Department of Finance


An Optimal Incentive System For Real Estate Agents

Date of this Version



Published in Journal of Real Estate Research Volume 20, Number 1/2 (2000), pp. 49-59. JRER does not permit re-posting, so a link to the full-text online document is provided here:


This article presents an alternative system for selling real estate. It overcomes the well-known deficiencies of the percentage commission system. In our system, the agent purchases the property from the seller and simultaneously receives a put option. The put option gives the agent the right to put the property back to the original owner. It is shown that this system has many of the desirable properties of a dealer system, while avoiding some of the problems that are inherent in that system.