Commission Splits in Real Estate Transactions

Commission Splits in Real Estate Transactions We examine commission splits between listing and selling agents in real estate transactions. We construct a theoretical model to show that agency problems arise when a listing agent attempts to maximize his or her payoff while setting the commission split. Mitigation to these agency problems can be achieved through the imposition of a limited duration on listing contracts. Our model produces several testable hypotheses, which are supported by empirical evidence. We find property listings with higher list prices and quick sales are associated with lower commission splits. Commission split is more likely to be higher when the listed property has a high degree of atypicality and/or is overpriced. Additionally, agent-owned properties pay higher commission splits. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Commission Splits in Real Estate Transactions

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Publisher
Springer Journals
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-015-9541-0
Publisher site
See Article on Publisher Site

Abstract

We examine commission splits between listing and selling agents in real estate transactions. We construct a theoretical model to show that agency problems arise when a listing agent attempts to maximize his or her payoff while setting the commission split. Mitigation to these agency problems can be achieved through the imposition of a limited duration on listing contracts. Our model produces several testable hypotheses, which are supported by empirical evidence. We find property listings with higher list prices and quick sales are associated with lower commission splits. Commission split is more likely to be higher when the listed property has a high degree of atypicality and/or is overpriced. Additionally, agent-owned properties pay higher commission splits.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Nov 18, 2015

References

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