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Op/Ed

Brokers, agents taking on too many listings and hurting homeowners

With technology connecting agents and consumers in new ways, the industry has responded by taking on more and more listings, but who really pays the price? Homeowners. Let’s look at a new study on the topic.

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It stands to reason that with a finite number of work hours a week, agents, no matter how efficient or technologically empowered they might be, can handle a limited number of listings successfully at any given time.

Yet some brokers and business models today—and agents themselves–are flirting with disaster by taking on too many listings to reap rewards from a system built upon commission-based compensation. The emergence of discount models that seek to increase agent productivity with technology based tools may be making the problem worse.

It stands to reason that if this hamster wheel keeps spinning out of control, somebody is going to lose. Now there’s proof. The big loser is the home seller, but it stands to reason their disappointment will rub off on the agencies and agents that that push too hard for profits.

A new study published in the current issue of the Journal of Housing Economics, How Many Listings Are Too Many? Agent Inventory Externalities and the Residential Housing Market, was conducted by Scott A. Wentland, Xun Bian and Bennie D. Waller of Longwood University in Farmville, VA and Geoffrey K. Turnbull of the University of Central Florida in Orlando.

It found that agents who take on too many listings (15 or more) will end up selling them for 3.0 percent less and will take significantly longer to sell them (129 percent more time) than agents with modest listing inventories (2 to 7 listings).

Moreover, they found that home sellers are the victims of a system that rewards agents with inventories that are too large

Too Many Clients, Too Little Time

“Agents representing 15 or more listings may be trying to represent ‘too many’ clients at one time, resulting in a substantially longer marketing duration and an important source of illiquidity for numerous homes in this market…The compensation structure in the real estate brokerage industry constantly puts agents in situations where they must balance their own interests with various clients’ interests. Agents are rewarded only if the property sells, as traditional full service broker compensation does not take into account the effort exerted to sell a particular property,” the authors concluded.

The study looked at whether agents have an incentive to take on too many listings—at least from the point of view of their clients. Additional listings may represent additional broker commissions, but they also place greater claims on the broker’s time and energy, which in turn can have adverse sales performance consequences for their clients. The dilution of agent effort and agency costs by very large numbers of listings adversely affects home prices and liquidity, the study found.

The study consisted of 21,450 properties residential properties obtained from a Virginia multiple listing service (MLS) for the period April 1999 through June 2009. Roughly half of all listings were represented by agents with medium inventory, where the agent is representing anywhere from two to seven additional listings. Nearly 10 percent of listings were represented by agents with very high inventory where agent inventory exceeded 15 or more additional listings. Nearly 17 percent of listings in the data set were represented by agents with a high or above average number of listings, from 8 to 14 additional listings. Nearly 20 percent of homes sold with listing agents who had one or zero additional inventory on the market. The bulk of the low listings were likely represented by agents who work part-time.

Baseline results showed that a small increase in agent inventory is associated with a slight discount in price and a substantial increase in time on market. The magnitude of the marginal effects are small, which is consistent with the expectation that one additional listing may not impose a very high marginal cost. An increase in agent inventory (9 listings) reduces the sale price by only 0.6 percent and increases marketing time by 13.6 percent, or approximately $1,000 and 15 days on average, respectively.

However, if the listing agent representing a seller had a very high number of other listings (i.e., 15+), that home generally sold for approximately 3 percent less and remained on the market for 129 percent longer than a home listed with an agent with a more modest inventory (i.e., 2 to 7 listings). This amounted to 142 days compared to the reference group whose time on market was on average 110 days. Despite the fact that this group represented only 10 percent of their sample, the result was still striking.

Greater Inventory = Lower Price, Longer DOM

“It is clear from the results that there is a relationship between agent inventory and sales outcomes that sellers care most about: selling price and time on market. Greater agent inventory is associated with a slightly lower price and a significantly higher time on market,” wrote the authors.

The study also compared sales of agent-owned homes with homes owned by clients and found that agents generally sell their homes for approximately 1.6 percent more than client properties. Inventory competition increases the time on market by 26 percent for clients, but only 12 percent for agents. In sum, agent-owned homes still take longer to sell with additional inventory, but not as long as client properties. This supports the theory that the inventory effect is driven primarily by agent incentives.

