Abstract
We explain why buyers in the housing market use an agent employed by the seller. Such agents reduce buyers' search costs so that more buyers search a particular house. This increases the probability of the sale of the house and possibly also its selling price. However, since the selling price increases, if at all, by less than the fee paid by the seller to the agent, both buyers and sellers are better off. We identify two characteristics that give rise to sellers' agents and show that markets that do not have such agents are missing at least one of these characteristics.
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References
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Bagnoli, M., Khanna, N. Buyers' and sellers' agents in the housing market. J Real Estate Finan Econ 4, 147–156 (1991). https://doi.org/10.1007/BF00173121
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DOI: https://doi.org/10.1007/BF00173121