Renegotiation of Listing Contracts, Seller Opportunism, and Efficiency: An Economic Analysis

REAL ESTATE ECONOMICS, Fall 1995

Posted: 25 Aug 1998

See all articles by Thomas J. Miceli

Thomas J. Miceli

University of Connecticut - Department of Economics

Abstract

When a property owner engages a real estate broker to sell his or her property, the parties enter into a listing contract which entitles the broker to a commission if a ready, willing and able buyer is found before the contract expires. While a limit on the duration of the contract provides the broker with an incentive to work hard to find a buyer, it also creates the potential for seller opportunism. In particular, sellers have an incentive to renegotiate a lower commission as the end of the contract approaches. The paper concludes that, from an efficiency perspective, courts should generally enforce such renegotiations, given that transaction costs between brokers and sellers are ordinarily low.

JEL Classification: K00

Suggested Citation

Miceli, Thomas J., Renegotiation of Listing Contracts, Seller Opportunism, and Efficiency: An Economic Analysis. REAL ESTATE ECONOMICS, Fall 1995. Available at SSRN: https://ssrn.com/abstract=6495

Thomas J. Miceli (Contact Author)

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-5810 (Phone)
860-486-4463 (Fax)

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