In the closing weeks of 2005, Chang-Tai Hsieh received nearly a dozen calendars and refrigerator magnets from real-estate agents eager to represent him the next time he buys or sells a home. Just before Halloween, two agents left pumpkins on his doorstep.Mr. Hsieh, an associate professor of economics at the University of California, Berkeley, thinks all this free stuff helps explain what's wrong with America's real-estate brokerage business: Rather than competing on the price of their services, agents tend to spend heavily on marketing gimmicks -- and pass that cost to the consumer.
As home prices soared in recent years, so did the percentage-based commissions charged by agents. Residential real-estate commissions in the U.S. totaled $61 billion in 2004, up 42% from 2000, estimates Real Trends, an industry publication. That's bad news for people who buy or sell homes. But isn't this trend at least making Realtors happy?
