The Impact of Agent Experience on the Real Estate Transaction

Article excerpt

Abstract

This research examines the productivity of real estate agents who acquire and maintain their real estate salesperson's license for two years or less (rookie) relative to those who have been licensed agents for 10 years or more (veteran). The findings show that properties listed by rookie agents will sell for approximately 10% less than those listed by more experienced agents. Properties listed by rookie agents also endure a significantly longer marketing duration than those of more experienced agents. Properties listed by veteran agents also sell for approximately 2% more than those of rookie agents and did so 32% faster. Finally, while the inexperienced agent does not significantly influence the probability of a sale, the more experienced agent does significantly increase the probability of a successful transaction.

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In situations where a real estate agent is utilized in a real estate transaction, it is the role of the agent to act as a conduit between the buyer and seller. According to the National Association of Realtors, 85% of sellers use the services of a real estate agent when selling their home while 79% of homebuyers utilize such services when purchasing a home (National Association of Realtors, 2011). It is generally accepted that homeowners looking to sell their property will seek out the services of an agent who will assist in an expedient transaction at the highest possible price. On the contrary, a potential homebuyer will desire the services of an agent who inspires confidence that a suitable property will be located while minimizing the transaction price. Real estate professionals are hired for their expertise and specialized knowledge; however, it is obvious that the experience and productivity of such individuals will vary significantly. For example, experienced agents are likely to have a greater breadth of knowledge as to the local housing market, neighborhoods, zoning ordinances, and school districts. It is also more likely that experienced agents will have developed ancillary relationships with home inspectors, appraisers, mortgage brokers, among others who may participate in the transaction process.

Individuals choose a career based on myriad reasons. Many choose to become a real estate agent due to schedule flexibility, potential income, and low barriers to entry. Such a career provides independence and a varied choice of employment opportunities, such as a large franchised brokerage firm or a smaller independent firm. There is also the prospect for real estate licensees, with experience and other additional requirements, to become real estate brokers and become able to own their own brokerage firms. Additionally, real estate licensees can choose to work as many or as few hours as desired, therefore making the profession appealing to those seeking part-time or flexible work schedules. This is quite a contrast to most occupations that require employees to work a fixed schedule determined by employers. Such flexibility coupled with the potential for high income attracts many opportunists to the industry, some of whom have not made a solid commitment to real estate as a career ( Jud and Winkler, 1999). Real estate agents are usually compensated on a commission-only basis, therefore income is highly correlated with the amount of time and effort exerted by the individual with the potential for unlimited income for disciplined, hardworking agents willing to work evenings, weekends, and holidays.

The requirements for obtaining a real estate salesperson's license are considered by many to be minimal. While licensure is required by every state as well as the District of Columbia, these requirements vary considerably by state. Some states require the successful completion of a pre-licensure course accredited by the state licensing agency, while other states allow these courses to be taken after being licensed (National Association of Realtors, 2011). …