Estimating the House Foreclosure Discount Corrected for Spatial Price Interdependence and Endogeneity of Marketing Time

Terrence M. Clauretie and Nasser Daneshvary

Real Estate Economics, 2009, vol. 37, issue 1, 43-67

Abstract: Most previous empirical research estimates a greater than 20% discount associated with the sale of foreclosed properties. Under the assumption that the real estate market is somewhat efficient, such a large discount would be counterintuitive. We argue, and empirically show, that the estimated foreclosure coefficients in most of the previous research are upward biased because they do not control for variables such as the physical condition of the property and the relationship between marketing time and price. Accounting for these factors and correcting for two types of spatial price interdependence, our results show that estimates of foreclosure discount reported by previous studies are about one‐third higher than the true discount caused by foreclosure per se.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6229.2009.00234.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:37:y:2009:i:1:p:43-67

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620

Access Statistics for this article

Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous

More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().