Revisiting Cash Financing in Residential Transaction Prices
Real Estate Finance, Summer 2016
15 Pages Posted: 20 Jan 2017
Date Written: June 10, 2016
The primary cash financing literature consists of two early 1990s publications. Both of these studies found large cash discounts in residential transaction prices. We revisit this topic by examining residential transaction prices in Pinehurst, North Carolina. We find that cash buyers in the market do not negotiate a discount for the use of cash financing. Instead, the results demonstrate that cash purchasers pay a significant higher price. The findings stand in contrast to the limited literature on cash financing and highlight why financing needs to be included in hedonic pricing models.
Keywords: Cash financing, Cash discount, Cash premium, Hedonic pricing model, Residential real property
JEL Classification: D14, D70, E30
Suggested Citation: Suggested Citation