Client Externality Effects of Agents Selling Their Own Properties

Abstract

This study is the first to examine the principal-agent issues surrounding how agents' efforts to sell their own properties affect their efforts to sell concurrently listed client properties. The principal-agent model shows that listed agent-owned properties induce agents to worker harder over all, but diminish effort dedicated to marketing concurrently listed client properties, leading to reduced liquidity and/or lower selling prices for those properties. The empirical results show that client properties competing with agent-owned properties remain on the market 30 to 46 % longer and sell for 1.8 % less than properties whose agents have no such conflict of interest.

Examining Both Sides of the Transaction: Bargaining in the Housing Market

“…Here, the literature is mixed. Bian, Turnbull and Waller (2017) find a reduction in the TOM for agents compared to other sellers while Rutherford, Springer and Yavaş (2005) and Xie (2018) observe no significant change in marketing durations. Levitt and Syverson (2008) find agents experience longer TOM.…”

“…Studies by Rutherford, Springer and Yavaş (2005), Levitt and Syverson (2008), Bian, Turnbull and Waller (2017) and Xie (2018) find that, on average, real estate agents obtain transaction prices for their homes that are approximately 2–4% higher than clients’ properties. This line of research is important because the finding suggests a conflict of interest stemming from the principle–agent relationship.…”

“…Consequently, if selling agents experience increases in both prices and TOM, the reason may be the expected positive relation between the two outcomes 1. Further, consideration must be given to the fact that TOM and prices are jointly determined and prior literature in this area, with the exception of Bian, Turnbull and Waller (2017), has failed to do so.…”

Sex and Selling: Agent Gender and Bargaining Power in the Resale Housing Market

“…Rutherford et al (2005),Levitt and Syverson (2008), andBian et al (2017) provide evidence of pervasive principal/agent effects in housing markets.…”

Price Signals and Uncertainty in Commercial Real Estate Transactions

“…The literature on residential real estate brokerage is expansive. Studies range from examining barriers to entry in the brokerage business (Hsieh and Moretti 2003), to how hard brokers work (Benjamin et al 2004;Goodwin et al 2012), to potential conflicts of interest when brokers act as principals (Bian et al 2017;Kadiyali et al 2014) or dual agents (Han and Hong 2016;Johnson et al 2015), to how commissions rates are determined (Shy 2012;Wiley et al 2014). Many other brokerage topics have been explored in the residential real estate setting as well, often with conflicting results.…”