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Auction versus Negotiated Sale: Evidence from Real Estate Sales
Author(s) -
Chow Yuen Leng,
Hafalir Isa E.,
Yavas Abdullah
Publication year - 2014
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 - 10.1111/1540-6229.12056
Subject(s) - common value auction , real estate , asset (computer security) , economics , microeconomics , homogeneous , empirical evidence , financial economics , econometrics , finance , computer science , philosophy , physics , computer security , epistemology , thermodynamics
We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions. In addition, we find that auctions do not necessarily generate a higher price premium for foreclosed properties than for nonforeclosed properties.