Examining Both Sides of the Transaction: Bargaining in the Housing Market

This article examines the bargaining power and information advantages of housing market participants with special interest in the outcomes of individuals compared to real estate agents. Prior studies examining agents' sales of their own properties find that they obtain higher prices than their clients, which is notable because it suggests a possible conflict of interest. In addition to reexamining agents' sales after correcting for a simultaneity issue, we consider agents' purchases of their own properties as well as the sales and purchases of the other market participants. Agents' purchases offer direct evidence of their ability to transact while in competition with other market participants without the potential conflict of interest. The results demonstrate that agents hold bargaining power relative to individuals. Companies (investors) also exhibit bargaining power over individuals, which seems to concentrate in vacant properties as well as during economic expansionary periods.

Automated summary

The study shows that real estate agents often obtain higher prices for their own properties compared to their clients, indicating a possible conflict of interest. Results demonstrate that agents have more bargaining power relative to individuals. Additionally, companies and investors also exhibit bargaining power over individuals, especially in vacant properties and during economic expansionary periods.