Understanding Distressed Residential Transaction Discounts Across Price Segments and Market Conditions

In the literature, there is a wide range of discounts associated with foreclosures. Comparisons across studies are difficult as they use different methodologies across large areas over different time periods. We employ a consistent methodology across space and time. We find modest discounts, within...

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Bibliographic Details
Published in:The Journal of real estate research 2020-01, Vol.42 (1), p.151-182
Main Authors: Aroul, Ramya Rajajagadeesan, Hansz, J. Andrew, Rodriguez, Mauricio
Format: Article
Language:English
Subjects:
Discounts
Foreclosure
Housing
Housing prices
Interest rates
Market prices
Market segments
Profits
Psychological distress
Sales
Short sales
Transaction costs
Underwriting
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Summary:In the literature, there is a wide range of discounts associated with foreclosures. Comparisons across studies are difficult as they use different methodologies across large areas over different time periods. We employ a consistent methodology across space and time. We find modest discounts, within the range of typical transaction costs, in all but the highest priced market segment. Higher priced segments could explain prior findings of substantial discounts. We find that discounts are time-varying, with discounts increasing with market distress. A one-size-fitsall approach is not appropriate when estimating distressed transaction discounts across large market areas or under changing market conditions.
ISSN:0896-5803
2691-1175
DOI:10.22300/0896-5803.42.1.151