Comparing agent-owner with agent-represented home sales illustrates that commission contracts lead to external agent moral hazard. Real estate developers are sophisticated sellers who can either use external agents or hire internal agents. The theory shows that neither scheme eliminates agent moral hazard. The empirical study of how the seller-agent relationship affects both price and liquidity in a simultaneous system concludes that external agents enjoy superior selling ability that offset moral hazard effects.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: Jan 7, 2014
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