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This article investigates the incentives of agents working with buyers (buying agents) under the fixed percentage commission system and the implications on housing market outcomes. Our model shows that the absence of a binding contract creates a risk of losing clients for buying agents, which helps mitigate the conflict of interest between buying agents and their clients. Both the buying agent's prediction accuracy regarding their client's reservation prices and the level of tolerance given by the buyer to the buying agent affect the binding force. Results from simulations and empirical analyses using house transactions in Canada support our model predictions.

Recurrent list‐price reductions for a house may signal the impatience of sellers to conclude a sell transaction more quickly, leading to more visits and a higher likelihood of being sold (positive signal). Recurrent list‐price reductions may also provide a market signal that the listing is problematic and thus harder to sell without a list‐price reduction, leading to a lower likelihood of being sold (negative signal). Unlike standard survival analysis, we investigate which signal prevails using a joint frailty model that accounts for the interdependence among recurrent list‐price reductions and the association between the recurrent reductions and the sold event. Our novel data set contains the time‐dated recurrent list‐price reductions for each house listed on the market. The results from the joint frailty model show time‐varying negative impacts of list‐price reductions on the likelihood of a house sale, supporting the dominance of the negative signaling effects of recurrent list‐price reductions. Although listings with frequent list‐price reductions are less likely to be sold, sold houses sell at a higher ratio of sold price to last list price, which incorporates current market conditions and fairer pricing, holding constant the initial list price and the aggregate list‐price reduction from the initial list price.

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