The Real Estate Brokerage Market and the Decision to Disclose Property Condition Defects
This article presents a theoretical model of the decision to disclose property condition defects by a real estate broker. The model introduces the costs and benefits of disclosure into the broker's profit function. The comparative static results of the model show that a number of factors will have a deterministic influence on the broker's expected profit and, hence, the broker's decision to disclose. Whether voluntary disclosure occurs depends upon the costs of repairing the defect, prevailing market conditions, commission rates and the legal environment in which the broker operates. Copyright 2008 American Real Estate and Urban Economics Association
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Volume (Year): 36 (2008)
Issue (Month): 4 (December)
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