Working Papers

The Impact of Agent Experience on Cooperating Broker’s Commission Rate and the Effect of Price and Liquidity in a Simultaneous Framework.  Bennie D. Waller.  Working paper, 2020.

The homo economicus or economic man model asserts that economic agents are rational and pursue optimal utility outcomes, such as income/wealth, for ones own self-interest while minimizing their efforts.    However many have criticized this theory as being too rigid as not all economic agents tie their efforts to payoff (e.g., teachers, social workers), however if such an individual’s effort does not impact their payoff, such an economic man will shirk as much as possible – regardless of the impact on others (Brekke and Nyborg, 2010).  Such a homo economicus might be used to describe some portion of real estate brokers.  In fact, there is a significant literature surrounding the moral hazard and asymmetric information disparities that exist between the principal (seller) and agent (broker).

As with most employed individuals, real estate agents are no different in that they seek to maximize their income, which in the real estate brokerage profession is based on commission.  A real estate broker’s generation of income is dynamic in that it is typically a percentage of property selling price. That is, commission revenue is the product of the selling price multiplied by a percentage of the selling price. Holding all else constant, it is tautological to suggest that a broker will benefit from garnering larger commission rates (or keeping a higher percentage of the commission split if the property is sold by a cooperating broker) on higher priced properties.  However, it is not that simple as the broker and the homeowner (seller) negotiate the terms of the listing contract including the commission rate and commission rate split for cooperating broker.  The ability to list premium properties and charge a higher commission rate is largely driven by an agent’s reputation which consists of a variety of components, but one of the more significant ones is likely to be agent experience.  This research examines broker experience and commission split for the selling broker and the impact on marketing outcome.  Preliminary findings reflect that the objectives of the seller and the listing agent may not be compatible in certain instances.

The Impact of Presidential Elections on the Marketing Outcomes of Residential Properties. Geoffrey K. Turnbull, Bennie D. Waller and Justin Contat.

Using a data set from a central Virginia MLS, we show that the uncertainty in the housing market before an election has statistically significant effects on both price and time on market, though the sign and magnitude of the changes depend upon the type of election. For presidential elections without an incumbent running, we find that election uncertainty is associated with a decrease in both price and time on market, both before and after the election. In contrast, for presidential elections with an incumbent and gubernatorial elections, we find that election uncertainty is associated with an increase in price and time on market, both before an after the election. Our results also suggest that these effects are likely to persist even after the election has occurred.

Property Occupancy: The Anomalies of Owner Agent Properties and the Resulting Impact of Principal/Agent Conflict. Geoffrey K. Turnbull, Bennie D. Waller and Velma Zahirovic-Herbert.

This study examines the marketing outcomes of client properties listed and marketed for sale by a real estate broker concurrently being marketed with clients’ listing agent’s personally owned property.  More specifically, we examine the various marketing outcomes dependent upon the property occupancy type of client and listing agent’s property (i.e., owner occupied, vacant or investment).  That is, does the occupancy type of an agent-owned property competing with a client property (owner occupied, vacant or investment) have a marketing impact on the outcome of the client property?  In this study, we examine the selling price and marketing liquidity of these client properties competing against concurrently marketed agent-owned properties.

Such conflict does impact the marketing outcomes both in terms of price and liquidity.  Dependent up the marketing combinatoric mix of client and owner agent properties being concurrently marketed; client property pricing outcomes vary upon occupancy types.  For example, a client-occupied property competing with owner-agent occupied property will transact at a $251 discount, while a client-vacant property will sell at a pricing premium of approximately $2,500 when concurrently being marketed with an agent-occupied property.  However, the major finding or take-away from the study is that all client properties regardless of occupancy type competing with a concurrently owned listing agent property regardless of occupancy type will endure significantly longer marketing duration ranging from 6.23% or about 5 additional days on market for client-vacant properties competing with agent-owned vacant properties to 37.71% or approximately 33 additional days for client-investment properties competing with listing agent-occupied properties.

Collectively these results provide evidence that clients working with a listing agent that is simultaneously marketing an agent-owned property is likely to encounter principal agent conflicts that may not exist for clients employing agents with no such conflicts.