Realtor effects on the housingmarket
Marnix Hazelhoff
17 February 2025
Reading time 4 minutes
Hong, S.-H. (2022). Real estate agents’ influence on housing search. Journal of Applied Econometrics, 37(5), 821-843.
The study focuses on the influence of real estate agents on housing prices and sales strategies. While agents play a crucial role in the selling process, the question remains whether their advice always aligns with the seller's best interests. Analysis by Seung-Hyun Hong (2022) shows that agents handle the sale of their own properties differently from those of their clients.
How do realtors affect the market?
Listing phase
Real estate agents often advise clients to set a lower asking price to speed up the sale, which benefits their commission but may not always be in the seller's best interest. Research shows that homes sold by clients are priced on average 2.84% lower than homes sold by agents themselves. This suggests that agents prioritize their own interests differently than those of their clients.
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Negotiation phase
When selling their own homes, agents negotiate more aggressively than when representing clients. This indicates that they put in less effort to secure the highest possible price for their clients. Additionally, if sellers set a higher asking price, it may require more effort from the agent to attract offers, potentially reducing their motivation to push for a sale.
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Closing phase
The focus in this stage is on finalizing the transaction. Agents streamline legal and administrative processes, which helps complete the sale efficiently. However, since their financial incentive is primarily tied to speed, they may be less inclined to make extra efforts to secure a better deal if it delays the sale.
​How Can Sellers Protect Themselves from Agent Influence?
To achieve a fair selling price, sellers can take a strategic approach to their agent’s advice and level of involvement. The following strategies can help:
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Critically assess agent advice
Use their recommendations as a guideline but determine the asking price based on market research. -
Increase market awareness
Analyze recent sales to set realistic expectations. -
Stay actively involved
Maintain control over the sales strategy and communicate regularly with the agent. -
Set performance agreements
Consider offering bonuses or other incentives to keep the agent motivated. -
Maintain a balanced asking price
Avoid pricing too low or too high to ensure the agent remains engaged in the sale.
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Conclusion
Hong's research shows that real estate agents have a significant influence on the housing market, particularly in the early stages of the sales process. Their advice on listing prices is shaped by their own financial incentives, which may not always be in the seller's best interest. By critically evaluating agent recommendations, actively participating in the sales process, and negotiating strategically, sellers can achieve a more favorable selling price. Transparency and regulation remain essential to ensure that agents support the market in a way that is fair to both buyers and sellers.
