Why Disclose Less Information? Toward Resolving a Disclosure Puzzle in the Housing Market

Abstract

We examine the role of information disclosure in the housing market, offering both theory and evidence for observed variability in disclosure strategies among property listings in a multiple listing service (MLS). Our initial empirical findings and the theoretical literature suggest a positive link between information disclosure (e.g., number of photos) and marketing outcomes (e.g., sale price, liquidity). While intuitive, it raises an interesting puzzle: why then do some agents disclose less information? Analytically, we show that it can be optimal to omit information in some circumstances, particularly when homes are more heterogeneous or have greater scope for taste-specific attributes. Empirically, the data support the prediction that less information disclosure is beneficial for a large subsample of properties (i.e., high-end homes). Our results also reveal scope for new principal-agent issues, as agents generally disclose less when they market their own homes, and even less for their higher-end homes when it is a more optimal strategy.