Real Estate Brokers, Housing Prices, and the Demand for Housing

Abstract

This study examines the role of real estate brokers in the market for residential housing. It is shown that brokers obtain higher prices for the homes they sell and implicitly shift part of the brokerage-commission burden to the buyer. Evidence also is found to suggest that buyers who search the housing market with the assistance of a real estate broker have a higher demand for housing than buyers who shop the housing market without the help of a broker. Real estate agents thus appear to be salesmen for the housing industry and to generate effects very similar to that of advertising.