The Listing Broker Phenomenon: Does the Listing Broker Impact the Percentage of Asking Price Realized in a Residential Sale? (2003)

ABSTRACT Is the selling price affected if the listing broker in a real estate transaction is also the selling broker? Does a property sell faster if the listing broker is also the selling broker? If in fact there are effects because of the dual presence of the broker in a transaction, what are they? In this paper we attempt to address these questions. INTRODUCTION There are many factors which influence both the length of time required to sell a piece of residential property and the final selling price of the property. The location and the physical attributes such as size, age, number of rooms, condition of the house, and other such items have an obvious impact on the value of the property. The time required to sell the property depends on these items as well as the listing price of the property. However, other factors such as the general economic conditions of the area and the level of mortgage interest rates may influence the number of days the property will remain on the market and the final selling price. Here we address the issue of the real estate broker in the real estate transaction process. In some sales, the broker listing the property for sale is also the broker making the final sale. In other sales, the listing and selling brokers are different. Does this make a difference in the selling price and the time the property is on the market? Based on eighteen years of real estate data, some interesting results are found. Literature Review Knight (2002) reports the results of a study that show the price change effect on the sales of houses. Using the maximum likelihood probit model, he finds houses undergo price changes most frequently when the markups are high. Those houses with unusual features are least likely to undergo price changes from list. This study suggests that mispricing a home in the initial listing can be very costly to the seller in terms of both time and money. If large price changes do occur the houses take longer to sell and tend to sell at lower prices. Yavas, Miceli, and Sirmans (2001) did an analysis of bargaining between the buyers and sellers and their relationship to an intermediary (broker). The results show that intermediaries increase the selling price and increase the time it takes to reach an agreement. Their study concludes that the major benefit of a broker may lie predominantly in the matching of buyers and sellers and not in the facilitating of bargaining. Rutherford, Springer, Yavas (2001) did an analysis comparing the use of an exclusive agency listing and an exclusive right to sell listing in real estate transactions involving a broker. Their study concluded that while both types of contracts yield the same price in a transaction, the exclusive agency contract resulted in a faster sale (or lower number of days on market). The faster sale is typically accomplished at the cost of accepting a lower price. An exclusive agency contract is correlated with more price concession during negotiation. Elder, Zumpano, and Baryla (2000) examine the role of a buyer broker (a broker who is paid by the buyer rather than the seller for services rendered) in the home buying process. They looked at the effects of the presence of buyer brokers and the selling price and number of days the property remained on the market. They conclude that with a buyer broker there is no price effect but a reduction in the buyer search time compared to for-sale-by-owner (FSBO) transactions. They conclude buyer brokers are more effective in reducing search times for their clients than the more traditional seller agents or other types of arrangements. Other studies have shown that there are several factors impacting housing prices and the time required to sell the property. In 1996, Capies, Hanna, and Smith studied the effects of employment and interest rates on housing prices. They concluded that changes in housing prices typically lag behind changes in employment. …