Is Dual Agency in Real Estate a Cause for Concern?

Abstract

We examine the effects of the regulation of dual agency in residential real estate transactions, for 10,888 transactions in Long Island, New York in 2004-2007. We find that dual agency has an overall null effect on sale price, but includes two opposing forces where buyer and seller interests might be compromised. The link between dual agency and timing of sales is less clear. These findings are robust to endogeneity bias. Although it appears dual agency does cause some market distortions, our analysis yields little evidence that prohibiting dual agency in real estate will increase welfare.

Keywords: Conflict of interest, real estate, first resort selling, strategic pricing, leaning on the seller, time-to-sale

JEL Classification: K21, L41, L42, L85