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The Real Estate Brokerage Market and the Decision to Disclose Property Condition Defects
Author(s) -
Wiley Jonathan A.,
Zumpano Len V.
Publication year - 2008
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/j.1540-6229.2008.00227.x
Subject(s) - real estate , commission , profit (economics) , business , microeconomics , property (philosophy) , economics , property rights , actuarial science , property market , estate , function (biology) , industrial organization , finance , philosophy , epistemology , evolutionary biology , biology
This article presents a theoretical model of the decision to disclose property condition defects by a real estate broker. The model introduces the costs and benefits of disclosure into the broker's profit function. The comparative static results of the model show that a number of factors will have a deterministic influence on the broker's expected profit and, hence, the broker's decision to disclose. Whether voluntary disclosure occurs depends upon the costs of repairing the defect, prevailing market conditions, commission rates and the legal environment in which the broker operates.