Academic journal article
By Epley, Donald R.
The Journal of Real Estate Research , Vol. 21, No. 3
This article uses canonical correlation analysis to investigate the income characteristics of active real estate agents in the United States who elected to participate in commercial and investment transactions. The model is unique in that it included activity areas to determine the specialties where agents generated the income and the type of clients who paid for the service. Future studies should consider the multiple dependent variable approach with activity areas to capture the relationship between income and the type of work involved.
The income characteristics of real estate agents in the United States are critical information to the real estate firm owner and the real estate industry in general. In essence, income generation characteristics as a group are the critical information that a firm needs to maintain and build its sales personnel, which is its most important asset. The survey results in this study provide a profile of the agents that can be used as the basis for future policies on education.
This article contains the results of a large survey of active real estate agents in the U.S. The first part of the sample was drawn from the most recent lists of active sales and broker licensees in ten states. The second was taken from the membership roles of agents who list affiliation with a commercial organization in the National Association of REALTORS (NAR). The latter included names in thirteen commercial boards and nine commercial divisions for a total coverage of twenty-six states. One objective of the study was to investigate the income characteristics of agents who elect to participate in commercial and investment market transactions.
An analysis of these agent characteristics has not appeared previously in the academic literature. This group is a very significant part of the salesforce that serves clients who are interested in the ownership of income-producing property. Normally, these agents minimize their involvement with single-family residential transactions.
Investigations of this group will become increasingly important as the value of real estate holdings continues to increase with the expansion of the national economy. The local agents who are familiar with the local commercial and investment real estate market trends will be the logical choice to handle the transaction to assure that the appropriate levels of due diligence are satisfied, and all firm guidelines on financial requirements are met.
This study is unique in three areas. First, it provides a statistical baseline comparison at the national level with previous and future surveys. Second, it uses a relatively new statistical approach in the real estate literature that relies on a bundle of multiple dependent variables. This statistical technique was not used in the six previous studies of agent licensee income. Third, it attempts to uncover significant types of activities and clients that provide needed insight into the determinants of agent income. Activity questions are critical to this study and future surveys in an effort to determine the work areas where the agents spend their time and the clients who demand the service.
One conclusion is a recommendation to subsequent researchers that the typical agent makes decisions regarding the level of income in combination with other characteristics. If the purpose of these studies is to explain succinctly the market forces that interact to determine income, the statistical technique selected must be one that utilizes a highly correlated bundle of significant factors. Canonical correlation analysis is shown here as an alternate tool of analysis as opposed to the univariate regression analysis that has appeared in the previous six studies.
Comparisons of wages and salaries among various industries typically are based on a human capital approach (Polachek, 1981; McDowell, 1982; and Willis, 1986). …