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Renegotiation of Listing Contracts, Seller Opportunism and Efficiency: An Economic Analysis

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  • Thomas J. Miceli

Abstract

When a property owner engages a real estate broker to sell his or her property, the parties enter into a listing contract which entitles the broker to a commission if a ready, willing and able buyer is found before the contract expires. While a limit on the duration of the contract provides the broker with an incentive to work hard to find a buyer, it also creates the potential for seller opportunism. In particular, sellers have an incentive to renegotiate a lower commission as the end of the contract approaches. The paper concludes that, from an efficiency perspective, courts should generally enforce such renegotiations, given that transaction costs between brokers and sellers are ordinarily low.

Suggested Citation

  • Thomas J. Miceli, 1995. "Renegotiation of Listing Contracts, Seller Opportunism and Efficiency: An Economic Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(3), pages 369-383, September.
    • Handle: RePEc:bla:reesec:v:23:y:1995:i:3:p:369-383
    DOI: 10.1111/1540-6229.00669
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    Cited by:

    1. Edward Rosenthal, 2011. "A Pricing Model for Residential Homes with Poisson Arrivals and a Sales Deadline," The Journal of Real Estate Finance and Economics, Springer, vol. 42(2), pages 143-161, February.

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