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The Optimal Duration of Real Estate Listing Contracts

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  • Thomas J. Miceli

Abstract

The length of the real estate listing contract is examined as a means of providing an incentive for brokers to act in the best interest of home sellers. A limitation on the duration of the contract accomplishes this objective by imposing a cost (namely, the foregone commission) on brokers who fail to complete a sale before the contract expires. The seller's optimal contract duration balances the benefits of improved incentives against the expected cost of renegotiating a new contract in the event of a failure bv the broker.

Suggested Citation

  • Thomas J. Miceli, 1989. "The Optimal Duration of Real Estate Listing Contracts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 267-277, September.
    • Handle: RePEc:bla:reesec:v:17:y:1989:i:3:p:267-277
    DOI: 10.1111/1540-6229.00491
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    References listed on IDEAS

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