Is Dual Agency in Real Estate a Cause for Concern?
Vrinda Kadiyali
&
Jeffrey Prince
&
Daniel H. Simon
Published online: 12 September 2012
#
Springer Science+Business Media, LLC 2012
Abstract We examine the effects of the regulation of dual agency in residential real
estate transactions, for 10,888 transactions in Long Island, New York in 2004–2007.
We find that dual agency has an overall null effect on sale price, but includes two
opposing forces where buyer and seller interests might be compromised. The link
between dual agency and timing of sales is less clear. These findings are robust to
endogeneity bias. Although it appears dual agency does cause some market distor-
tions, our analysis yields little evidence that prohibiting dual agency in real estate will
increase welfare.
Keywords Conflict of interest
.
Real estate
.
Strategic pricing
.
Leaning on the seller
.
Time-to-sale
Introduction
In this paper, we study the effects of the regulation of dual agency, where the same
agent, or agency, represents both the buyer and the seller, in the residential real estate
market. Most Americans participate in this market as buyers and sellers. Typically,
both the buyer and the seller use an agent,relyingontheagenttoguidethe
transaction, make assessments on the value of houses, and conclude transactions
J Real Estate Finan Econ (2014) 48:164–195
DOI 10.1007/s11146-012-9385-9
V. Kadiyali
Johnson Graduate School of Management, Cornell University, 385 Sage Hall, S.C.,
Ithaca, NY 14853, USA
e-mail: kadiyali@cornell.edu
J. Prince (*)
Kelley School of Business, Indiana University, BU 456, 1309 E. Tenth St., Bloomington,
IN 47405, USA
e-mail: jeffprin@indiana.edu
D. H. Simon
School of Environmental and Public Affairs, Indiana University, SPEA Room 231, 1315 E. Tenth St.,
Bloomington, IN 47405, USA
e-mail: simond@indiana.edu
@Phil_Robichaud
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