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Real estate agency perfect competition
Is housing market perfect competition
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To what extent do real estate agencies in Brisbane match the characteristics of a perfectly competitive industry?
For real estate agencies to meet the criteria for a perfectly competitive industry there are three criteria that they have to meet;
Many sellers with small firms
Homogenous product
Easy entry and exit into the particular industry
A basic chart showing the distinct qualities of a perfectly competitive industry, one in which any price above the current market price will not be filled, causing producers to become price takers, where they cannot determine the price, only the quantity supplied.
(A Layton, T Robertson, IB Tucker. 2005. Economics 2nd Edition Australia Nelson)
MANY SELLERS, SMALL FIRMS
There are many real estate firms that are currently in the market in Brisbane.
Large firms such as Raine & Horne, Ray Green, L J Hooker down to the small, privately owned outlets.
On the REIQ (Real estate institute of Queensland) website, (http://www.reiq.com.au) accessed April 6th 2007, a search for real estate agencies in Brisbane inner city alone returned 79 results.
These real estate agencies do not have enough power to influence price in the industry individually due to the large amount of competitors in the industry.
The vast amount of Real Estate firms around the Brisbane CBD, satisfy this theory for a perfectly competitive market in the real estate industry, by having many small firms with plentiful sellers, in which an individual firm cannot determine market price.
HOMOGENUS PRODUCT
To satisfy this second criteria, the product or services that are sold in an industry have to be identical.
The term ‘real estate’ means;
“Land, including all the natural resources and permanent buildings on it”.
(http://www.answers.com/topic/real-estate) Answers website Accessed April 6th 2007
Therefore, a real estate agency offers its service to sell or buy “land, including all the natural resources and permanent buildings on it” on behalf of the consumer.
So are the services that real estate agencies provide identical?
There are many differences in the type and degree of service a consumer is presented with by different real estate agencies.
Firms cannot charge more then the maximum legal rate of commission, which is 5% of the first $18,000 and 2.5% of the balance of the sale price.
Fair Trading website accessed April 08, 2007 (http://www.fairtrading.qld.gov.au/OFT/oftweb.nsf/0/7B752F3FBE4D72F94A256DDD001D25A0?OpenDocument)
While real estate agents have to follow these figures, in the Courier Mail (April 7-8 2007 p9) Leigh Lalonde stated not all agencies charge the maximum commission, some choosing to negotiate with consumers to suit individual needs while others offer flat rate fees.
The State of Missouri requires professionals to obtain a license before providing services to the public, in many careers. Misconceptions hold that issuance of licenses is just something that is needed in order to charge money for services. Licenses are issued however, because the public puts their trust in professionals who are more knowledgeable than they are. Many people today want to avoid the hassles and risks associated with the transfer of land, so they put their trust in licensed real estate professionals. The Missouri Broker Disclosure Form (MBDF) is a document used by the Missouri State Real Estate Commission that attempts to provide the public, knowledgeable information, about agency relationships (the fiduciary relationship between buyers/sellers and agents). It also holds real estate agents and brokers somewhat accountable to the public in representing them in their best interest; all real estate agents are required to present and explain this form to buyers and sellers. It seems in today’s society that greed, corruption, and self-interest has spread like an infectious disease and we live in a world where it is risky to put our trust in other people. The government tries to respond to that corruption by putting into place more regulations and laws to keep people honest. In summary, the Missouri Broker Disclosure Form is a document designed to help the public make an informed choice about the agency type, of the people that they are putting trust in, and the fiduciary commitments due to them.
The next portion of the chapter talks about how real-estate agents use information to gain power and wealth. Most real-estate agents have a better sense of knowing the condition that a home or apartment is in, and this gives them an upper-hand against the buyer or seller. Like the Ku Klux Klan, real-estate agents use secret words and information to
After the housing bubble burst, everyone involved in the process was subject to severe criticism. From the realtors to the land title insurance agents to the banks, the housing industry underwent a major overhaul. In order to make sure that what happened less than a decade ago doesn’t happen again with the same veracity, the American Land Title Association (ALTA), which guides the conduct of land title insurance agents, published a “Best Practices” manual. ALTA seeks to guide its membership on best practices to protect consumers and to meet legal and market requirements. This paper will lay out the best practices used by ALTA for title insurance and settlement.
