The impact of minimum services laws on real estate brokerage competitive intensity

As many as fourteen US states have now mandated minimum service requirements for real estate brokerage relationships in residential transactions. This study attempts to determine whether these minimum service laws have any impact on brokerage competition. Federal government agencies allege such laws discourage competition because they limit the offering of nontraditional brokerage services. However, alternatively, a legislative “bright line” definition of the lowest level of acceptable service may reduce any perceived risk in offering non-traditional brokerage services and therefore encourage competition. Using several empirical strategies and state-level data over nine years (2000-08), we do not find any consistent and significant impact (positive/negative) of minimum services laws on number of licensees per 100 households, our proxy for competition. Interestingly, we also find that association strength, as measured by Realtor association membership penetration, has a strong deterring effect on competition.

Do laws influence the cost of real estate brokerage services? A state fixed effects approach

A FTC-DOJ study argues that state laws and regulations may inhibit the unbundling of real estate brokerage services in response to new technology. Our data show that 18 states have changed laws in ways that promote unbundling since 2000. We model brokerage costs as measured by number of agents in a state-level annual panel vector autoregressive framework, a novel way of analyzing wasteful competition. Our findings support a positive relationship between brokerage costs and lagged house price and transactions. We find that change in full-service brokers responds negatively (by well over two percentage points per year) to legal changes facilitating unbundling