Two sides of dual agency: evidence from homebuyers and transactions

Abstract

This study gains insights to the motivating causes of dual agency transactions in residential real estate by examining two distinct sources of data. The first is evidence from the National Association of Realtors® (NAR) homebuyers’ survey; the second is multiple listing service (MLS) transaction data. The survey evidence is used to examine buyer characteristics and search methods related to the outcome where a homebuyer is unrepresented by a buyer broker, who would exclusively represent their interests. Results suggest that certain factors contribute to both the likelihood that a buyer will be unrepresented and the incidence of dual agency, including homebuyer experience and inexperience, geographic familiarity by brokers and buyers and the channels used in marketing residential products to generate initial contacts with potential buyers. The matching of results from the empirical analysis using the MLS transaction data and the NAR homebuyer survey data adds confirmation to our findings. Even as dual agency creates opportunities for efficiency gain in the real estate transaction, the empirical results have implications for the consequences of homebuyer involvement in the initiation of dual agency, strategic behaviour recommendations for brokers as well as the possibility to policy adjustments.