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Is there a Principal-Agency Problem with Real Estate Agents in Rental Markets?

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  • Luis A. Lopez

    (University of Illinois at Chicago)

Abstract

This paper examines the principle-agency problem between landlords and real estate agents using novel data on rental contracts. Real estate agents are found to obtain higher contract rents by approximately 1% more for themselves (and family members) than for other landlords, which is economically small. The results suggest that the principle-agency program with real estate agents is less of a concern in the rental market than the ownership market. The reason potentially relates to the commission structure, the relatively low effort associated with finding a tenant, the landlord’s ability to evaluate an agent’s performance, and reputation concerns from repeated interactions.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:jrefec:v:69:y:2024:i:1:d:10.1007_s11146-022-09927-8
    DOI: 10.1007/s11146-022-09927-8
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