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Profitability Through Product Expansion: Does It Work In The Real Estate Brokerage Industry?

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Gustav D. Jud, Retired (Creator)
Daniel T. Winkler, Professor (Creator)
Institution
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: This paper examines the economics of product expansion in the real estate brokerage industry. A two-stage model is developed to examine the effects of product expansion on the profitability of these firms. In the first stage, a variable for additional complementary services is developed through a factor analysis for inclusion in a profitability regression model. In the second stage, the profitability regression equations are estimated with a sample selection correction. When compared with a pure residential brokerage strategy, product expansion offered by real estate brokerage firms has a statistically significant effect on revenues and net profit. The effect on the net margin, however, is statistically insignificant. The factor analysis indicates that inspection, financial, legal, and physical services appear to be important variables leading to higher revenues and net profits.

Additional Information

Publication
Journal of Real Estate Practice and Education; 2008; 11, 1
Language: English
Date: 2008
Keywords
Real estate, Finance, Expansion, Markets