A new paper by the National Bureau of Economic Research looks at what may happen if the six percent Realtor fee added to the price of a home sale were modified (via Freakonomics).
Lower commissions resulted in significantly higher home sales. Obviously this would benefit the economy:
A one-half reduction in the commission rate leads to a 73% increase in the number of houses each agent sells and benefits consumers by about $2 billion. House price appreciation in the first half of the 2000s accounts for 24% of overall entry and a 31% decline in the number of houses sold by each agent. Low cost programs that provide information about past agent performance have the potential to increase overall productivity and generate significant social savings.
There are other benefits associated with lower or flexible commissions that are not captured by our model... For example, lower commissions reduce transaction costs, which might lead to a more liquid housing market, improved asset allocation, and better housing consumption. Flexible commissions also provide a channel for consumers to choose services tailored to their preferences.
This post was originally posted on The Business Insider
