Question

The options for the drop-down are both: less or more

1. Individual Problems 21-1 When real estate agents sell their own, rather than dients, houses, they leave the houses on the market for a longer time (10 days longer on average) and wind up with better prices. Suppose that real estate agents earn a commission equal to 3% of the sale value of each house that they help sell. Suppose a real estate agent ha an offer on a house of $100,000. The agent can get a 4 % higher offer with more effort and by leaving the house on the market for a few more wees If the agent sells the house now, she will earn a commission of $ . By keeping the house on the market and expending more effort sell the house, the agent can earn a commission of $ Thus, the agent gains s for the extra effort and time of keep the house on the market. Suppose a real estate agent has an offer on a house that she owns. The agent has a current offer of $100,000, but can get a 4% higher offer with more effort and by leaving the house on the market for a few more weeks. Assume that all of the commission is paid back to the agent, since she wi act as the agent for the sale. more than selling the house now. Since this amount is than what she would ga If the agent waits to sell the house, she gains s likely to keep a house on the market and expend by waiting to sell a house she does not own (as in the first part of the problem), the agent is more effort to sell a house that she owns, as opposed to one that she does not own.

Answer 1

Answer:

If the agent sells the house now, she will earn a commission of $ 3,000.

( $100,000 * 3/100 = 3,000)

By keeping it in the market longer, she will earn a commission of $ 3,120.

( $ 104,000 * 3/100 = 3,120) - as she will get 4% more if she waits, the house will sell for $104,000.

The agent gains $120 extra for the efforts.

($3120 - $3000 = $120.)

If the house belongs to the agent herself:

The agent will get $4,000 for waiting.

($104,000 - $ 100,000 = $ 4,000)

(She pays the commission to herself. So effectively, commission is not paid, $104,000 is not reduced by the amount of commission.)

This amount is more than the one she makes by selling the house she does not own. So she is more likely to sell her own house.