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

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  • Darren K. Hayunga
  • Henry J. Munneke

Abstract

This article examines the bargaining power and information advantages of housing market participants with special interest in the outcomes of individuals compared to real estate agents. Prior studies examining agents’ sales of their own properties find that they obtain higher prices than their clients, which is notable because it suggests a possible conflict of interest. In addition to reexamining agents’ sales after correcting for a simultaneity issue, we consider agents’ purchases of their own properties as well as the sales and purchases of the other market participants. Agents’ purchases offer direct evidence of their ability to transact while in competition with other market participants without the potential conflict of interest. The results demonstrate that agents hold bargaining power relative to individuals. Companies (investors) also exhibit bargaining power over individuals, which seems to concentrate in vacant properties as well as during economic expansionary periods.

Suggested Citation

  • Darren K. Hayunga & Henry J. Munneke, 2021. "Examining Both Sides of the Transaction: Bargaining in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 663-691, June.
    • Handle: RePEc:bla:reesec:v:49:y:2021:i:2:p:663-691
    DOI: 10.1111/1540-6229.12272
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    2. Paul M. Anglin & Yanmin Gao, 2023. "Value of Communication and Social Media: An Equilibrium Theory of Messaging," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 861-903, May.
    3. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    4. Luis A. Lopez, 2024. "Is there a Principal-Agency Problem with Real Estate Agents in Rental Markets?," The Journal of Real Estate Finance and Economics, Springer, vol. 69(1), pages 29-69, July.
    5. Geoffrey K. Turnbull & Arno J. van der Vlist, 2022. "Bargaining power and segmented markets: Evidence from rental and owner‐occupied housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(5), pages 1307-1333, September.
    6. Lawrence Kryzanowski & Yanting Wu & Tingyu Zhou, 2023. "Conflicts of interest and agent heterogeneity in buyer brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 130-169, January.

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