Is the Compensation Model for Real Estate Brokers Obsolete?

Thomas Miceli (), Katherine A. Pancak and C. F. Sirmans
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Katherine A. Pancak: University of Connecticut
C. F. Sirmans: University of Connecticut

No 2006-23, Working papers from University of Connecticut, Department of Economics

Abstract: This study examines the traditional compensation model for real estate brokers under which both the listing and buyer brokers are paid by the seller based on a percentage of the property sales price. We argue that this model has not evolved to reflect contemporary legal agency relationships and technology-driven information availability. It therefore creates substantial transactional inefficiencies for buyers and sellers at both the matching and bargaining stages of a transaction. While there is evidence that market forces are pushing for a change in the status quo, there is also evidence that the brokerage industry is resisting this change by pursuing anti-competitive policies and laws. We explore the economics of the current and alternative compensation structures and suggest policy implications regarding anti-competitive behavior in the brokerage industry.

Keywords: agency; brokerage; multiple listings; percentage commission (search for similar items in EconPapers)
JEL-codes: D83 L85 R33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2006-11
Note: We acknowledge the helpful comments of Abdullah Yavas (special issue editor), an anonymous reviewer, and participants at the Annual Meeting of the Real Estate Society, April 2006.
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Journal Article: Is the Compensation Model for Real Estate Brokers Obsolete? (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2006-23

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