Evidence of Information Asymmetries in the Market for Residential Condominiums

• Published in: The journal of real estate finance and economics Vol. 35; no. 1; pp. 23 - 38
• Main Authors: Rutherford, Ronald C, Springer, Thomas M, Yavas, Abdullah
• Format: Journal Article
• Language: English
• Published: Norwell Springer Nature B.V 01-07-2007
• Subjects: Asymmetric information; Brokerage; Comparative analysis; Condominium; Condominiums; Estate agents; Geographic location; Housing; Information; Market prices; Marketing; Pricing policies; Purchasing; Real estate; Real estate agents & brokers; Real estate market; Real estate sales; Residence; Single family; Studies; Transactional analysis; Transactions
• ISSN: 0895-5638; 1573-045X
• DOI: 10.1007/s11146-007-9027-9

Previous research (Rutherford et al. 2005; Levitt and Syverson 2005) identify and quantify agency problems in the brokerage of single-family houses. Real estate agents are found to receive a premium when selling their own houses in comparison to similar client-owned houses. Given the homogeneity of the condominium market in comparison to the single-family house market, we use a large sample of condominium transactions to examine if agency problems exist in the condominium market. Controlling for sample selection and endogeneity bias of the data, we find evidence for a similar price premium for agent-owned condominiums. In contrast to the results for single-family houses in the same geographic market, we find that agent-owned condominiums must stay on the market longer to receive a higher price. [PUBLICATION ABSTRACT]