James R. Frew

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

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.

Multiple listing service participation in the real estate brokerage industry: Cooperation or competition?

Yinger [5] presented a model of real estate broker behavior which describes their ability to match home buyers and sellers. The model shows that since larger brokerage agencies assist greater numbers of buyers and sellers, they have a higher probability of finding matches. Moreover, when brokers share listing information, the model shows that the number of successful matches that the brokerage community can achieve is increased. Based on these results, Yinger advocates legislation to make multiple listing service (MLS) membership compulsory.’ He assumes that once such a law is passed, brokers will naturally share all listings with the MLS, “perhaps after a waiting period of a few days,” and hence barriers to entry to the industry would be reduced and more sales achieved. This paper demonstrates that sharing information is often inconsistent with income maximization. On the contrary, when a broker expects to match a listing with his own buyer, expected income would be maximized by withholding the listing from the MLS to avoid the possibility of splitting the commission with another broker, unless the expected penalty costs of this opportunistic behavior outweighed the gains. Given the problems of monitoring and enforcing an MLS-type contract that have been discussed in the literature,2 it is likely that such strategic behavior would often result in a positive payoff, particularly for large brokerage agencies who obtain many of the listings. Thus, although Yinger’s model enhances understanding of advantages of shared listing information, his assumption that the benefits implied by his model automatically hold in the world where income incentives create significant intervening variables commits the same error that has so often made regulation counterproductive. Here again, the enforcement costs

Atypicality and the Natural Vacancy Rate Hypothesis

This paper formulates and tests a model of rent change based on the natural vacancy rate hypothesis. It incorporates the Haurin [6] hypothesis in which the natural rate for particular units is determined by their atypicality. Estimates of the model indicate a natural rate of 6.5%. However, the rate is shown to vary systematically across individual units: the more atypical an apartment unit, the higher the natural rate. Copyright American Real Estate and Urban Economics Association.

The Value of a Real Estate Franchise

Franchise affiliation has become common in the real estate brokerage industry. Department of Commerce estimates show that in 1981 about 30% of all real estate brokerage establishments were franchise affiliated. This paper develops and estimates a model of brokerage firm sales, using sample data collected in 1982 for three North Carolina cities. Controlling for the size and experience of the brokerage staff and the experience of the broker, the paper finds that franchise affiliation contributes to firm sales. Affiliation with a national franchise appears to be worth about

The Effects of Zoning on Population and Employment Density

930,000 in additional sales to the average firm. Copyright American Real Estate and Urban Economics Association.

Transportation Routes, Apartment Rents, and the Assessment of Value

This article examines zonings impacts on population and employment density. It develops a model to explore the effects of zoning on the density of residential and nonresidential land use. Drawing on this model, density gradients that incorporate the effects of zoning are estimated for Greensboro, North Carolina. The model is used to simulate the effects of a change in restrictive-use residential zoning. The simulation shows that a 1 percent increase in the level of restrictive-use residential zoning across all neighborhoods in the city is associated with a 0.3 percent increase in gross population density and a 0.1 percent decline in net density (intensity). It suggests that restrictive-use zoning affects both the density and the intensity of residential land use through its effects on the value of residential land.

Competition Between Original Brands and Generics in Pharmaceuticals: Analysis and Policy Implications

This study examines the rent gradient of a medium-sized city. A regression analysis is performed on the connection between apartment rents and distances to the city center, a freeway, and the closest intersection between freeways. A vector of other attributes is included in the equation to control for differences between sampled apartments. We find all three distance variables to be statistically significant, which indicates that they should be included in rent-estimation models. Moreover, we estimate a quadratic relationship between the rents and both highway variables and a third degree polynomial form for the distance to the city center.

Broker Assessment of Real Estate Franchising: Asset or Expense?

This paper will discuss the significant price differences between original pharmaceutical products and generic drugs which continue to exist long after introduction of lower-priced generics. Apparently, uncertainty about generic quality allows the original brand to maintain a superior image and substantial market share, despite intensive competitive activity. The effectiveness of promotion in maintaining substantial market share after patent expiration is illustrated for Librium(R). Existing policies concerning generic drugs are reviewed, and appropriate revisions will be recommended.

An Investigation of Agency Structure and Broker Attitudes in the North Carolina Real Estate Industry

Results of a three-part study of real estate franchising are reported. Multiple Listing data and broker survey responses are analyzed to determine relative performance, and differences in agency structure and operations, between franchise affiliates and independent firms. Broker attitudes toward franchising costs and benefits are related to structural, competitive, and environmental factors.

Franchise Affiliation and Promotional Techniques: Competition and Comparative Performance Among North Carolina Real Estate Brokers

Population mobility has created a large residential real estate industry, in which over one million participants are increasingly affected by franchise growth (Gaines, 1979). This paper introduces a 1982 North Carolina broker survey whose purpose is to study the impact of franchising on the real estate industry.