSRN: https://ssrn.com/abstract=2649755

Panle Jia Barwick (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Maisy Wong

The Wharton School, University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-746-3470 (Phone)

HOME PAGE: http://maisy.wharton.upenn.edu/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
14
Abstract Views
315
PlumX Metrics