Auction versus Negotiated Sale: Evidence from Real Estate Sales

Publication Type:
Journal Article
Citation:
Real Estate Economics, 2015, 43 (2), pp. 432 - 470
Issue Date:
2015-06-01
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© 2015 American Real Estate and Urban Economics Association. We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions. In addition, we find that auctions do not necessarily generate a higher price premium for foreclosed properties than for nonforeclosed properties.
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