Time on the Market: The Impact of Residential Brokerage
Jud, G Donald, Seaks, Terry G, Winkler, Daniel T, The Journal of Real Estate Research
G Donald Jud*
Terry G. Seaks*
Daniel T. Winkler*
Abstract. This paper examines the impact of brokers, brokerage firms and marketing strategy on time on the market (TOM) in the residential housing market. Using a duration model methodology, the study finds duration dependence to be positive, suggesting that the probability of sale increases with TOM. Pricing-related marketing strategies are found to strongly influence TOM, but individual agent and firm characteristics are not statistically significant. These results are consistent with an efficient market within a multiple listing service-no group of agents or firms appears to possess special advantages enabling them to sell homes more quickly than their rivals.
Introduction Residential housing is not a liquid asset, as anyone who has ever tried to sell a house can attest. Because housing is illiquid, homesellers often employ real estate brokers to assist with a sale. This paper assesses the impacts of brokers, brokerage firms and price-related marketing strategies on housing liquidity.
The degree of housing market illiquidity is most often measured by time on the market (TOM). A number of studies have examined the determinants of TOM. Belkin, Hempel and McLeavey (1976) demonstrate that TOM is a positive function of the difference between listing price and selling price. Miller (1978) reports a positive relationship between list price and TOM. Additional studies by Janssen and Jobson (1980), Kang and Gardner (1989), and Asabere, Huffman and Mehdian (1993) have confirmed that listing price and above-market pricing affect TOM. These studies, however, use regression analysis instead of the more appropriate duration model approach.
Kalra and Chan (1994), Yang and Yavas (1995a), and Haurin (1988) report that TOM is influenced by local and national economic conditions and is subject to strong seasonal effects. Haurin (1988), drawing on search theory developed by Feinberg and Johnson (1977), shows that TOM is positively related to the atypicality of a house, that is, more unusual houses require more time to market.
Haurin also reports that larger brokerage firms sell homes more rapidly than smaller ones. The effect of brokerage firm size on TOM is confirmed by Larsen and Park (1989) and Sirmans, Turnbull and Benjamin (1991); however, Yang and Yavas (1995a) report that the size of the selling firm has no effect. In a separate study, Yang and Yavas (1995b) find that homes listed and sold by the same brokerage firm do not sell more rapidly than others. Their findings do not support the suspicions of some researchers (see Carney, 1982, and Frew, 1987) that listing brokers may systematically delay submitting properties to their multiple listing service (MLS) that they expect to sell quickly and at low cost. Sirmans, Turnbull and Benjamin (1991) also find no support for this proposition. Yang and Yavas (1995b) report further that commission rates of selling agents do not significantly impact TOM; however, increases in the number of listings (sales) of the listing agent increases (decreases) TOM.
Most brokers try to represent themselves as having special abilities and knowledge that enable them to sell a home more quickly and at a higher price than their rivals. When choosing a real estate agent to sell a home, sellers often are encouraged by broker advertising to select the agent who touts selling a home at a higher price in a shorter period of time. The question in which we are interested is whether the seller's choice of a real estate agent affects housing liquidity, or TOM. From the seller's perspective, the issue is whether there are savings in marketing time to listing with some agents or firms in preference to others. Section two of the paper formulates an analytical model to assess agent performance. Sections three and four present the methodology and sample data, respectively. Section five sets forth empirical estimates of the model, and the final section summarizes findings and discusses the implications of the study. …