New business is usually a welcome event for a real estate agent, but how busy is too busy for an agent? Turns out agents with 15 or more listings may take as much as 26 percent longer to sell a home, according to a recent study.
As agent ratings and rankings that take into account transaction data become more popular, the study results have implications for how consumers will choose the agents they work with.
The study, “How Many Listings Are Too Many? Agent Listing Inventory and Sales Performance,” was conducted by researchers at Farmville, Virginia-based Longwood University and the University of Central Florida and presented at the American Real Estate and Urban Economics Association annual conference in January. It is currently in the publication process.
The researchers obtained data from the Central Virginia Regional Multiple Listing Service in Richmond and analyzed 12,388 residential listings sold between April 1999 and June 2009.
The study examined how an agent’s inventory — the number of listings he or she represents — affects the sales outcomes of individual client properties in terms of selling price and time on market.
“People often choose a real estate agent after seeing her face on billboards all over town, which leads them to assume the agent will do a great job selling their house,” said Dr. Scott Wentland, one of the researchers who conducted the study, in a statement.
“But an agent can only devote so much time to a client. The question is: Will that agent sell your house faster because she’s a better agent, or will her workload dilute her efforts? We found it will take longer to sell your house.”
The study controlled for general market inventory, property characteristics and the changing mix of inventory for an agent over time. It also took into account distance between the properties in an agent’s inventory.
The study included listings handled by agent teams as well as individual agents, but did not look specifically at whether there was an effect for agents who worked in teams, Wentland said.
Sellers and agents come to the home-selling process with incompatible incentives, researchers said. In general, sellers want to sell their homes as fast as possible at the highest possible price. Meanwhile, agents get a commission for every sale they have, encouraging them to take on a lot of listings.
As the agent’s inventory of listings grows, the proportion of effort dedicated to each individual listing declines, the study said.
“Let’s say an agent is currently representing nine homes and let’s say nine people walked into their office in one afternoon and increased their inventory by nine listings. Those previous nine listings would take anywhere from 14 to 26 percent longer (to sell), depending on the measure,” Wentland told Inman.
Extrapolating from an average time on market of 111 days, that’s between about 15 and 29 additional days on market. The effect on sales price was slight: less than 1 percent.
To gauge whether those incompatible incentives were at work, the researchers compared the effect of additional inventory competition on the time on market of listings owned by agents themselves. Those listings took 12 percent longer to sell compared to 26 percent for non-agent-owned listings.
Avoid extremes in productivity
There is wide variation in agent productivity. This study found that roughly half of all listings were represented by agents with what the researchers called “medium” inventory: an additional two to seven listings. Nearly 17 percent were represented by an agent with a “high” number of additional listings, eight to 14.
Nearly 20 percent had listing agents with a “low” one or zero additional listings. At the other extreme, nearly 10 percent of listings were represented by agents with “very high” inventory: 15 or more listings.
If a listing agent representing a seller has a “very high” number of other listings, that home generally sells for about 3 percent less and remains on the market for 129 percent longer than a home listed with an agent with a “medium” inventory, the study found.
That amounts to 160 days — more than five months — longer than the medium inventory group whose time on market was on average 124 days, the study said.
Researchers called this result “striking.”
“Agents representing 15 or more listings may be trying to represent ‘too many’ clients at one time, resulting in a substantially longer marketing duration,” they said.
But selling too few homes can also be detrimental. Homes represented by agents with “low” inventory sold for a discount of about 1 percent and stayed on market about 35 percent longer than the “medium” inventory group.
“However, this is likely a part-time agent effect, as agents who represent few homes may have a different level of experience, skills and motivation than agents representing more listings as part of a full-time career,” researchers said.
Agents with a “high” inventory did not seem to have a discernible impact on the sale price and time on market of the homes they represented relative to the “medium” inventory group, the study said.
The results show there’s “nothing particularly wrong” with representing a normal to moderately high amount of listings, Wentland said.
“We found the biggest effect on agents that represented the (largest) amount of homes. One home might not make that much difference, but if an agent has nine or 10 more homes (to sell), that might actually significantly impact your home and how long it takes to sell,” he said.
The study results indicate that agents should take a balanced approach to their workload when considering taking on additional clients, Wentland said.
“All of us sometimes take on more than we can chew. Agents are no different than anybody else. If agents keep their inventory at reasonable levels … that could turn out better for their clients,” he said.
It may also turn out better for an agent’s reputation in the long term, he added.
“It may make sense not to take on quite so many listings so you’re better able to serve your client and ultimately have a better reputation,” he said.
When it comes to sellers, the study indicates they should ask prospective listing agents a key question, Wentland said: How many other people are you representing right now?
“That could be the difference between your house selling in a couple months or maybe six months. If you’re making payments on multiple mortgages, that could be a big deal,” he said.
Editor’s note: This article has been corrected to note that this study has been presented at the American Real Estate and Urban Economics Association annual conference and is currently in the publication process. The article previously stated that the study had been published.
