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2012 News Releases

Award-winning paper by Longwood student examines real estate issue

May 10, 2012

Brandon Caracciolo

If you're looking for a real estate agent to sell your home, you might be better off choosing someone who doesn't have any properties of his or her own on the market, the results of a Longwood University research study indicate.

Conducted by Longwood business student Brandon Caracciolo, the study showed that properties owned by real estate agents sell for more and are on the market longer than properties owned by agents' clients. This could mean that agents' interest in making money for themselves trumps their obligations to their clients, said Caracciolo.

"The Performance of Owner-Agent Properties during Volatile Economic Conditions" won a best paper award in January at the annual Clute Institute conference, an international conference devoted to business research.

"Brandon's paper was the only one by a student at his session; the other four papers were presented by college professors," said Dr. Bennie Waller, who directed the research project. "The number of students who even present papers at this conference is incredibly small."

The data for the study included 78,339 listings, of which 46,386 sold, from a multiple listing service in central Virginia between 1995 and 2009. In addition to examining that entire period, the study broke down the data in two periods - before the housing market crash, 1995-2007, and after the crash, 2007-09, which revealed significant differences.

"What made the paper so different is that it spans the economic crisis," said Waller, professor of finance and real estate and chair of the Department of Accounting, Economics, Finance and Real Estate. "The results of this study are very strong."

Caracciolo looked at the situation in which an owner-agent is trying to sell property he owns - not his primary residence but usually a vacation home or second home - in addition to properties owned by clients. Caracciolo found that, although there were no significant differences in selling price before the economic crisis, in the period after the crisis (2007-09), agent-owned properties on average sold for $7,603 more than comparable client properties.

Caracciolo found similar results for time on market: No significant difference between agent-owned properties and client properties before the crisis, but, after the crisis, agent owner-agent properties were on the market 26 days longer than comparable client properties.

One possible explanation for the disparity in selling price and time on market could be that owner-agents were more motivated to sell their own properties, which may "violate the agent's fiduciary duties," Caracciolo said.

On the other hand, he said, many traditional sellers often have to act quickly due to job transfers and other factors, thus making them more willing to sell faster and for less. Agent-owned properties may stay on the market longer because they are investment properties, he added.

The difference in results for 2007-09, as compared with the period before the crisis, could be explained by the mass exodus of agents, Caracciolo said. Those who remained were likely to be experienced, successful agents who have "staying power," which might also explain the prolonged market time and higher sales price for their own properties. "They are more likely to own historic properties, water access properties, and properties that do not reside in specific geographical areas," Caracciolo wrote in his paper.

Caracciolo, who graduates May 12 with a double concentration in finance and real estate, conducted the study as part of an independent honors research project. A resident of Woodbine, Md., he plans to attend the University of Baltimore School of Law in the fall and is interested in a career in the "commercial side of business law."