Chris Cunningham, Kristopher Gerardi, and Lily Shen
Working Paper 2022-11b
September 2022 (Revised June 2024)
Abstract:
Despite the ubiquity and expense of full-service real estate agents, there is limited empirical evidence of their efficacy. This paper uses data on residential property listings and transactions in three large metro areas spanning more than 20 years to estimate the distributions of real estate agent value-added with respect to both price and time-to-sale outcomes. Controlling for detailed property characteristics and, in some specifications, property fixed effects, we document considerable heterogeneity in the final prices negotiated by real estate agents on both the buy-side and the sell-side of the market, as well as in the time that it takes agents to sell properties. In addition, we show that homes sold using "flat-fee" brokers who provide sellers access to the local Multiple Listing Service (MLS) database but do not provide additional services transact at prices that are from 1 percent to 4 percent higher than the average sale conducted with a full-service agent. While the average agent does not appear to provide enough value-add to justify their high expense, we document the existence of a small fraction of high-performing agents. We show that high performance is persistent and that these agents achieve better outcomes in cold, thin markets compared to booming markets.
JEL classification: D01, D8, J24, G5, L8, R31
Key words: market intermediaries, value-added, bargaining, negotiation, agemcy theory, real estate, prices, time on the market
https://doi.org/10.29338/wp2022-11
The authors thank Brent Ambrose, Salome Baslandze, Danny Ben-Shahar, Jim Conklin, Arash Dayani, Simon Fuchs, Daniel Greene, Sven Damen, Qu Feng, Georg Kirchsteiger, He Tai-Sen, Veronika Penciakova, Mark Jensen, Vincent Yao, Blerina Zykaj, and seminar participants at the University of Florida, the University of Georgia, the University of Antwerp, ULB, the 2022 SMU-Jinan Conference on Urban and Regional Economics, UEA, AsRES-AREUEA Joint Conference, and the ASSA-AREUEA conference for helpful comments and suggestions. They also thank Stephanie Sezen for excellent research assistance. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
Please address questions regarding content to Kristopher Gerardi, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309 or Lily Shen, Clemson University, 145 Business Building, Clemson, SC 29634.
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