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The Impact of Dual Agency

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Author Info

  • J’Noel Gardiner

    ()

  • Jeffrey Heisler

    ()

  • Jarl Kallberg

    ()

  • Crocker Liu

    ()

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    Abstract

    In 1984, the State of Hawaii’s legislature enacted a law making it mandatory for real estate agents engaged in dual agency relationships (i.e., when the seller’s and the buyer’s agents are employed by the same real estate firm) to disclose this fact to both parties in writing. The assumption was that the dual agency relation was damaging to the seller. This study analyzes the effect of disclosed and undisclosed dual agency, and the impact of the legislation, using data prior to and after the legislation (approximately 2,000 residential sales in each period). To account for property characteristics, hedonic models for the log of sale price and for the log of days on market are estimated in each period. Our empirical analysis suggests that dual agency significantly reduced the sales price, but the influence was much smaller after the legislation (8.0 versus 1.4%). In addition, dual agency significantly decreased the time on market by approximately 8.5% pre-legislation and 8.1% post-legislation, although the influence was much stronger for lower priced residences. These results are confirmed using a seemingly unrelated regression model. Copyright Springer Science+Business Media, LLC 2007

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    File URL: http://hdl.handle.net/10.1007/s11146-007-9028-8
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    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 35 (2007)
    Issue (Month): 1 (July)
    Pages: 39-55

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    Handle: RePEc:kap:jrefec:v:35:y:2007:i:1:p:39-55

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    Web page: http://www.springerlink.com/link.asp?id=102945

    Related research

    Keywords: Brokerage; Property law; Real estate services;

    References

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    1. Mayer Christopher J., 1995. "A Model of Negotiated Sales Applied to Real Estate Auctions," Journal of Urban Economics, Elsevier, vol. 38(1), pages 1-22, July.
    2. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August.
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    4. Vickie L. Bajtelsmit & Elaine Worzala, 1997. "Adversarial Brokerage in Residential Real Estate Transactions: The Impact of Separate Buyer Representation," Journal of Real Estate Research, American Real Estate Society, vol. 14(1), pages 65-76.
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    9. Williams, Joseph T, 1995. "Pricing Real Assets with Costly Search," Review of Financial Studies, Society for Financial Studies, vol. 8(1), pages 55-90.
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    11. 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.
    12. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-74, December.
    13. Yinger, John, 1981. "A Search Model of Real Estate Broker Behavior," American Economic Review, American Economic Association, vol. 71(4), pages 591-605, September.
    14. Rutherford, R.C. & Springer, T.M. & Yavas, A., 2005. "Conflicts between principals and agents: evidence from residential brokerage," Journal of Financial Economics, Elsevier, vol. 76(3), pages 627-665, June.
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    Cited by:
    1. Shu-Man You & Chun-Chang Lee & Ming-Hsun Tseng, 2012. "An Examination of Service Quality, Transaction Costs and Sales Ethics among Real Estate Advertising Sales Agents," International Real Estate Review, Asian Real Estate Society, vol. 15(2), pages 189-214.
    2. 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.
    3. Sean Salter & Ken Johnson & Ernest King, 2010. "Listing Specialization and Pricing Precision," The Journal of Real Estate Finance and Economics, Springer, vol. 40(3), pages 245-259, April.

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