Penn State University completed a 12-market study that looked at patterns of competition in each market between brokerage firms. Some of the highlights:

  • Real estate sales is an intensely competitive business, surprising since the real estate boom was expected to reduce competition.
  • Franchised firms have a larger market share than local firms.
  • No single firm dominates any one market.
  • Sellers are more informed about property values.
  • Consumers are demanding and brokers are providing a wider range of services.
  • No evidence of increases in For Sale By Owner and Discount Brokers.

3 Responses to “The Real Estate Brokerage Business: Its Intense”

  1. ElamBend says:

    How could a real estate boom lower competition? With all that money being made (or seeming to be made) by brokers and sales people, it’s no surprise that people flooded into the business, especially with the low barriers of entry. And, although it makes sense that the franchises dominate the market as a whole, real estate; particularly home sales remains local and personality driven. Franchises often expand by purchasing local powerhouses, but there are always guys (usually top performers) peeling off and starting their own shop. It is a dog-eat-dog business. It’s no wonder that the turnover is high, and when the real estate market cools, it’ll shed people like a sinking ship. Hopefully, this rat knows how to swim.

  2. Jonathan J. Miller says:

    Thats a great point. However, I think the report authors thought that, going into the study, one or two big established firms would have a competitive advantage and would dominate the rest of the market, simply because they had a head start.

  3. Subjectivist says:

    The real estate brokerage business has low barriers to entry but high barriers to success. In a boom everyone and his mother wants to broker a real estate deal, its when the market cools that the weak get weaned out and the strong survive.