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The Journal of Real Estate Finance and Economics

Erschienen in:

19.12.2015

Client Externality Effects of Agents Selling Their Own Properties

verfasst von: Xun Bian, Geoffrey K. Turnbull, Bennie D. Waller

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 2/2017

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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.

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The presence or absence of co-brokerage commissions does not alter the conclusions.

This model, like most agency models, suppresses the buyer-seller negotiation process. See Harding et al. (2003) and Merlo and Ortalo-Magne (2004) for empirical analyses of bargaining issues.

Real estate agents may attempt to influence sellers’ asking prices in which case they may have an incentive to suggest suboptimal asking prices (Arnold 1992; Rutherford et al. 2005). This model does not address these complications.

Turnbull and Sirmans (1997) show that much of the commission rate variation reflects varying housing (hence brokerage) market conditions over time over the housing market cycle.

See Turnbull and Dombrow (2006) for a thorough discussion of the relationship between the estimated coefficients and underlying competition and shopping externality effects.

Dummy variable estimates are interpreted using the Kennedy (1981) bias adjustment throughout the paper.

Chow tests confirm that pooling the entire 1999–2006 is appropriate.

We are indebted to an anonymous reviewer for suggesting this interpretation.

As a robustness check, we further control for agent-level heterogeneity by eliminating agents with very small number of listings during the sample period. It is possible that agents who sold their own properties may be more likely to be part-timers and, perhaps, are less talented relative to others. To rule out a part-time effect, we eliminate properties listed by agents with three or less properties. The conclusions remain unchanged. These estimates and models including agent-fixed effects are available upon request.

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Titel: Client Externality Effects of Agents Selling Their Own Properties
verfasst von: Xun Bian
Geoffrey K. Turnbull
Bennie D. Waller
Publikationsdatum: 19.12.2015
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 2/2017
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-015-9543-y

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