Working Paper: NBER ID: w21489
Authors: Panle Jia Barwick; Parag A. Pathak; Maisy Wong
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.
Keywords: real estate; commissions; brokerage; steering behavior; market structure
JEL Codes: D4; L1; L8; R2; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower commission rates (L85) | less likely to sell (R33) |
| lower commission rates (L85) | longer to sell (G19) |
| buyers' agents' preferences (L85) | less likely to sell (R33) |
| buyers' agents' preferences (L85) | longer to sell (G19) |
| larger market shares (L19) | less engagement with low commission properties (L85) |
| less engagement with low commission properties (L85) | worse sales outcomes (L14) |