Commercial real property instalment land contracts

James E. Larsen, Marlena L. Akhbari and Brandon C.L. Morris

Journal of Property Investment & Finance, 2025, vol. 43, issue 3, 288-302

Abstract: Purpose - This paper reports the results of an investigation of the use of instalment land contracts (ILCs) in the Montgomery County, Ohio commercial real property market. Design/methodology/approach - Generalised spatial two-stage least squares regression is used to analyse data from 164 ILC financed commercial property transactions and 918 traditionally financed commercial property transactions, all of which were initiated between January 1, 2016 and December 31, 2023. Findings - In our sample, the use of ILCs for the acquisition of commercial real estate is concentrated on relatively low-value properties. A bargaining power imbalance was discovered; the price ILC vendees promised to pay was more than buyers using traditional financing paid for similar property. Practical implications - The results suggest that some commercial property investors use ILCs because they cannot qualify for a loan from an institutional lender, and some may benefit from the additional regulations that ILC critics have proposed. Originality/value - This is the first published empirical study of ILC use in a local commercial property market.

Keywords: Bargaining power; Commercial property prices; Directional distribution map; Generalised spatial two-stage least squares regression; Geocode; Instalment land contract; United States (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-09-2024-0121

DOI: 10.1108/JPIF-09-2024-0121

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