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The Impact of Dual Agency

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  • J’Noel Gardiner

    ()

  • Jeffrey Heisler

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  • Jarl Kallberg

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  • Crocker Liu

    ()

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

Suggested Citation

  • 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.
  • Handle: RePEc:kap:jrefec:v:35:y:2007:i:1:p:39-55
    DOI: 10.1007/s11146-007-9028-8
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    References listed on IDEAS

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    Citations

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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. Anup Agrawal & Tommy Cooper & Qin Lian & Qiming Wang, 2013. "Common Advisers in Mergers and Acquisitions: Determinants and Consequences," Journal of Law and Economics, University of Chicago Press, vol. 56(3), pages 691-740.
    3. Ken H. Johnson & Zhenguo Lin & Jia Xie, 2015. "Dual Agent Distortions in Real Estate Transactions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 507-536, June.
    4. Bian, Xun & Waller, Bennie D. & Turnbull, Geoffrey K. & Wentland, Scott A., 2015. "How many listings are too many? Agent inventory externalities and the residential housing market," Journal of Housing Economics, Elsevier, vol. 28(C), pages 130-143.
    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. Vrinda Kadiyali & Jeffrey Prince & Daniel Simon, 2014. "Is Dual Agency in Real Estate a Cause for Concern?," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 164-195, January.
    7. Xun Bian & Bennie D. Waller & Abdullah Yavas, 2017. "Commission Splits in Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 165-187, February.
    8. Cai, Ye & Kim, Yongtae & Park, Jong Chool & White, Hal D., 2016. "Common auditors in M&A transactions," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 77-99.
    9. Xun Bian & Geoffrey K. Turnbull & Bennie D. Waller, 2017. "Client Externality Effects of Agents Selling Their Own Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 139-164, February.
    10. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, Elsevier.
    11. 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.
    12. Justin Benefield & Ronald Rutherford & Marcus Allen, 2012. "The Effects of Estate Sales of Residential Real Estate on Price and Marketing Time," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 965-981, November.

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    Keywords

    Brokerage; Property law; Real estate services;

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