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Problem 4 Assume that you are a real estate broker with an exclusive contract - the condo association rules state that everyone selling their condominiums
Problem Assume that you are a real estate broker with an exclusive contract the condo
association rules state that everyone selling their condominiums must go through you or a broker
designated by you. A typical condo costs $ today and sells again every years. Assume
the first sale will happen in years. This will last for years, and then all bets are off. Your
commission will be Condos appreciate in value at a rate of per year. The interest rate is
per annum.
a What is the value of this exclusivity rule for one condo? In other words, at what price should
you be willing to sell the privilege of being the exclusive representation for one condo to
another broker?
b If free Internet advertising was equally effective and if it could replace all realestate agents
so that buyers' and sellers' agents would no longer earn the traditional each what
would happen to the value gain of the condo?
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