In the end, the authors place blame on agents, not their brokers or business models. “The results imply that agent incentives to secure additional contracts and potential commissions generate negative externalities for other properties in their inventory. Greater inventory diverts selling effort from existing inventory, resulting in longer time on market for all houses in the inventory. Agent effort to list properties has a direct effect on selling effort itself—a relationship previously overlooked. Further, the effect appears to be causal as well, in light of the identification strategy of employing an owner-agent interaction. It is clear than agent incentives drive this effect,” they said.

This story was originally published on June 08, 2015.

Steve Cook is editor and co-publisher of Real Estate Economy Watch, which has been recognized as one of the two best real estate news sites in the nation by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, Cook was vice president of public affairs for the National Association of Realtors.

Op/Ed

why dressing your best is important even while working from home

(EDITORIAL) Your computer will say work, but your favorite oversized t-shirt says go back to bed. You feel and work your best when you look your best!

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man working from home on laptop

There are many often discussed benefits to working from home. If you’re not spending time on a daily commute, that means you have more time to work on personal projects and share with your family and friends. Plus it saves you gas and/or fare money.

While it’s tempting to cozy up and work in your most comfortable sweatpants or yoga pants, there are a number of reasons that dressing up to go to work can help increase work from home productivity — even if you’re just commuting to your couch!

You should wear pants (yes, every day).

When you look your best, you feel your best, and arguably work your best.

It’s pretty hard to resist the temptation of vegging out a bit if you’ve rolled out of bed and headed to your desk while still wearing pajamas. If you have no plan to get dressed for the day, the temptation to hit the snooze button until the moment you need to be present and accounted for will really work against you.

Your computer will say work, but your favorite oversized t-shirt says go back to bed.

When you’re working from home, planning to get up early and prepare for your day allows you to create a transitional space that will help distinguish your home life from your work life. Dressing for success, even if you don’t see anyone during your office hours, will drive your sense of purpose and help you carve out a more productive space. It will also signify to any family members or roommates that you’ve entered the workspace and shouldn’t be bothered.

If you work from a restaurant, coffee shop, or workspaces, it can make you more approachable.

If you’re not dressed for the part, those around you may assume that you’re spending your time recreationally. Even if you are constantly answering your phone, drafting emails, or working on a project. It’s deceptively easy to look like you’re simply browsing the internet or socializing in casual attire.

There are plenty of opportunities to network and meet new people, even when you work from home. You never know who you may end up connecting with, and dressing appropriately to your profession can send the message that you’re an expert and take what you do seriously.

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Op/Ed

Finding the joy of learning during unprecedented times

(EDITORIAL) Many have had to learn new ways of doing their jobs recently and while it can be frustrating, there can also be a lot of joy in adding to your skillset

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learning on the job

There are so many different types of learning in so many stages of life. Some we may not quite remember like learning how to walk in a time in our life that we didn’t even consider giving up. We have other capabilities that still seem clear as day like learning to swim and after several lessons, you beg the lifeguard to watch you swim an entire lap across the pool so you could go on the diving board. There was also that time the training wheels came off and Grandma finally let go of the back of the banana seat on your pink bike with white wheels and you were on your first bike ride.

There are easy lessons and some really hard ones. No doubt, there were school subjects that lit us up inside and others that we dreaded – all the while feeling like we were alone and no one else quite knew what we were going through. As an adult, there have been lessons that have to be learned over and over again.

If you went to college and can think back to your senior year, do you remember wondering how you were going to demonstrate you had the skills necessary for someone to hire you and pay you for work? Did you worry that you didn’t really know all the ins and outs and how could you share in an interview that you were the perfect candidate?

Now fast forward ten years or so and hopefully, you can stand really proud of all the things you have learned while being in the workforce or a business owner. It seems fair to assume you are familiar with a new software program. You likely have found ways to please customers and/or communicate with your team or boss. At this time, you probably are PC and Mac Proficient as well as now you can lead a webinar on Zoom like the next guy.

