Listing Contract Length and Time on Market

Miceli (1989) in a search for the optimal time to allow a broker to market property provides a theoretical model which posits that the principal (seller) may use the length of the listing contract to motivate the agent (listing broker) to better align incentives. Expanding slightly on Miceli, this present work predicts that longer time allotted the broker to market residential property will decrease broker effort resulting in lower search intensity and eventually a longer marketing span for property, ceteris paribus. This prediction is borne out across three empirical modeling methodologies commonly used in time on market studies.

Transaction costs and market institutions

This paper examines the effect of transaction costs of search on the institution of grain brokers in Ethiopia. Primary data are used to derive traders' shadow opportunity costs of labor and of capital from IV estimation of net profits. A two-step Tobit model is used in which traders first choose where to trade and then choose whether to use a broker to search on their behalf. The results confirm traders' individual rationality in choosing brokerage, showing high transaction costs are linked to increased broker use while high social capital reduces broker use.Grain Economic aspects. ,Grain Prices Ethiopia. ,Grain Trade East Africa. ,Grain trade. ,

An Investigation of Buyer Search in the Residential Real Estate Market under Different Market Conditions

The purpose of this research is to examine buyer search under different market conditions. We conduct a survival regression analysis of survey data generated by the National Association of Realtors for 1988, 1991 and 1993. We find, in all instances, that economic conditions are the dominant factor influencing search duration. Some evidence does indicate, however, that search is influenced by interest rates. Additionally, the evidence suggests that the probability of finding a home increases for broker-assisted search, while this is not the case for self-conducted search.

International Comparisons of Real Estate E-nformation on the Internet

How much information should brokers supply on a website? The Internet allows brokers to reduce the cost of providing information to potential buyers. However, brokers may risk disintermediation if they provide too much information. This paper presents a model of a broker’s choice of how much information to provide on a website. The model considers buyers’ tradeoffs between hiring a broker and gathering information on their own. It then investigates why real estate brokers in different countries provide different amounts of information on websites. Tests reveal that information provided on broker websites depends on the search cost of prospective buyers.

Clearing the Air on Radon Testing: The Duty of Real Estate Brokers to Protect Prospective Homebuyers

This Note recommends that the federal government create legislation that will impose a duty on real estate brokers to test homes for radon and to disclose the results to prospective purchasers. Based on a common law negligence theory, such a duty would become part of the current obligation of a real estate broker: (1) to conduct a reasonably diligent and competent search of property for sale; and (2) to disclose to prospective homebuyers all material defects affecting the value or desirability of the home. In his investigation, the broker must use the expertise and knowledge that derive from his training and experience as a professional. Initially, the Note addresses the dilemma of the homebuyer who discovers radon only after occupying the home and who has no formally defined cause of action based on common law precedent or statute. Part II traces the development of a real estate broker\u27s liability in negligence to the recently imposed duty to discover and disclose latent defects. Part III analyzes the duty to discover and disclose latent defects with respect to radon and concludes that real estate brokers should have an affirmative duty to test for radon and to disclose the results to prospective purchasers. Finally, part IV recommends legislation to protect the unwary homebuyer who otherwise would take possession of the home and suffer potential economic loss and exposure to a carcinogenic substance

Clearing the Air on Radon Testing: The Duty of Real Estate Brokers to Protect Prospective Homebuyers

This Note recommends that the federal government create legislation that will impose a duty on real estate brokers to test homes for radon and to disclose the results to prospective purchasers. Based on a common law negligence theory, such a duty would become part of the current obligation of a real estate broker: (1) to conduct a reasonably diligent and competent search of property for sale; and (2) to disclose to prospective homebuyers all material defects affecting the value or desirability of the home. In his investigation, the broker must use the expertise and knowledge that derive from his training and experience as a professional. Initially, the Note addresses the dilemma of the homebuyer who discovers radon only after occupying the home and who has no formally defined cause of action based on common law precedent or statute. Part II traces the development of a real estate broker\u27s liability in negligence to the recently imposed duty to discover and disclose latent defects. Part III analyzes the duty to discover and disclose latent defects with respect to radon and concludes that real estate brokers should have an affirmative duty to test for radon and to disclose the results to prospective purchasers. Finally, part IV recommends legislation to protect the unwary homebuyer who otherwise would take possession of the home and suffer potential economic loss and exposure to a carcinogenic substance

Adversarial Brokerage in Residential Real Estate Transactions: The Impact of Separate Buyer Representation

Although substantial research effort has been directed to the examination of optimal search and pricing behavior under traditional brokerage arrangements, market outcomes under conditions of undisclosed subagency and buyer representation have not been fully explored. This study applies the legal and economic theory of agency to real estate markets with cooperating brokers. The existence of cooperating brokers acting as subagents of the seller with the buyer’s full knowledge does not change the buyer’s and seller’s net payoffs relative to the single-agent case. However, when the buyer mistakenly believes that the cooperating broker/subagent is acting as his agent in negotiations, there may be informational gains that result in a higher selling price and a higher payoff to the seller at the expense of the buyer. The analysis indicates that buyer brokers may be a potential solution to this agency problem. When both parties to a real estate transaction have separate representation, their net payoffs are shown to be higher and the sales price lower than under traditional brokerage arrangements. The result is dependent on several factors, including: market conditions, relative bargaining power of the parties, method of broker compensation, and disclosure of the status of the buyer broker.

