The Impact of Dual Agency

In 1984, the State of Hawaii's legislature enacted a law making it mandatory for real estate agents engaged in dual agency relationships (i.e., when the seller's and the buyer's agents are employed by the same real estate firm) to disclose this fact to both parties in writing. The ass...

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Bibliographic Details
Published in:The journal of real estate finance and economics 2007-07, Vol.35 (1), p.39-55
Main Authors: Gardiner, J'Noel, Heisler, Jeffrey, Kallberg, Jarl G, Liu, Crocker H
Format: Article
Language:English
Subjects:
Agency
Client relationships
Conflicts of interest
Disclosure
Economic impact
Estate agents
Hawaii
Hypotheses
Information dissemination
Law making
Legislation
Legislatures
Literature reviews
Market analysis
Prices
Pricing
Professional relationships
Property
Purchasing
Real estate
Real estate agents & brokers
Regression analysis
Reputations
Sales
Studies
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Summary:In 1984, the State of Hawaii's legislature enacted a law making it mandatory for real estate agents engaged in dual agency relationships (i.e., when the seller's and the buyer's agents are employed by the same real estate firm) to disclose this fact to both parties in writing. The assumption was that the dual agency relation was damaging to the seller. This study analyzes the effect of disclosed and undisclosed dual agency, and the impact of the legislation, using data prior to and after the legislation (approximately 2,000 residential sales in each period). To account for property characteristics, hedonic models for the log of sale price and for the log of days on market are estimated in each period. Our empirical analysis suggests that dual agency significantly reduced the sales price, but the influence was much smaller after the legislation (8.0 versus 1.4%). In addition, dual agency significantly decreased the time on market by approximately 8.5% pre-legislation and 8.1% post-legislation, although the influence was much stronger for lower priced residences. These results are confirmed using a seemingly unrelated regression model. [PUBLICATION ABSTRACT]
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-007-9028-8