Investigating the Impact of Agency Disclosure on Home Prices

 

Past studies found that passage of mandatory disclosure statutes did not improve real estate consumers’ reported receipt of agency disclosure. To date, the literature has not provided evidence that consumers are harmed when they do not receive agency disclosure. Using a nationwide dataset from 2012, this study offers three findings. First, the overall proportion of buyers reporting receipt of disclosure has still not improved. Second, receipt of disclosure among ethnic minorities has improved. Finally, there is no evidence that buyers who do not report receipt of agency disclosure pay different prices for homes than buyers who do report receiving disclosure.

Keywords:

• Agency disclosure
• real estate
• home prices
• consumer notice

Notes

1 Question 52 of the FTC questionnaire asked, “Did the agent who handled the purchase of your home provide you with a statement of his/her legal responsibilities when you first began working together?”

2 Wiley and Zumpano (2009) also identified the factors that influenced the probability of disclosure such as more demanding pre-license education, more emphasis on agency education and testing in license exams.

3 Erroneous responses are those that are complete but have entries that are most likely incorrect. For example, one excluded response indicated a 27-square foot home with a selling price of $278,893.

4 The results are qualitatively unchanged if responses of “Don’t know” are dropped from the regression analysis or if DISCLOSE is coded as 1 only if the buyer chose “Yes, at first meeting” and 0 only if he chose “No,” dropping all other observations.

5 All results are qualitatively unchanged when buyers that were not sure if they received agency disclosure are dropped from the sample.