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Examination of the Effect of Buyer Agency on the Distribution of Closing Costs

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  • Roy Black
  • Julian Diaz
  • Marvin Wolverton

Abstract

This article investigates the effect of agency on the distribution between buyer and seller of cash charges paid at closing. An analysis of covariance (ANCOVA) model is developed to control for the concomitant effects of financing choice and compensating changes in nominal price on buyer’s closing costs and seller’s closing costs. The findings, based upon Atlanta area data from the 1989-1991 period, reveal that brokers operating under an explicit, exclusive-agency contract with the buyer do affect negotiated outcomes. Average buyer’s closing costs are found to have been reduced by 31% and average seller’s closing costs to have increased by 10% when a buyer’s broker was involved in a transaction. This study also examines the buyer’s broker effect on upper- and lower-price-bracket homes.

Suggested Citation

  • Roy Black & Julian Diaz & Marvin Wolverton, 1997. "Examination of the Effect of Buyer Agency on the Distribution of Closing Costs," Journal of Real Estate Research, Taylor & Francis Journals, vol. 14(1), pages 43-54, January.
    • Handle: RePEc:taf:rjerxx:v:14:y:1997:i:1:p:43-54
    DOI: 10.1080/10835547.1997.12090885
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    References listed on IDEAS

    as
    1. Karl L. Guntermann, 1979. "FHA Mortgage Discount Points, House Prices and Consumer Behavior," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 7(2), pages 163-176, June.
    2. 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.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. Brueggeman, William B & Zerbst, Robert H, 1979. "Discount Points and Housing Prices: A Reply," Journal of Finance, American Finance Association, vol. 34(4), pages 1055-1060, September.
    5. Colwell, Peter F & Guntermann, Karl L & Sirmans, C F, 1979. "Discount Points and Housing Prices: Comment," Journal of Finance, American Finance Association, vol. 34(4), pages 1049-1054, September.
    6. Stanley D. Smith & G. Stacy Sirmans, 1984. "The Shifting of FHA Discount Points: Actual Vs. Expectations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(2), pages 153-161, June.
    7. 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.
    8. Zerbst, Robert H & Brueggeman, William B, 1977. "FHA and VA Mortgage Discount Points and Housing Prices," Journal of Finance, American Finance Association, vol. 32(5), pages 1766-1773, December.
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    Cited by:

    1. 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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