The Journal of Real Estate Finance and Economics

, Volume 43, Issue 3, pp 336–358 | Cite as

The Limited-Service Brokerage Decision: Theory and Evidence

  • Jonathan A. Wiley
  • Leonard V. Zumpano
  • Justin D. Benefield


This study examines the home seller’s brokerage services decision, comparing full-service brokerage and limited-service arrangements. A model is developed which considers seller motivation and availability of effort, along with the cost of brokerage services, broker productivity and market dynamics as factors of influence in this decision. Limited-service arrangements are found to have a significant impact on price and marketing time. The popularity of limited-service arrangements is strongly influenced by the total dollar cost of brokerage services, which, in turn, is determined by housing market conditions.


Limited-service Brokerage Principal-agent 


  1. Anglin, P. M. & Arnott, R. (1991). Residential real estate brokerage as a principal-agent problem. Journal of Real Estate Finance and Economics, 4, 99–125.CrossRefGoogle Scholar
  2. Anglin, P. M., Rutherford, R. C., & Springer, T. M. (2003). The trade-off between selling price of residential properties and time-on-the-market: the impact of price setting. Journal of Real Estate Finance and Economics, 26, 95–111.CrossRefGoogle Scholar
  3. Arnold, M. A. (1992). The principal-agent relationship in real estate brokerage services. Real Estate Economics, 20, 89–106.CrossRefGoogle Scholar
  4. Benjamin, J. D. & Chinloy, P. T. (2000). Pricing, exposure, and residential listing strategies. Journal of Real Estate Research, 20, 61–74.Google Scholar
  5. Benjamin, J. D., Jud, G. D., & Sirmans, G. S. (2000). What do we know about real estate brokerage? Journal of Real Estate Research, 20, 5–30.Google Scholar
  6. Cubbin, J. S. (1974). Price, quality, and selling time in the housing market. Applied Economics, 6, 171–187.CrossRefGoogle Scholar
  7. Elder, H. W., Zumpano, L. V., & Baryla, E. A. (2000). Buyer brokers: do they make a difference? their influence on selling price and search duration. Real Estate Economics, 28, 337–362.CrossRefGoogle Scholar
  8. Fisher, L. M. & Yavaş, A. (2009). A case for percentage commission contracts: the impact of a “race” among agents. Journal of Real Estate Finance and Economics, doi: 10.1007/s11146-008-9139-x.Google Scholar
  9. Han, L., Hong, S. (2009). Testing cost inefficiency under free entry in the real estate brokerage industry. Working paper, November 9, 2008. Available at SSRN:
  10. Hsieh, C. & Moretti, E. (2003). Can free entry be inefficient? fixed commissions and social waste in the real estate industry. Journal of Political Economy, 111, 1076–1122.CrossRefGoogle Scholar
  11. Johnson, K. H., Springer, T. M., & Brockman, C. M. (2005). Price effects of non-traditionally broker-marketed properties. Journal of Real Estate Finance and Economics, 31, 331–343.CrossRefGoogle Scholar
  12. Jud, G. D., Seeks, T. G., & Winkler, D. T. (1996). Time-on-the-market: the impact of residential brokerage. Journal of Real Estate Research, 12, 447–458.Google Scholar
  13. Knight, J. R. (2002). Listing price, time on market, and ultimate selling price: causes and effects. Real Estate Economics, 30, 213–237.CrossRefGoogle Scholar
  14. Megbolugbe, I. F., Marks, A. P., & Schwartz, M. B. (1991). The economic theory of housing demand: a critical review. Journal of Real Estate Research, 6, 381–393.Google Scholar
  15. Miller, N. G. (1978). Time on the market and selling price. Real Estate Economics, 6, 164–174.CrossRefGoogle Scholar
  16. Munneke, H. J. & Yavaş, A. (2001). Incentives and performance in real estate brokerage. Journal of Real Estate Finance and Economics, 22, 5–21.CrossRefGoogle Scholar
  17. Nash, J. (1950). The bargaining problem. Econometrica, 18, 151–162.CrossRefGoogle Scholar
  18. Rutherford, R. C., Springer, T. M., & Yavaş, A. (2001). The impacts of contract type on broker performance. Real Estate Economics, 29, 389–409.CrossRefGoogle Scholar
  19. Rutherford, R. C., Springer, T. M., & Yavaş, A. (2005). Conflicts between principals and agents: evidence from residential brokerage. Journal of Financial Economics, 76, 627–665.CrossRefGoogle Scholar
  20. Sirmans, G. S., Macpherson, D. A., & Zietz, E. N. (2005). The composition of hedonic price models. Journal of Real Estate Literature, 13, 1–44.Google Scholar
  21. Williams, J. T. (1998). Agency and brokerage of real assets in competitive equilibrium. Review of Financial Studies, 11, 239–280.Google Scholar
  22. Yavaş, A. (1992). A simple search and bargaining model of real estate markets. Real Estate Economics, 20, 533–548.CrossRefGoogle Scholar
  23. Yavaş, A. (1994). Economics of brokerage: an overview. Journal of Real Estate Literature, 2, 169–195.Google Scholar
  24. Zorn, T. S. & Larsen, J. E. (1986). The incentive effects of flat-fee and percentage commissions for real estate brokers. Real Estate Economics, 14, 24–47.CrossRefGoogle Scholar
  25. Zumpano, L. V., Elder, H. W., & Baryla, E. A. (1996). Buying a home and the decision to use a real estate broker. Journal of Real Estate Finance and Economics, 13, 169–181.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Jonathan A. Wiley
    • 1
  • Leonard V. Zumpano
    • 2
  • Justin D. Benefield
    • 3
  1. 1.Clemson UniversityClemsonUSA
  2. 2.The University of AlabamaTuscaloosaUSA
  3. 3.College of Charleston5 Liberty Street, 4th FloorCharlestonUSA

Personalised recommendations