Real estate agents have one of the largest gender-based wage gaps in today’s economy. There is not one particular economic approach that explains this gap, but a combination of the human capital and statistical discrimination models may account for much of the gap between the wages of male and female real estate agents.
Along these lines, the state of perfect competition that items must be indistinguishable from firm to firm is not met. The restaurant, apparel and shoe commercial ventures all display monopolistic competition. Firms inside those businesses endeavors to cut out their own particular sub industries by offering products or services not copied by their rivals. From numerous points of view, monopolistic competition is nearer than oligopoly to perfect competition. Boundaries to section and exit are lower, singular firms have less control over business sector costs and purchasers, generally, are learned about the contrasts between firm’s products. Monopoly and oligopoly are counterpoints to monopoly and oligopoly. Rather than being comprised of numerous purchasers and couple of buyers. These extraordinary markets have numerous dealers however couple of purchasers. The resistance business in the U.S. constitutes a monopoly; numerous organizations make products and services and endeavors to offer them to a particular purchaser, the U.S. military. A case of an oligopoly is the tobacco
"Real Estate Agents and Brokers." Encyclopedia of Careers and Vocational Guidance. 15th ed. Vol. 5. Chicago: Ferguson's, 2010. 235-44. Print. Ferguson's.
COMP. 12b 17 March 2005 BECOMING A REAL ESTATE AGENT Hello my name is Mike Smith. I am here today to talk to you about becoming a Real Estate Agent. I will let you know everything you need to know about how to become a Real Estate Agent.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
The first step to buying your home is assessing your financial situation. A person must evaluate how much exactly they can afford and borrow. Most people hire a real estate agent to find a home. A real estate agent can help in finding different homes that suit the person’s needs. At the Department of Housing and Urban Development’s website, “You'll want to start searching for a broker as soon as you decide to buy a home. Talk to several and find someone you think you'll be comfortable working closely with”(1) Having a wide range of options is always helpful. An agent can also help in negotiating the price, and showing what the potential buyer needs after finding a home. A buyer might also need the services of a lawyer, a loan officer, insurance agents, and an accountant. In all purchasing your own home is a daunting task if you plan on doing it alone.
Valuation of real estates or properties basically, refers to appraising a property or a real estate to form an opinion about the value of the property. This value is normally the properties’ market value. Properties are heterogeneous in nature; meaning they are not all identical or alike and thus, they have different values. However, it is possible to get a range for the values. There are some obvious factors like physical location of a property that automatically makes the market value of different properties differ. The materials used on a property and other features also contribute to making property differ in their value. Other factors such as the physical size of a property still determine a property’s market value (Histon Fine Homes, 2008
Real estate agencies in Brisbane are dealt with on a daily basis. The focal point of this paper is to analyse firstly to what extent Brisbane real estate agencies match the characteristics of a perfectly competitive industry. Secondly it will examine the pros and cons of the industry in relation to welfare implications using producer and consumer surplus concepts. This paper will not state which market structure real estate agencies fall under, it is just to what extent the agencies fit into a perfectly competitive industry.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
If competitors offer equally attractive products and services, then one will most likely have little power in the situation, because suppliers and buyers will...
A market structure are the characteristics of a market that significantly affect the behavior and interaction of buyers and sellers (Cabiya-an, 2014). This essay will describe the 4 market structures; perfect competition, monopolistic competition, oligopoly and monopoly. I will compare and contrast the market structures in relation to benefits and costs to the consumer and producer.
As compensation they charge a fee for this agreement. Agent and Brokers also differ from a merchant wholesaler because they do not own goods and services that they buy and sell. Agents works closely with buyers and sellers with more lasting businesses (Kotler & Keller, 2012). An example of an agent with this representation is a real estate agent who enters into a contract to sell a house or business to a consumer. The relationship exists until the need is met and at this point the agent collects a pre-determined