CONTRACTS FOR THE SALE OF RESIDENTIAL REAL-ESTATE

I propose a model where the terms of a real estate broker's contract influence both the broker's and the seller's choices. Given equal contract, higher quality, and thus higher priced on average, houses will sell in less time. Thus, simple conditions suffice to show that a ''competitively set'' commission rate should fall as the average price rises and, since a seller's cost of waiting are higher for higher quality houses, a ''cartel's'' commission rate should rise with the average price. Because this model studies the effects of alternate contracts on observable variables such as the sale price of a house and its time-till-sale, its implications are testable.