Industry News

Experience levels affect likelihood of sales transactions

Published on:

An agent’s work experience is “highly predictive of how successfully and quickly they can sell homes,” according to the authors of a 100-page working paper titled “Heterogeneous Real Estate Agents and the Housing Cycle.”

The report from the National Bureau of Economic Research analyzed 8.5 million real estate transactions from 60 different multiple listing service (MLS) platforms. The research covered housing cycles between 2001 and 2014.

The authors found “inexperienced intermediaries have a large market share, especially following house price booms” and determined that their listings have a lower probability of selling, “and this effect is amplified during the housing bust.” The U.S. housing market is subject to strong boom-bust cycles, they wrote, adding experienced real estate agents have a 24% higher probability of selling listings during housing busts.

“The prevalence of inexperienced real estate agents arises from fixed (“flat”) commission rates and is exacerbated by low entry costs,” stated authors Sophia Gilbukh and Paul Goldsmith-Pinkham. Gilbukh is an assistant professor of real estate at the Zicklin School of Business at Baruch College. Goldsmith-Pinkman is an assistant professor of finance at the Yale School of Management.

Citing 2017 data from the National Association of REALTORS® (NAR), the report notes inexperienced agents are often hired by homebuyers and sellers. Nearly three-quarters (74%) of sellers and 70% of buyers signed a contract with the first agent they interviewed.

Another factor the report notes is “with so many people in the profession, clients may personally know someone who is a licensed agent and hire them to avoid social consequences. Clients do not realize the importance of choosing the right agent or find it difficult to gauge experience,” the authors stated, referencing reports from NAR and Inman that identified concerns around knowledge gaps associated with inexperience. 

Back to top