ABSTRACT
The buying and selling of real estate is complicated. Unlike commodities, real estate transactions involve heterogeneous products, asymmetric information, and search costs. As a result of these complexities, real estate is generally transacted through agents and/or brokers. Some aspects of real estate brokerage are common across a number of countries. Generally, the seller of a house will engage the real estate agent to sell that house. Real estate agents are intermediaries who are compensated to solve these at problems. Interestingly, in the US, there are far more agents than necessary to solve these problems. S. D. Levitt and C. Syverson created a stir when they wrote a paper about the incentives of real estate agents under standard commission-based contracts. They argued that agents had an incentive to sell houses quickly at prices that are less than the maximum price they would command if exposed to the market for the optimal length of time.
