Conflicts of Interest and the Realtor Commission Puzzle

Barwick, Panle Jia; Pathak, Parag A.; Wong, Maisy

doi:10.3386/w21489

Cited by 4 publications

(5 citation statements)

References 32 publications

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“…Similarly, Rosenthal (2015) concluded that experienced selling agents load their high commissions on the housing selling prices, reducing the likelihood of selling the houses. The results are not aligned with Barwick et al (2015), who found that properties listed with lower commission rates experience less favourable transaction outcomes: they are 5% less likely to sell. The results were also not aligned with the findings of Merlo et al (2015), who studied the home selling problem using data on transaction histories for 780 residential properties in England and found that the commission rate is only 1.8% of the home's sale price.…”

Section: Discussion Of Resultscontrasting

confidence: 72%

“…• Real estate agent fees Rutherford and Yavas ( 2012) conducted a study on the impact of discount brokerage in residential real estate markets and found that houses listed by discount brokers sell at similar prices to the nondiscount brokerage listings and are less likely to sell and take longer to sell; hence, increasing the real estate inventories. Moreover, Barwick et al (2015) studied the conflicts of interest and the realtor commission puzzle using a dataset on realtor commissions for 653,475 residential listings in eastern Massachusetts from 1998-2011. The study found that properties with lower commission rates experience less favourable transaction outcomes: they are 5% less likely to sell and take 12% longer.…”

Section: Transaction Costsmentioning

confidence: 99%

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Influence of Transaction Costs on Unsold New Houses Held by Members of Kenya Property Developers Association in Nairobi County

Ngeera

2023

RJBF

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Despite the housing shortage in Kenya, property developers continue to record high numbers of unsold new houses thus tying up funds which jeopardizes the capacity of property developers to engage in constructing more new houses to meet the ever-increasing demand. The purpose of this study was to determine the influence of transaction costs on unsold new houses held by members of the Kenya Property Developers Association (KPDA). The study adopted a positivist philosophy and descriptive correlational research design. The study population consisted of 4,085 unsold new houses. A sample size of 364 units was drawn using a multistage random sampling technique. Property managers of the members of KPDA were the unit of observation and data was collected through a self-administered questionnaire. Data analysis was done through descriptive statistics which comprised of relative frequency distributions, means, and standard deviation. Inferential statistics used included ordinal logistic regression and one-way analysis of variance. The study findings from the generalized ordinal logistic regression revealed that transaction costs of the unsold new houses explained 18.7% of the duration they remained unsold (r 2 = 0.187. Moreover, the results indicated that registration fees (β = 0.398, p < 0.05), real estate agent commissions (β = 0.568, p < 0.05), and legal fees (β = 0.306, p < 0.05) had a significant influence on the duration that new houses remained unsold. The study concluded that transaction costs of the unsold new houses impact the duration the houses remained unsold. The study recommends that residential property developers should consider reducing the transaction costs of the unsold house to below 5% of the quoted price.

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Section: Discussion Of Resultscontrasting

confidence: 72%

Section: Transaction Costsmentioning

confidence: 99%

Influence of Transaction Costs on Unsold New Houses Held by Members of Kenya Property Developers Association in Nairobi County

Ngeera

2023

RJBF

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“…The main result in Table 6 is that homeowners who list via a flat-fee broker are significantly less likely to sell their home within a year, consistent with findings of Barwick et al (2015) who document low commission rate listings have lower propensity to sell. Depending on the city and specification, they are between 6.2% and 10.6% less likely compared to homeowners who hire traditional agents.…”

Section: Probability Of Sale Analysissupporting

confidence: 64%

Untitled

2022

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Despite the prevalence and high cost of real estate agents, there is limited empirical evidence as to the nature or efficacy of their services. In this paper we estimate real estate agents' value-added when either selling or buying homes using data from three large multiple listing services (MLS). We find that homeowners who forgo a conventional real estate agent, but who list their homes on the MLS via a flat fee broker, sell for between 1 and 4 percent more before commission but take longer to sell and are less likely to complete a sale. However, these average effects mask a significant amount of real estate agent heterogeneity. Using a novel aspect of our data, which allows us to identify and track agents over time, we estimate the distributions of real estate agents' fixed effects in both hedonic and time-on-the-market models. We find that exchanging a listing agent in the 25th percentile for one in the 75th would increase the final sales price by 5-6 percent, and a similar exchange for buying agents would lower purchase prices by 4-6 percent. The interquartile range of agent fixed effects from our model of time-on-the-market is 17-25 days. We do not find a significant trade-off between price and time-to-sell, however, as agents who obtain higher prices do not take longer to sell, suggesting that they are not simply setting higher reservation prices. We also show that agents who sell homes for more also appear to pay more for a home when serving as a buyer's agent, indicating that the average agent does not possess exceptional negotiating skills or that such skills are overwhelmed by principal-agent problems. Finally agents do not appear to get better at bargaining; agents do sell faster with experience, but mostly by selling for lower prices.

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“…An investment adviser provides nancial advice rather than transaction services. Although both are often considered nancial advisers, without engaging in misconduct (e.g., Bergstresser, Chalmers, and Tufano, 2009;Mullainathan, Noeth, and Schoar, 2012;Christoersen, Evans and Musto 2013;Chalmers and Reuter, 2015;Egan 2016). 7 For example, Anagol, Cole, and Sarkar (2013) in the insurance industry; Gurun, Matvos and Seru (2015) in the mortgage industry; Hastings, Hortaçsu and Syverson (2015) in the fund industry; and Barwick, Pathak and Wong (2015) in the real estate industry. 6 brokers and investment advisers dier in terms of their registration, duties, and legal requirements.…”

Section: Data and Descriptive Statisticsmentioning

confidence: 99%

The Market for Financial Adviser Misconduct

Egan

Matvos

Seru

2019

Journal of Political Economy

291

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We construct a novel database containing the universe of financial advisers in the United States from 2005 to 2015, representing approximately 10% of employment of the finance and insurance sector. We provide the first large-scale study that documents the economy-wide extent of misconduct among financial advisers and the associated labor market consequences of misconduct. Seven percent of advisers have misconduct records, and this share reaches more than 15% at some of the largest advisory firms. Roughly one third of advisers with misconduct are repeat offenders. Prior offenders are five times as likely to engage in new misconduct as the average financial adviser. Firms discipline misconduct: approximately half of financial advisers lose their jobs after misconduct. The labor market partially undoes firm-level discipline by rehiring such advisers. Firms that hire these advisers also have higher rates of prior misconduct themselves, suggesting "matching on misconduct." These firms are less desirable and offer lower compensation. We argue that heterogeneity in consumer sophistication could explain the prevalence and persistence of misconduct at such firms. Misconduct is concentrated at firms with retail customers and in counties with low education, elderly populations, and high incomes. Our findings are consistent with some firms "specializing" in misconduct and catering to unsophisticated consumers, while others use their clean reputation to attract sophisticated consumers.

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Conflicts of Interest and the Realtor Commission Puzzle

Cited by 4 publications

References 32 publications

Influence of Transaction Costs on Unsold New Houses Held by Members of Kenya Property Developers Association in Nairobi County

Influence of Transaction Costs on Unsold New Houses Held by Members of Kenya Property Developers Association in Nairobi County

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The Market for Financial Adviser Misconduct

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