Real Estate Brokers: Do they inflate housing prices? - CEREG

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Table 5 │House price estimates: OLS (continued)The dependent variable is PM2. The values of the coefficient RE for the full and subsambles are presented.Sample Coefficient Std Error Significance level Average PM2Buyer socio-occupational categorySOC2 55.97 49.95 0.263 2128.78SOC3 -28.07 21.71 0.1962 2330.19SOC4 40.39 17.78 0.0232 2126.13SOC5 24.84 25.77 0.3354 2040.37SOC6 23.35 39.06 0.5502 1854.74SOC7 24.87 36.67 0.4978 2310.12SOC8 196.84 71.81 0.0065 2224.88Seller socio-occupational categorySOC2 8.79 49.65 0.8595 2250.89SOC3 22.38 23.87 0.3484 2330.64SOC4 25.13 20.35 0.217 2207.24SOC5 62.23 29.77 0.0368 2139.02SOC6 107.54 52.87 0.0427 1970.84SOC7 29.30 21.07 0.1643 2064.06SOC8 34.39 59.28 0.5621 2119.93Buyer matrimonial statusSingle woman 8.28 24.72 0.7378 2160.36Single man 56.93 19.78 0.004 2108.32Married woman 92.30 71.03 0.195 2207.05Married man -7.38 18.97 0.6971 2235.07Remarried man -9061.37 4441.91 0.2902 2271.15Widow 105.28 81.65 0.199 2257.60Widower -561.42 519.41 0.3156 2274.16Seller matrimonial statusSingle woman 28.36 37.21 0.4462 2200.47Single man 69.91 28.45 0.0141 2232.64Married woman 43.41 40.85 0.2883 2123.92Married man 10.11 16.05 0.5285 2201.02Remarried man -57.32 114.55 0.6179 2168.54Widow 89.65 40.96 0.0289 2021.67Widower 71.02 104.12 0.497 1923.886. ConclusionThe purpose of this study has been to empirically assess whether and to what extent real estateagents affect the sale price of French residential properties. Results were obtained using10,610 residential apartment transactions from twelve cities in France dispersed nationwideand registered in 2005. The estimates suggest that real estate brokers have a positive effect onhousing price. In line with the article of Zietz and Newsome (2002), we find that the impact ofbrokers varies by property size. Statistically significant positive effects were found for oneand two room apartments. The influence of brokers also varies according to the level of24
experience of buyers and sellers measured by age. Sellers above forty years of age appearedto benefit from the services of real estate agents by obtaining higher prices for their homes.While buyers, between thirty and fifty years old, seemed to pay the tribute of theirunawareness of the real estate market. Another major finding is that real estate agents haveheterogeneous behaviors depending on the city location. The estimates revealed that brokersdid not affect prices in all the cities considered and in the cities they did have influence, thelevel was not homogenous. Furthermore, we found one city in which brokers statisticallydecrease housing prices.The answer to the question, to whom real estate brokers benefit the most, is obviously not thebuyers. Although, brokers give valuable information and as it has been proved in earlierstudies they manage to reduce search time of clients, buyers pay twice the services of brokersthrough commission and price. A popular belief states that homeowners who intent to selltheir house on their own add the commission the broker would have charged to the estimatedprice delivered freely by the broker. If this were true than the housing price paid by buyerswould be less when using a broker as the commission is not included in the valuation of thehouse but corresponds to the billing of the services provided. The overall price paid by thebuyer should then be the same whether they are assisted by brokers or non-assisted but in thelatter case they do not benefit from the experience of brokers. It would be interesting tocompare the prices of homes sold by both owners and brokers with the first estimation of theprice given to the owner by the broker. This would enable to assess whether the higher pricesresulting from brokerage intermediation originates in the experience advantage of brokersover owners or in an underestimation of the first valuation of houses.The real estate brokerage industry in the United States, for example, contrary to France offersa complete service to clients. Indeed, American brokers who are involved in the 86% 6 of realestate transactions, do not only sell houses, they offer turnkey solutions which can go from theinscription of children in the new school up to the administrative tasks linked with the housemoving. Offering a large range of services, promulgating strict rules of business ethics,ensuring compliance with regard to these rules, and harmonizing commissions by counting onthe volume rather than the search for the highest price may be a solution to the French realestate brokerage industry problem.6 Baker (2007)25
Page 1 and 2: Real Estate Brokers: Do they inflat
Page 4: esults have risen from empirical st
Page 7 and 8: Zietz and Newsome (2001), examined
Page 9 and 10: - In terms of education he must hol
Page 11 and 12: ias, when not corrected for in the
Page 13 and 14: The number of rooms is included to
Page 15 and 16: Other characteristics such as matri
Page 17 and 18: Table 4 │Probit estimates of brok
Page 19 and 20: This is surprising as the assisted
Page 21 and 22: We estimate separate regressions fo
Page 23: Table 5 │House price estimates: O
Page 27 and 28: ReferencesBajtelsmit, V. L. and E.
Page 29: Annex 2 │Chart of MarseilleThe ma

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