A Qualitative inquiry into the relationship marketing practice of UK insurance brokers.

Significant changes in the UK insurance broking market in recent years have forced insurance brokers to ask: How can we retain our clients? What is the nature of our relationship with our clients? What are the key components in these relationships? How should we manage such relationships? Existing theories in the relationship marketing domain do not provide an answer to these questions. This research aims to form a framework reflecting the nature of broker-client relationship as a development process with key components influencing the quality of relationship attached to each stage of the process. Hence three research objectives are derived: 1) Form a development stage framework reflecting the nature of broker-client relationship; 2) Identify key components influencing relationship quality in each stages of the relationship; and 3) Discuss the model’s implication towards marketing practice. In this research the author takes an interpretivism-constructivist position, by bracketing the author’s value in the interview process, the interviewer (author) constructs the “reality” jointly with the interviewees (broker account executives). The qualitative approach is adopted so that the nature and meaning of broker-client relationships can be investigated in-depth. An abduction analytical approach is taken, which sits between induction and deduction, closer to an inductive perspective. The following data analysis process is then followed: organize data, immerse into data, generate categories and codes, coding data, generate themes, generate frameworks, and search for deviant cases and alternative understandings. Through the analysis of 5 in-depth qualitative interviews, the author reaches the following conclusions: A relationship typically has four stages: initiating, growing, maintaining and terminating. However, a relationship may not necessarily have all four stages, nor might it follow the same sequence. The key components affecting relationship quality in each stage of a relationship varies. In the initiating stage, the most critical components are trustworthiness, professionalism and communication. In the growing stage, they are trustworthiness, commitment, professionalism and calculative trust. In the maintaining stage, the most critical components are heuristic trust, communication, dependence, satisfaction and interaction and in the terminating stage, they are trustworthiness, professionalism and communication. The cost of maintaining a relationship increases whilst the relationship becomes closer. Customer’s expectation in a “too close” relationship can be excessively high. From the broker’s perspective, a balance must be maintained between both the total costs (the cost to the company plus social costs to the broker himself/herself) and the total benefits (benefit to the company and the broker himself/herself). The “tipping point” for the broker (the sole agent of the broker company) is the moment when such total costs overweigh total benefits. The above conclusion has three managerial implications for UK insurance brokers: 1) A relationship can be lost at any development stage of a relationship hence broker needs to be prepared to cope with such relationship. 2) Different strategy must be adopted for different stages of relationship. 3) Avoid the pitfalls of being “too close” in a relationship to keep relationship marketing efforts cost effective

Competition on MARS? A study of broker-dealer competition in the U.S. municipal auction rate securities market

The relationship between competitive bidding in auctions and its impact on price and interest rates has long been of importance for a wide range of market practitioners. Although research has shown that increased competition among broker-dealers and bidders results in lower municipal interest rates, the amount of literature addressing auction rate securities is almost non-existent. The U.S. municipal auction rate securities market (MARS) offers an opportunity to expand the growing but limited empirical analysis of auctions. In particular, researchers can study the impact of market power and competitive search on interest rates using this uniform pricing, multi-unit, frequently repeated dutch auction process. Furthermore, in general, previous cross-sectional models measuring relationships in standard municipal markets are quite static in that they mostly assume some form of dynamic parametric homogeneity. Using a novel empirical approach, i.e., one that doesn't assume the time-constancy of cross-sectional parameters, our research shows that greater underwriter competition and search for potential investors in the form of multiple broker-dealers does indeed lead to lower municipal auction rates. This outcome does not hold for the entire sample life of the security--a result that was captured clearly using our methodology.MARS, municipal auctions, securities, parametric heterogeneity

Curbing Broker-Dealers\u27 Abusive Sales Practices: Does Professor Jensen\u27s Integrity Framework Offer a Better Approach?

Retail investors, particularly senior citizens, need competent and careful investment advice more than ever before. Many must rely on the services provided by investment advice providers, including broker-dealers. Regulators have sounded the alarm about sales of risky, complex products to retail customers in search of better returns, especially senior citizens and retirees. Both the SEC and FINRA have identified abusive broker-dealer sales practices as priorities in their examinations of broker-dealers and have brought numerous enforcement actions against broker-dealers for sales practices that harm retail investors. These enforcement actions frequently allege both failures of the firms’ due diligence processes to assure the suitability of recommended investments and failures of the supervisory and compliance systems that are supposed to detect and deter impermissible sales practices. In this essay, prepared for the Wake Forest Law Review Business Law Symposium, Agency Theory: Still Viable?, I explore whether Michael Jensen’s integrity framework, set forth in Werner Erhard & Michael C. Jensen, Putting Integrity into Finance: A Purely Positive Approach (3 March 2013), could provide an effective alternative for improving broker-dealers’ sales practices