The Optimal Duration of Real Estate Listing Contracts

Thomas Miceli

Real Estate Economics, 1989, vol. 17, issue 3, 267-277

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.

Date: 1989
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