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Paper eres2001_244:
Using a real estate broker as a way of signalling the quality of a house

id eres2001_244
authors Mougel, Catherine
year 2001
title Using a real estate broker as a way of signalling the quality of a house
source 8th European Real Estate Society Conference (26-29 June 2001) Alicante, Spain
summary Using game theory and more specifically a signalling game, we draw a general model which help us to study the bargaining step of a real estate transaction. In our game, the two players are aseller and a buyer, which bargain over the transaction price of a house. Information is not symmetric, Thus, the seller has private information about the good that he wants to sell. The buyer is not a real estate professional and doesn’t know the true quality of the real estate good. In our game, the house can be ‘food’ or ‘bad’. Only the seller can contract with a broker. This real estate broker is not really a player but he can be used by the seller as a signal of quality. The seller knowing the quality of his house, can directly propose a transaction price to the buyer or can delegate it to the broker. Thus the buyer can choose to accept or to refuse the price without knowing the quality of the house. This buyer can only observe if the seller or the broker proposes the price.
keywords We study the different equilibriums of this game (pooling, separating, mixed strategy), we find the general conditions to follow. To study different situations, we consider 3 case studies. They deal with the quality of houses in a same residential area. Thus, when the quality of houses is good, it’s better for the seller to use a broker. However, when the quality of houses is bad, the best solution for the seller is to sell himself. The next step of this paper is to compare the results of the game with data of our regional real estate transactions market.
series ERES:conference
discussion No discussions. Post discussion ...
session Change and dynamics on Property market
last changed 2009/07/10 18:07
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