Restructuring Agency Relationships in the Real Estate Brokerage Industry: An Economic Analysis

Thomas Micelli, Katherine Pancak and C Sirmans

Journal of Real Estate Research, 2000, vol. 20, issue 1-2, 31-48

Abstract: Recent state legislative reforms of real estate agency relationships suggest that traditional agency law and practice are not meeting the needs of the parties involved in a residential real estate purchase and sales transaction. In this article, we argue that this is due, at least in part, to the bundling of information and representation services provided by brokers. This bundling results in a tradeoff between the benefits to buyers and sellers in sharing information prior to a match, and the cost to the parties individually of revealing information during bargaining. We conclude that, from an economic perspective, effective agency reform must solve this basic conflict, perhaps by unbundling the matching and representation functions.

Date: 2000
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DOI: 10.1080/10835547.2000.12091025

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