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The Effect of Different Brokerage Modes on Closing Costs and House Prices

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Abstract

This study examines the effect of two different modes of real estate broker behavior on both the cash charges paid at closing and the price of houses. The mode of brokers representing only sellers is contrasted with one in which brokers represent buyers. Popular literature and formal studies are reviewed to illustrate the problems inherent in real estate brokers' representation of buyers and sellers. The role of the real estate broker is examined as a provider of information as well as that of a market maker. Two hypotheses are tested: there is no difference to the buyer in shifting cash charges at closing, and there is no difference in house prices attributable to the representational form of real estate brokerage. The study utilizes data on eighty single-family residential sales between January 1989 and August 1990 in north suburban Atlanta, Georgia to test these hypotheses.

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  • Roy T. Black & Hugh O. Nourse, 1995. "The Effect of Different Brokerage Modes on Closing Costs and House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 10(1), pages 87-98.
    • Handle: RePEc:jre:issued:v:10:n:1:1995:p:87-98
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    1. Michael E. Solt & Norman G. Miller, 1985. "Managerial Incentives: Implications for the Financial Performance of Real Estate Investment Trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(4), pages 404-423, December.
    2. Thomas S. Zorn & James E. Larsen, 1986. "The Incentive Effects of Flat‐Fee and Percentage Commissions for Real Estate Brokers," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(1), pages 24-47, March.
    3. Gene A. Marsh & Leonard V. Zumpano, 1988. "Agency Theory and the Changing Role of the Real Estate Broker: Conflicts and Possible Solutions," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 151-164.
    4. Jay N. Ball & Hugh O. Nourse, 1988. "Testing the Conventional Representation Model for Residential Real Estate Brokerage," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 119-131.
    5. G. Donald Jud, 1983. "Real Estate Brokers and the Market for Residential Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(1), pages 69-82, March.
    6. Thomas Potter & Theron R. Nelson & Susan Logan Nelson, 1991. "Product Liability Issues in Real Estate Brokerage," Journal of Real Estate Research, American Real Estate Society, vol. 6(1), pages 87-98.
    7. Sidney B. Rosenberg & John B. Corgel, 1990. "Agency Costs in Apartment Property Management Contracts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(2), pages 184-201, June.
    8. Donald R. Levi & Curtis D. Terflinger, 1988. "A Legal-Economic Analysis of Changing Liability Rules Affecting Real Estate Brokers and Appraisers," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 133-149.
    9. David Geltner & Brian D. Kluger & Norman G. Miller, 1991. "Optimal Price and Selling Effort from the Perspectives of the Broker and Seller," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(1), pages 1-24, March.
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    Cited by:

    1. Joy T. Black & Julian Diaz, III & Marvin L. Wolverton, 1997. "Examination of the Effect of Buyer Agency on the Distribution of Closing Costs," Journal of Real Estate Research, American Real Estate Society, vol. 14(1), pages 43-54.
    2. J’Noel Gardiner & Jeffrey Heisler & Jarl Kallberg & Crocker Liu, 2007. "The Impact of Dual Agency," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 39-55, July.
    3. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    4. repec:dau:papers:123456789/515 is not listed on IDEAS
    5. William G. Hardin III & Ken H. Johnson & Zhonghua Wu, 2009. "Brokerage Intermediation in the Commercial Property Market," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 397-420.
    6. Ken H. Johnson & Randy I . Anderson & James R. Webb, 2000. "The Capitalization of Seller Paid Consessions," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 287-300.
    7. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    8. Geoffrey Turnbull & Jonathan Dombrow, 2007. "Individual Agents, Firms, and the Real Estate Brokerage Process," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 57-76, July.
    9. Sahin, M. Abdullah & Sirmans, C.F. & Yavas, Abdullah, 2013. "Buyer brokerage: Experimental evidence," Journal of Housing Economics, Elsevier, vol. 22(4), pages 265-277.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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