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Assessing the Performance of Real Estate Auctions
Author(s) -
Mayer Christopher J.
Publication year - 1998
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00737
Subject(s) - common value auction , boom , real estate , bust , economics , residential real estate , quality (philosophy) , microeconomics , dutch auction , finance , auction theory , revenue equivalence , philosophy , epistemology , environmental engineering , engineering
This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat‐sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%–9%, while sales in Dallas following the oil bust obtained discounts of 9%–21%. This evidence is consistent with the theoretical prediction that the auction discount increases in downturns when a seller trades‐off a longer expected selling time in a search market against an immediate auction sale. The study finds no evidence of the declining price anomaly.