Interview about market design by the National Association of Real Estate Investment Trusts

An interview about market design by the National Association of Real Estate Investment Trusts inevitably turned to the real estate market...

Nobel Prize Winner Alvin Roth Plays the Match Game  By Allen Kenney

Here's the final question and answer:

REIT: What about on a more discrete level? If you’re an executive in the real estate industry, for example, how might you know if you could get better results by changing how you engage in your own micro-markets for deals?

Roth: I’m a sometimes observer and participant in the residential real estate market. The large role still played by realtors is surprising to me as prices and searchability have gone up.

There was a time when the multiple listing service was a monopoly that made it hard to know what houses were on the market if you didn’t engage a realtor. Nowadays, it’s much easier to know what houses are on the market. You can even take virtual tours.

Still, realtors’ commissions have remained steadily at high rates around the country, even as prices have gone up. Of course, there’s more competition among realtors, so it’s not necessarily the case that realtors are all getting rich. But I’m surprised by the high commissions that are still extracted in cases when it’s not clear to me that the realtors are providing a big service.

If commercial real estate is similar, there might be ways to arrange more bilateral transactions. There might be ways to sell without so much assistance from realtors.