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The traditional default rule in the United States has been that, where two brokerage firms participate in the sale of a piece residential real estate, both firms are fiduciaries of the seller. This article provides original empirical evidence showing to be erroneous a common assumption - that, in conflicts between their principals and third parties, real estate agents promote their principals' interests - underlying revisions made in a number of jurisdictions to those principles in the last twenty years. This article examines whether agents act in accordance with their duties along two dimensions: First, we hypothesize that selling agents may secure business by taking actions that promote the interests of buyers to the detriment of selling agents' principals, the sellers, in ways that decrease sales prices. Second, we examine whether sellers receive worse sales prices where the selling and listing functions are divided between two firms. Such a relationship would be consistent with selling agents improperly seeking to promote buyers' interests, with intra-firm relationships restraining that misconduct better than inter-firm relationships. The results support the conclusion that, to secure business, selling agents who are fiduciaries of sellers use actions that decrease the returns to their principals, with some evidence that the participation of a listing agent in the same firm as the selling agent partially restrains this activity. In sum, some economically significant malfeasance is not restrained by the duties imposed by law.



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