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Selling your property: The more convenient
for brokers, the more likely it will sell.
Buying or selling a home can be an overwhelming process. The typical
homeowner buys/sells a property less than a handful of times in a
lifetime (oftentimes as few as once or twice). Indeed, unlike
transactions at the local grocery store or shopping mall, real estate
transactions tend to involve inexperienced buyers and sellers with
relatively little knowledge of the market in which they are transacting.
Researchers at Longwood University (Bennie D Waller and Scott Wentland)
examine a number of potential impediments that buyers and sellers face
that may reduce the probability of a successful transaction. Such
impediments include leaving the property vacant, having tenants in the
property, requiring appointments for showing the property and the amount
of commission offered to the selling broker.
“Real estate operates in a market with high transaction costs, where
search and bargaining costs in particular are quite high” said Scott
Wentland of Longwood University.
As
a matter of fact, this is a significant reason why the services of real
estate professional are employed to reduce some of these costs (which
are not solely monetary).
The
services offered by brokers are not free.
“There are significant impediments faced by buyers, sellers, and
brokers alike to making mutually advantageous exchanges in this market”
said Bennie D. Waller of Longwood University.
For example, a property occupied
with a tenant requires an increased effort on the part of the broker to
arrange an acceptable time for showing the property for the tenant and
buyer. These increased inconveniences on the broker will likely decrease
the probability that the property will sell.
The study was conducted from data comprised of nearly 20,000 properties
that were listed for sale over the period 2000-2009 in an east coast
multiple listing service (MLS).
Of those 20,000 properties listed for sale, 12,516 properties
were sold with the remaining properties being withdrawn from the
marketplace or expiring.
Indeed, a number of factors may function as signals in the listing
contract that might further preclude cooperating brokers from showing
the property such as having “investment” potential, or listing
instructions offering the property “as is”.
Among other things, this language may signal to cooperating
brokers that the listed property may be of sub-standard quality which is
likely to decrease the distribution of offers made on the property.
This investigation explores
the determinants of the probability of sale for properties in which
listing contract profile data function as a signaling mechanism to
brokers about search and transactions costs. Experienced real estate
professionals will carefully evaluate the information available to them
when the property is listed in a multiple listing service. This
information will directly impact the probability of sale due to the
inherent, often non-monetary, costs associated with showing and
negotiating for certain properties. Using a logit model, we examine a
number of non-traditional factors that affect the probability of a
successful transaction, which also impact the marketing duration. Our
results provide strong evidence that excessive transaction costs impact the behavior of the cooperating broker, thereby affecting the probability of
sale and marketing duration. For example, properties which are
overpriced, occupied with tenants, or located far from the listing agent
reflect higher transaction costs, and we find that such impediments
reduce the probability of sale. Our results indicate that such
impediments reduce the overall efficiency of the real estate market and
can help explain, at least in part, the failure of this market to clear
as effectively as other markets.
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