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Costs and Pricing of Home Brokerage Services

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  • Michael Carney

Abstract

This paper explores a simple economic search model, and various brokerage cost assumptions, to derive brokerage pricing implications for three dimensions of the home transaction: (1) level of home price, (2) new relative to existing home sales, and (3) co‐op relative to non‐co‐op sales. The model incorporates time‐on‐market (the price‐time tradeoff) as an important element in home brokerage (search) It is argued that relative search cost differences imply that commission rates will be lower (1) on sales of higher‐priced homes, (2) on sales of new relative to existing homes and (3) on non‐co‐op relative to co‐op sales. A main contribution of the paper is the presentation of considerable supporting evidence showing variation in actual home brokerage commission rates according to these three variables.

Suggested Citation

  • Michael Carney, 1982. "Costs and Pricing of Home Brokerage Services," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(3), pages 331-354, September.
    • Handle: RePEc:bla:reesec:v:10:y:1982:i:3:p:331-354
    DOI: 10.1111/1540-6229.00269
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    Cited by:

    1. Natalya Delcoure & Norm G. Miller, 2001. "The Future of the US Residential Real Estate Brokerage Industry in Light of the Internet and International Indications," ERES eres2001_147, European Real Estate Society (ERES).
    2. Abdullah Yavas, 2001. "Impossibility of a Competitive Equilibrium in the Real Estate Brokerage Industry," Journal of Real Estate Research, American Real Estate Society, vol. 21(3), pages 187-200.
    3. Gabrovski, Miroslav & Ortego-Marti, Victor, 2019. "The cyclical behavior of the Beveridge Curve in the housing market," Journal of Economic Theory, Elsevier, vol. 181(C), pages 361-381.
    4. G. Donald Jud & Terry G. Seaks & Daniel T. Winkler, 1996. "Time on the Market: The Impact of Residential Brokerage," Journal of Real Estate Research, American Real Estate Society, vol. 12(3), pages 447-458.
    5. Pat Wilson, 1993. "Shared Information - Comparing Multilist and Franchise Operations," Working Paper Series 23, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    6. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    7. 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.
    8. Beck, Jason & Scott, Frank & Yelowitz, Aaron, 2010. "Competition and market structure in local real estate markets," MPRA Paper 27531, University Library of Munich, Germany.
    9. James D. Shilling & C. F. Sirmans, 1988. "The Effects of Occupational Licensing on Complaints Against Real Estate Agents," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 1-9.
    10. Sirmans, C. F. & Turnbull, Geoffrey K., 1997. "Brokerage Pricing under Competition," Journal of Urban Economics, Elsevier, vol. 41(1), pages 102-117, January.

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