Adversarial Brokerage in Residential Real Estate Transactions: The Impact of Separate Buyer Representation
AbstractAlthough substantial research effort has been directed to the examination of optimal search and pricing behavior under traditional brokerage arrangements, market outcomes under conditions of undisclosed subagency and buyer representation have not been fully explored. This study applies the legal and economic theory of agency to real estate markets with cooperating brokers. The existence of cooperating brokers acting as subagents of the seller with the buyer’s full knowledge does not change the buyer’s and seller’s net payoffs relative to the single-agent case. However, when the buyer mistakenly believes that the cooperating broker/subagent is acting as his agent in negotiations, there may be informational gains that result in a higher selling price and a higher payoff to the seller at the expense of the buyer. The analysis indicates that buyer brokers may be a potential solution to this agency problem. When both parties to a real estate transaction have separate representation, their net payoffs are shown to be higher and the sales price lower than under traditional brokerage arrangements. The result is dependent on several factors, including: market conditions, relative bargaining power of the parties, method of broker compensation, and disclosure of the status of the buyer broker.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by American Real Estate Society in its journal Journal of Real Estate Research.
Volume (Year): 14 (1997)
Issue (Month): 1 ()
Contact details of provider:
Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael A. Arnold, 1992. "The Principal-Agent Relationship in Real Estate Brokerage Services," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(1), pages 89-106.
- Salant, Stephen W, 1991. "For Sale by Owner: When to Use a Broker and How to Price the House," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 157-73, June.
- Abdullah Yavaş, 1992. "A Simple Search and Bargaining Model of Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(4), pages 533-548.
- 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.
- 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.
- Violand, Wendy & Simon, Arnaud, 2011. "Real estate brokers: do they inflate housing prices? The case of France," Economics Papers from University Paris Dauphine 123456789/515, Paris Dauphine University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (JRER Graduate Assistant/Webmaster).
If references are entirely missing, you can add them using this form.