 The price of ignorance: Foreclosures, uninformed buyers and house pricesGeoffrey K. Turnbull and Arno J. van der Vlist Journal of Housing Economics, 2022, vol. 57, issue C Abstract: Uninformed buyers may pay more when purchasing complex assets, such as houses. This paper compares local house buyers who are later foreclosed with those not foreclosed for various buyer-types, namely, owner-occupier households, investor-companies, second-home buyers, and small-scale investors. Data from one of the foreclosure epicenters, Orange County, Florida, reveal that subsequent foreclosures are associated with higher prices for comparable housing at the time of purchase. The premium paid by buyers between 2000 and 2007 who experience foreclosure after 2007 is larger closer to the 2007 market peak, approaching 3 percent. We find considerable heterogeneity across buyer-types. In particular, foreclosed second-home buyers and small-scale investors systematically pay more, while investor-companies and owner-occupiers do not. The pattern is consistent with the hypothesis that the premium paid by foreclosed households reflects poor information or limited financial acumen. Keywords: Uninformed buyers; Asymmetric information; House price; Investors; Second-home owners; Foreclosure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:57:y:2022:i:c:s1051137722000183 DOI: 10.1016/j.jhe.2022.101844 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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