Joyful learning is a precious gift in times of boom or bust. As adults and professionals, we make too little use of it. While the joy is a worthwhile end in its own right, joyful learning can also be used to ignite individual careers and collective productivity. Sparking learning joy, earning flexibly, and contributing productively are timelessly valuable pursuits, and are being felt especially acutely now.”

This is great advice from the article “The Simple Joy of Learning on the Job” from the Harvard Business Review and there is no better time to really challenge our personal efforts on creating joy at work than in the current climate. There is a lot out of our control but something that we can consider – what would bring us more joy in the daily grind?

Ideas:

  • Make sure everyone in your meetings knows how to create a virtual background on Zoom (because those are way more entertaining than you would ever expect).
  • Give yourself a chance maybe once per week to watch a TedTalk on a creative process around art, film, music, entertainment (or any industry that you go to for comfort).
  • Log in and click around to see if there is anything you want to learn more about on LinkedIn Learning, Udemy, or Dabble.
  • Try to attend at least one webinar every six months from the professional organization you are in and have on your LinkedIn profile but honestly just haven’t made the time for it.
  • Try Adobe’s Creative Cloud to get your juices flowing
  • If you’ve had entrepreneurial desires, is now a time to ask a family or friend if you can help them with anything as they may be shifting their business to include more (or all) virtual offerings?
  • Consider ways to cheer up colleagues by themed dress code for meetings (Hat Day, Team Sports sweatshirt, Halloween costume day) or consider starting/ending meeting with music.

This article is not meant to imply that everyone needs to learn a new coding language or how to pull insights on big data (albeit those things may interest you too). The idea here is to find our joy again and bring it into our new workspaces which for some of us, that means at home.

If you feel you may have lost your sense of joy, this Design Your Life Workbook has really user-friendly design thinking prompts to help you journal and think through what brings you joy – or even remind you what were things that brought you joy that didn’t necessarily equate to work. It was created for a Career Exploration class at Stanford. The authors also just published this book: Designing Your Work Life: How to Thrive and Change and Find Happiness at Work.

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Op/Ed

The wealthy are miserable in their careers – money isn’t enough

(EDITORIAL) A high salary can be an exciting perk but records show the wealthy truly aren’t happy. You need to have a ‘why’ to live a fulfilling life.

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wealthy are miserable and should find fulfillment at work

The wealthy elite are miserable at work, or so the New York Times alleges in “The Future of Work: Wealthy, Successful, and Miserable.” My knee-jerk reaction was “boo hoo.” Of course, you’ll be miserable if you only work for yourself, a lesson that should have been easily learned and fixed in your 20’s.

The NYT’s example was a wealthy investment banker who earned 1.2 million. It’s extremely hard to find pity for someone who earned that much in a thankless job. And the article was less about the future of work and more about how to find job satisfaction. However, everyone should understand that in order to be happy in a job, you must do something that fulfills you.

Fulfillment comes in a variety of forms. It is fulfilling to help others, while working with colleagues you respect.

Sometimes the job description itself doesn’t lead to fulfillment but the way you work does. For example, I worked for two years as a personal injury paralegal helping car accident victims. If that doesn’t make you cringe, this will: I managed well over 100 cases, a very demanding case load, and was also the Office Manager. Tragedy literally walked into the door and called every day. I adored the job – it was hands down the best I’d ever had. Why? It was intense, varied, and immensely fulfilling because I made a difference every day.

I helped people get their life back and fought against big insurance companies who were screwing people out of their deserved recovery. As a victim of a no-fault car accident myself four years ago, I was on a crusade and loved it.

The reasons I left were a complicated mix of work/life balance issues, but primarily because my husband became deathly ill unexpectedly and I chose him and his life over the job I loved. And I don’t regret it – although I still miss that job that had changed my life for the better (despite being underpaid).

In addition to doing something I believed in, part of what made the job great was autonomy, something the NYT article alludes to.

Autonomy to do the job the way you see fit is a precious thing. But it’s also about finding purpose within yourself to do the job.

I was able to bring a sense of purpose to the job description, something everyone should be doing. It’s more about finding your “why,” your reason for being there every day.

And your “why” must be about more than earning a paycheck. No matter how large it is.

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