Sales Concessions in the US Housing Market

J Real Estate Finan Econ, DOI 10.1007/s11146-016-9592-x

56 Pages Posted: 22 Jan 2017

See all articles by Darren K. Hayunga

Darren K. Hayunga

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: November 18, 2016

Abstract

This article examines the use of concessions in the US housing market, specifically payments for closing costs, home warranties, and structural repairs. This is the first study to examine the motivations and characteristics of homeowners that utilize concessions. It also examines the impact concessions have on transaction prices and marketing durations. While the literature has attempted to determine if concessions can reduce marketing durations or increase transaction prices, the evidence is tainted by endogeneity and sample issues. Additionally, we find that relative bargaining power between buyers and sellers has a fundamental effect on how concessions alter prices and marketing durations. This aspect has been considered only narrowly in the extant literature. Our results demonstrate that when sellers have bargaining power, transactions including concessions exhibit higher prices and shorter marketing durations. Conversely, when buyers have greater negotiation leverage, transactions including concessions experience lower prices and longer marketing periods.

Keywords: Buyers’ incentives, Sellers’ concessions, Sellers’ motivations, Closing costs, Home warranties, Home repairs

JEL Classification: D12, R21, R31

Suggested Citation

Hayunga, Darren K., Sales Concessions in the US Housing Market (November 18, 2016). J Real Estate Finan Econ, DOI 10.1007/s11146-016-9592-x , Available at SSRN: https://ssrn.com/abstract=2901881

Darren K. Hayunga (Contact Author)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-1365 (Phone)

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