The role of list price in transaction outcomes
DOI:
https://doi.org/10.30672/njsr.102913Keywords:
List price, sales price, real estate agents, hedonic pricing, duration model, pricing strategies, anchoring effect, trade-offAbstract
The purpose of the study is to analyze the effect of list price strategies on two transaction outcomes, transaction price and time on market. The study quantitatively tests two hypotheses concerning transaction price and time one market. This is performed using both a hedonic modelling framework, as well as duration modelling. The models are applied to a set of property transactions for the capital region in Iceland, in total 35,000 transactions between 2014 and 2020. This study concludes that the choice of list price does affect transaction outcomes. In particular, a low list price in relation to market value adversely affects transaction price, and speeds up the transaction process. Thus, the findings confirm an existing trade-off between achieving a higher price, or selling a property quicker. The findings of this study may come to practical use in the sales process of real estate, as it may inform real estate agents as to the expected outcomes of different list price strategies. The results of this study are in line with previous findings under different sales processes, thus suggesting that list price strategies work similarly independent of sales processes. As such, this study increases understanding of the role of list prices.
References
Arkes, J. (2019). Regression Analysis: A Practical Introduction. London: Routledge.
Asabere, P.K. & Huffman F.E. (1993). Price concessions, time on the market, and the actual sale price of homes. Journal of Real Estate Finance and Economics, 6(2), 167‐174.
Björklund, K., Alex Dadzie, J., & Wilhelmsson, M. (2006). Offer price, transaction price and time‐on‐market. Property Management, 24(4), 415‐426.
Bucchianeri, G. W. and Minson, J. A. (2013). ‘A homeowner’s dilemma: Anchoring in residential real estate transactions’. Journal of Economic Behavior and Organization, 89(6), pp. 76–92. doi: 10.1016/j.jebo.2013.01.010.
Enegren, C. J. (2017). Varför förekommer listpriser? Masteruppsats, Lunds Tekniska Högskola. Available at:
http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=8906528&fileOId=8906530
Genovese, D. & Mayer, C. (2001). Loss Aversion and Seller Behavior: Evidence from the Housing Market. The Quarterly Journal of Economics, Oxford University Press, 116(4), 1233-1260.
https://www.andreisimonov.com/Microstr_PhD/GenesoveMayer.pdf
Han, L. & Strange, W. C. (2014). Bidding Wars for Houses. Real Estate Economics, 42(1), 1‐32.
Han, L. & Strange, W. C. (2016). What is the role of the asking price for a house? Journal of Urban Economics, 93, 115‐130.
www.sciencedirect.com/science/article/pii/S0094119016300018?via%3Dihub
Haurin, D.R., Haurin, J.L., Nadauld, T. & Sanders, A. (2010). List prices, sale prices and marketing time: an application to U.S. housing markets. Real Estate Economics, 38(4), 659‐685.
Haurin, D., McGreal, S., Adair, A., Brown, L., & Webb, J. R. (2013). List price and sales prices of residential properties during booms and busts. Journal of Housing Economics, 22(1), 1-10.
Hoeberichts, M. M., van Rooij, M. & Siegmann, A. (2013). House List Prices and Durations in Boom and Bust. Available at: https://ssrn.com/abstract=2321521
Hungria-Gunnelin, R., Kopsch, F. & Enegren, C. J. (2020). Brokers´ list price setting in an auction context. Journal of International Housing Markets and Analysis. (forthcoming)
Hungria-Gunnelin, R. (2013). Impact of number of bidders on sale price of auctioned condominium apartments in Stockholm. International Real Estate Review, 16(3), 274-295.
Jacowitz, K. E. and Kahneman, D. (1995). Measures of Anchoring in Estimation Tasks. Personality and Social Psychology Bulletin, 21(11), 1161–1166.
Jud, G. D., T. G. Seaks, and D. T. Winkler. (1996). Time on the Market: The Impact of Residential Brokerage. Journal of Real Estate Research, 12(3), 447-458.
https://libres.uncg.edu/ir/uncg/f/D_Winkler_Time_1996(MULTI%20UNCG%20AUTHORS).pdf
Knight, J. R. (2002). Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes. Real Estate Economics, 30(2), ..
Kahneman, D. (2011), Thinking, Fast and Slow, Farrar, Straus and Giroux, New York, NY. 103 av 468
Lai, C.D. (2006). Generalized Weibull Distributions. Heidelberg, Germany: Springer.
https://link-springer-com.ludwig.lub.lu.se/book/10.1007%2F978-3-642-3 9106-4
Levitt, S. D., & Syverson, C. (2008). Market distortions when agents are better informed: The value of information in real estate transactions. The Review of Economics and Statistics, 90(4), 599‐611.
Pryce, G. (2010). Bidding Conventions and the Degree of Overpricing in the Market for Houses. Urban Studies, 48(4), 765-791.
www.jstor.org/stable/43080346
Staff (2019a), Program on Negotiation at Harvard Law School, The Anchoring Effect and How it Can Impact Your Negotiation, (July 23, 2019), available at https://www.pon.harvard.edu/daily/negotiation-skills-daily/the-drawbacks-of-goals/#:~:text=The%20anchoring%20effect%20is%20a,first%20piece%20of%20information%20offered&text=In%20negotiations%2C%20the%20anchoring%20effect,can%20affect%20the%20end%20result.
Staff (2019b) https://www.pon.harvard.edu/daily/negotiation-skills-daily/what-to-share-in-negotiation/
Stevenson, S. & Young, J. (2015). The probability of sale and price premiums in withdrawn auctioned properties. Urban Studies, 52(2), 279‐297.
Taylor, C. (1999). Time-on-the-Market as a Sign of Quality. The Review of Economic Studies, 66(3), 555-578. Retrieved September 30, 2020, from http://www.jstor.org/stable/2567014(s.555)
Tucker, Catherine, Juanjuan Zhang, and Ting Zhu (2013). “Days on Market and Home Sales.” The RAND Journal of Economics 44(2): 337–360. (s.337-338 och353)
Yavas, A. & Yang, S. (1995). The strategic role of listing price in marketing real estate: Theory and evidence. Real Estate Economics, 23, 347‐368.
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Fredrik Kopsch, Ólafur Sindri Helgason, Alexandra Hansson, Felicia Johansson
This work is licensed under a Creative Commons Attribution 4.0 International License.
NJSR is an Open Access journal which means that all content is freely available without charge to the user or their institution. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles, or use them for any other lawful purpose, without asking prior permission from the publisher or the author. This is in accordance with the BOAI definition of Open Access.
Copyright of published articles remains with the author(s).
Accepted 2021-05-26
Published 2022-01-24