Distortions in Real Estate Transactions with Out-of-State Participants

Cynthia Holmes () and Jia Xie ()
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Cynthia Holmes: Ryerson University
Jia Xie: Ryerson University

The Journal of Real Estate Finance and Economics, 2018, vol. 57, issue 4, No 3, 592-617

Abstract: Abstract Using the MLS and the land registration data from Indiana, this paper identifies and explains price distortions associated with out-of-state sellers and buyers in the housing market. We find that out-of-state buyers pay 20.4% higher prices than local buyers, and the premium is fully explained by the former purchasing larger homes than the latter. On the other hand, out-of-state sellers receive a 21.2% price discount, among which 9.3% is attributable to differences in transactional characteristics, 3.2% is explained by increased motivation and weak bargaining power of out-of-state sellers, and 1.5% is due to differences in agent characteristics and behaviours. The remaining 7.2% discount varies systematically with the informational disadvantage of out-of-state sellers, and with the market condition. Our results are robust to model misspecification.

Keywords: Out-of-state; Motivation heterogeneity; Information asymmetry; Market distortion; Real estate transactions (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s11146-017-9624-1

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