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A Note on Buyer's Agent Commission and Sale Price

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  • Joachim Zietz
  • Bobby Newsome

Abstract

The article examines whether and to what extent the level of a buyer's agent commission will affect the sale price of a house. The estimation results suggest that a higher commission rate leads to a higher sale price, although only for lower-priced houses. It is suggested that, at least for this market segment, there may be a principal-agent problem: buyer's agents do not act in the best interest of their clients because of the institutional structure of sales commissions.

Suggested Citation

  • Joachim Zietz & Bobby Newsome, 2001. "A Note on Buyer's Agent Commission and Sale Price," Journal of Real Estate Research, Taylor & Francis Journals, vol. 21(3), pages 245-254, January.
    • Handle: RePEc:taf:rjerxx:v:21:y:2001:i:3:p:245-254
    DOI: 10.1080/10835547.2001.12091053
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    References listed on IDEAS

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    1. Leonard V. Zumpano & Donald L. Hooks, 1988. "The Real Estate Brokerage Market: A Critical Reevaluation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(1), pages 1-16, March.
    2. G. Donald Jud, 1983. "Real Estate Brokers and the Market for Residential Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(1), pages 69-82, March.
    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. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    5. Alastair Hall, 1987. "The Information Matrix Test for the Linear Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(2), pages 257-263.
    6. Elder, Harold W & Zumpano, Leonard V & Baryla, Edward A, 1999. "Buyer Search Intensity and the Role of the Residential Real Estate Broker," The Journal of Real Estate Finance and Economics, Springer, vol. 18(3), pages 351-368, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gabrovski, Miroslav & Ortego-Marti, Victor, 2019. "The cyclical behavior of the Beveridge Curve in the housing market," Journal of Economic Theory, Elsevier, vol. 181(C), pages 361-381.
    2. repec:dau:papers:123456789/515 is not listed on IDEAS
    3. William G. Hardin III & Ken H. Johnson & Zhonghua Wu, 2009. "Brokerage Intermediation in the Commercial Property Market," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 397-420.
    4. Panle Jia Barwick & Parag A. Pathak & Maisy Wong, 2015. "Conflicts of Interest and the Realtor Commission Puzzle," NBER Working Papers 21489, National Bureau of Economic Research, Inc.
    5. Panle Jia Barwick & Parag A. Pathak & Maisy Wong, 2017. "Conflicts of Interest and Steering in Residential Brokerage," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 191-222, July.
    6. Edward Rosenthal, 2011. "A Pricing Model for Residential Homes with Poisson Arrivals and a Sales Deadline," The Journal of Real Estate Finance and Economics, Springer, vol. 42(2), pages 143-161, February.
    7. Yang Zhang & Hong Zhang & Michael J. Seiler, 2016. "The Effects of Time Constraints on Broker Behavior in China¡¦s Resale Housing Market: Theory and Evidence," International Real Estate Review, Global Social Science Institute, vol. 19(3), pages 353-370.
    8. Joachim Zietz & Bobby Newsome, 2002. "Agency Representation and the Sale Price of Houses," Journal of Real Estate Research, Taylor & Francis Journals, vol. 24(2), pages 165-192, January.
    9. Jonathan Wiley & Justin Benefield & Marcus Allen, 2014. "Cyclical Determinants of Brokerage Commission Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 196-219, January.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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